<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------
FEDERATED INVESTORS, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 6722 25-1111467
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation Classification Code
or organization) Number)
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
(412) 288-1900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN W. MCGONIGLE
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
(412) 288-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
With Copies To:
MICHAEL C. MCLEAN
KIRKPATRICK & LOCKHART LLP
1500 OLIVER BUILDING
PITTSBURGH, PENNSYLVANIA 15222-2312
(412) 355-6500
Approximate date of commencement of the proposed sale of the securities to
the public: AT THE EFFECTIVE TIME OF THE MERGER DESCRIBED IN THIS REGISTRATION
STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, no par
value per share 4,000 shares -- $1,334 $1.00
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Class B Common Stock, no par 55,618,000
value per share shares -- $185,394 $55.00
</TABLE>
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(1) Represents the maximum number of shares issuable to holders of Class A
Common Shares, stated value $1.00 per share, of Federated Investors
("Trust Class A Common Shares"), and holders of Class B Common Shares,
stated value $.01 per share of Federated Investors ("Trust Class B Common
Shares"), pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") described in this Registration Statement.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(f)(2) in the absence of a market,
based upon one third of the amount of the stated values of Trust Class A
Common Shares, stated value $1.00 per share, and Trust Class B Common
Shares, stated value $.01 per share, computed as of December 31, 1997, and
the one to one ratio at which such stock will be exchanged for shares of
Class A Common Stock, no par value per share of Federated Investors, Inc.
and Class B Common Stock, no par value per share of Federated Investors,
Inc. pursuant to the Merger Agreement.
------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
EXHIBIT INDEX IS ON PAGE II-3.
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<PAGE>
FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
April , 1998
Dear Federated Investors Shareholder:
You are cordially invited to attend a Special Meeting of the shareholders of
Federated Investors ("Federated") to be held on April , 1998, at Federated
Investors Tower, 27th Floor, Pittsburgh, Pennsylvania commencing at 10:00
a.m., local time.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger and the transactions contemplated thereby providing for the
merger of Federated, a Delaware business trust, with and into its wholly-owned
subsidiary, Federated Investors, Inc., a Pennsylvania corporation (the
"Company"). Pursuant to the Agreement and Plan of Merger, each outstanding
Class A Common Share and Class B Common Share of Federated will be converted
into the right to receive one share of Class A Common Stock and Class B Common
Stock, respectively, of the Company and will have the relative rights and
terms set forth in the Restated Articles of Incorporation of the Company. The
consummation of the Merger is subject to several conditions, including the
completion of a concurrent public offering by the Company of Class B Common
Stock on terms satisfactory to the Company and Federated and the absence of
written demands for appraisal rights by dissenting shareholders holding at
least 2/3 of the total outstanding Class B Common Shares of Federated held by
all holders entitled to such appraisal rights under the Restated Declaration
of Trust. If these conditions are not satisfied or waived by the Trust or the
Company, the Merger will not occur.
The purpose of the Merger is to convert the organization of Federated from a
Delaware business trust into a Pennsylvania corporation in order to streamline
the organizational structure by eliminating the parent holding company and by
utilizing a corporate entity, where the rights and liabilities of equity
holders are well established and where corporate equity securities may be used
in connection with possible future acquisitions. Federated was organized as a
Delaware business trust in 1989 in order to facilitate the acquisition of all
of the outstanding stock of the Company and the assets of the Federated
Research Division from an affiliate of Aetna Life and Casualty Company
("Aetna"). Aetna retained approximately a 27% interest in Federated until
1996, at which time all of the outstanding shares of Federated held by Aetna
were repurchased. As a consequence of this repurchase, the Board of Trustees
has determined that the continuation of the business trust as the parent of
the Company serves no essential business purpose.
More importantly, the Board of Trustees of the Trust believes that as a
result of the Merger the Company will be able to pursue more effectively
opportunities for growth through acquisitions. As a corporate entity, the
Company's equity securities, including "blank check" preferred stock and Class
B Common Stock, can be used in connection with possible future acquisitions
and in capital raising activities to promote growth. Moreover, the new
provisions in the Restated Articles of the Company to permit the holders of
Class B Common Stock to vote in the election of a majority of the Board of
Directors, in the event the Company enters into a definitive agreement with
respect to a business combination in which Class B Common Stock would be
issued in a transaction to be treated as a "pooling of interests" for
accounting purposes, are intended to facilitate growth by acquisition. In
other respects, holders of Class A Common Stock and Class B Common Stock of
the Company will have substantially the same rights as holders of the Class A
Common Shares and the Class B Common Shares in respect of dividends and
distributions and voting rights.
The Merger is conditioned upon the consummation of an initial public
offering. As a result of the public offering, the Company's Class B Common
Stock will be publicly traded and is expected to be listed on a national
securities exchange. This will provide access to public equity and debt
capital markets for the Company as well as provide a trading market and
liquidity for the Company's shareholders.
<PAGE>
The Board of Trustees of Federated has unanimously determined that the
Merger is in the best interests of Federated and its shareholders and
recommends that you vote FOR the proposal to approve and adopt the Agreement
and Plan of Merger and the transactions contemplated thereby. The accompanying
Proxy Statement/Prospectus more fully describes the proposal to be considered
at the Special Meeting. You are urged to give it your careful attention.
APPROVAL OF THE PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF
MERGER BY FEDERATED SHAREHOLDERS WILL REQUIRE THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING CLASS A COMMON SHARES AND CLASS B
COMMON SHARES OF FEDERATED, EACH VOTING SEPARATELY AS A CLASS. IT IS VERY
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING WHETHER OR
NOT YOU PERSONALLY ARE ABLE TO ATTEND. IN ORDER TO INSURE THAT YOU WILL BE
REPRESENTED, WE ASK YOU TO COMPLETE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY. A POSTAGE-PAID RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
You should not send in certificates representing Class A Common Shares and
Class B Common Shares of Federated at this time. Following consummation of the
Merger, information will be sent to you regarding the procedure for
surrendering your stock certificates and receiving certificates for the shares
of Class A Common Stock and Class B Common Stock of the Company issued in
exchange for your Federated shares.
Sincerely,
J. Christopher Donahue
President and Chief Operating Officer
<PAGE>
FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL , 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders (the "Special
Meeting") of Federated Investors, a Delaware business trust ("Federated" or
the "Trust"), will be held on April , 1998, at Federated Investors Tower,
27th Floor, Pittsburgh, Pennsylvania, commencing at 10:00 a.m., local time, to
consider and vote upon the following matters described in the accompanying
Proxy Statement/Prospectus.
1. Approval and adoption of the Agreement and Plan of Merger, dated as of
February 20, 1998 and exhibits thereto (the "Merger Agreement"), between
Federated Investors, Inc. (the "Company"), a Pennsylvania corporation and
wholly owned subsidiary of the Trust, and the Trust, and the transactions
contemplated thereby, including the merger of the Trust with and into the
Company (the "Merger"), pursuant to which, among other things, each
outstanding Class A Common Share, stated value $1.00 per share, of the
Trust ("Trust Class A Common Shares") will be converted into the right to
receive one share of Class A Common Stock, no par value per share, of the
Company and each outstanding Class B Common Share, stated value $.01 per
share, of the Trust ("Trust Class B Common Shares") (other than any shares
held in the Trust's treasury immediately prior to the Effective Time of the
Merger as defined in the Merger Agreement) will be converted into the right
to receive one share of Class B Common Stock, no par value per share, of
the Company. A copy of the Merger Agreement and exhibits thereto is
attached as Appendix A to the accompanying Proxy Statement/Prospectus,
including a copy of the Restated Articles of Incorporation of the Company
and the Restated Bylaws of the Company, which are separately attached
hereto as Appendices B and C, respectively.
2. The transaction of such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only the holder of record of Trust Class A Common Shares and the holders of
record of Trust Class B Common Shares at the close of business on April ,
1998 will be entitled to notice of, and to vote at, the Special Meeting and
any adjournment or postponement thereof. A list of such shareholders will be
open to examination by any shareholder at the Special Meeting and for a period
of ten days prior to the date of the Special Meeting during ordinary business
hours at the principal executive offices of the Trust, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the
United States.
By Order of the Board of Trustees,
John W. McGonigle
Executive Vice President and Secretary
Pittsburgh, Pennsylvania
April , 1998
YOUR VOTE IS VERY IMPORTANT
TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 20, 1998
PRELIMINARY PROXY STATEMENT
OF FEDERATED INVESTORS
(A DELAWARE BUSINESS TRUST)
PROSPECTUS OF
FEDERATED INVESTORS, INC.
(A PENNSYLVANIA CORPORATION)
This Proxy Statement/Prospectus is being furnished to holders of Class A
Common Shares, stated value $1.00 per share ("Trust Class A Common Shares"),
and holders of Class B Common Shares, stated value $.01 per share ("Trust Class
B Common Shares"), of Federated Investors, a Delaware business trust
("Federated" or the "Trust"), in connection with the solicitation of proxies by
the Board of Trustees of the Trust for use at the Special Meeting (the "Special
Meeting") to be held on April , 1998, at Federated Investors Tower, 27th
Floor, Pittsburgh, Pennsylvania, commencing at 10:00 a.m., local time, and at
any adjournment or postponement thereof.
This Proxy Statement/Prospectus also constitutes the Prospectus of Federated
Investors, Inc., a Pennsylvania corporation and wholly-owned subsidiary of the
Trust (the "Company"), with respect to 4,000 shares of Class A Common Stock, no
par value per share ("Class A Common Stock") and 55,618,000 shares of Class B
Common Stock, no par value per share ("Class B Common Stock" and together with
Class A Common Stock, "Common Stock"), to be issued in the Merger (as defined
herein) in exchange for the outstanding Trust Class A Common Shares and Trust
Class B Common Shares. Upon consummation of the Merger, the Trust will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation under the name "Federated Investors, Inc." The
holders of Trust Class A Common Shares and Trust Class B Common Shares will
become holders of Class A Common Stock and Class B Common Stock of the Company,
having the relative rights and other provisions set forth in the Restated
Articles of the Company, and will hold the same proportionate beneficial
ownership interest in the Company as such holders held in the Trust.
All information contained in this Proxy Statement/Prospectus relating to the
Company has been supplied by the Company, and all information contained in this
Proxy Statement/Prospectus relating to the Trust has been supplied by the
Trust.
------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------
This Proxy Statement/Prospectus and accompanying proxy card are first being
mailed to shareholders of the Trust on or about April , 1998.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL , 1998.
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Class A Common Stock and Class B Common
Stock offered hereby. This Prospectus, which is a part of the Registration
Statement, is complete in material respects but does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
shares of Class A Common Stock and Class B Common Stock, reference is hereby
made to such Registration Statement and the exhibits and schedules thereto,
copies of which may be inspected without charge at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and at
the Northwest Atrium Center, 500 Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained from the public reference
section of the Commission upon payment of the fees prescribed by the
Commission. In addition, registration statements and certain other documents
filed with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's
site on the World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, has been
filed with the Commission through EDGAR. The summaries in this Prospectus of
additional information included in the Registration Statement or any exhibit
thereto are qualified in their entirety by reference to such information or
exhibit.
As a result of the Merger and the consummation of the related public
offering of the Company contemplated thereby, the Company will become subject
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith will file periodic reports, proxy statements and other
information with the Commission. Subject to the consummation of the Merger,
the Company intends to furnish its shareholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by
independent public accountants and with quarterly reports containing unaudited
consolidated financial information for the first three quarters of each fiscal
year.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL INFORMATION...................................................... 2
SUMMARY..................................................................... 5
THE SPECIAL MEETING......................................................... 12
General................................................................... 12
Matters to be Considered at the Meeting................................... 12
Voting at the Meeting; Record Date........................................ 12
Proxies................................................................... 13
THE MERGER.................................................................. 14
Reasons for the Merger; Recommendation of the Board of Trustees........... 14
Interests of Certain Persons in the Merger................................ 14
Directors and Executive Officers of the Company After the Merger.......... 14
Security Ownership of the Company After the Merger........................ 15
Stock Option and Benefit Plans............................................ 15
Accounting Treatment...................................................... 15
Federal Income Tax Consequences........................................... 15
Resale Restrictions....................................................... 15
Appraisal Rights.......................................................... 15
THE MERGER AGREEMENT........................................................ 19
The Merger................................................................ 19
Conversion of Securities.................................................. 19
Representations and Warranties............................................ 20
Additional Agreements..................................................... 20
Stock Option and Benefit Plans............................................ 20
Conditions................................................................ 20
Termination; Expenses..................................................... 21
Amendment and Waiver...................................................... 21
FEDERATED................................................................... 22
DIVIDEND POLICY............................................................. 24
CAPITALIZATION.............................................................. 25
SELECTED CONSOLIDATED FINANCIAL DATA........................................ 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................................. 27
Overview.................................................................. 27
Profitability Trend Summary............................................... 28
Results of Operations..................................................... 30
Capital Resources and Liquidity........................................... 35
Year 2000 Disclosure...................................................... 36
Interest Rate Sensitivity................................................. 37
Economic and Market Conditions............................................ 37
Impact of Inflation....................................................... 37
Recent Accounting Pronouncements.......................................... 37
BUSINESS.................................................................... 38
Overview.................................................................. 38
Business Strategy......................................................... 39
Organization and Markets.................................................. 41
Competition............................................................... 51
Regulatory Matters........................................................ 51
Employees................................................................. 52
Facilities................................................................ 52
Legal Proceedings......................................................... 52
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
MANAGEMENT.................................................................. 53
Directors and Executive Officers.......................................... 53
Election of Directors..................................................... 55
Audit Committee........................................................... 55
Compensation Committee.................................................... 55
Executive Compensation.................................................... 56
Compensation Pursuant to Plans............................................ 57
CERTAIN TRANSACTIONS........................................................ 63
Relationship with Aetna and Westinghouse Pension Plan..................... 63
Other Transactions........................................................ 63
PRINCIPAL SHAREHOLDERS...................................................... 64
DESCRIPTION OF SECURITIES................................................... 66
COMPARISON OF SHAREHOLDER RIGHTS............................................ 70
LEGAL MATTERS............................................................... 79
EXPERTS..................................................................... 79
INDEX TO FINANCIAL STATEMENTS............................................... F-1
</TABLE>
<TABLE>
<C> <S>
Appendix A Agreement and Plan of Merger dated as of February 20, 1998 between
Federated Investors and Federated Investors, Inc.
Appendix B Restated Articles of Incorporation of Federated Investors, Inc.
Appendix C Restated By-laws of Federated Investors, Inc.
Appendix D Section 8.7 of the Restated Declaration of Trust of Federated
Investors and Section 262 of the Delaware General Corporation Law
</TABLE>
4
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Reference is made to, and this summary is qualified
in its entirety by the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Proxy
Statement/Prospectus and the Appendices hereto. All share references reflect
the one for one stock dividend paid in December 1996 and the one for one stock
dividend declared on February 20, 1998 to be paid on April 15, 1998 to
shareholders of record on March 17, 1998. Shareholders are urged to read this
Proxy Statement/Prospectus and the Appendices hereto in their entirety. Unless
the context otherwise requires, Federated, a Delaware business trust which owns
all the outstanding stock of Federated Investors, Inc., is hereinafter referred
to as the "Trust" or, prior to the consummation of the Merger, "Federated", and
Federated Investors, Inc., a Pennsylvania corporation and currently a wholly
owned subsidiary of the Trust, is hereinafter referred to as the "Company" or,
after consummation of the Merger, "Federated."
FEDERATED
Federated is a leading provider of investment management products and related
financial services. Federated sponsors, markets and provides investment
advisory, distribution and administrative services primarily to mutual funds.
Federated has been in the mutual fund business for over 40 years and is one of
the ten largest mutual fund managers in the United States.
Federated manages assets across a wide spectrum of asset categories including
substantial participation in fast-growing areas such as equity and
international investments. Many of Federated's products are ranked highly by
recognized industry sources based on investment performance relative to peer
funds. At December 31, 1997, Federated had 80 managed funds eligible for
Morningstar, Inc. ratings. Of these funds, 73 (or 91%) are rated "three,"
"four" or "five" stars, and 39 (or 49%) are rated "four" or "five" stars,
placing Federated among the leaders in the mutual fund industry for percentage
of top-rated funds.
Federated has built a national reputation as a high quality provider of a
broad range of investment management products and related financial services.
Federated distributes its products through financial intermediaries such as
banks, brokers and other investment advisers who use them to meet the needs of
their customers; these customers include retail investors, corporations, and
retirement plans. Federated employs one of the largest sales forces directed to
financial intermediaries and institutions in the industry with more than 175
sales representatives and managers across the United States. Through
substantial investments in distribution over the last 20 years, Federated has
developed an extensive network of over 3,500 financial institutions which sell
Federated's products to their customers. Federated also directly sells its
products to more than 500 institutions such as corporations and government
entities. Although many of its products are designed for retail distribution,
Federated does not actively engage in the direct sale of mutual funds to the
general public.
Since late 1996, Federated has been conducting a comprehensive review of its
business strategies in order to position itself for increased profitability,
long term sustainable growth and enhanced shareholder value. Net income
increased by $38 million in 1997, or over 300% from 1996, in substantial part
as a result of these management initiatives, which included steps to increase
Federated's emphasis on the growth of equity and international Managed Assets
(as defined).
Historically, Federated's mix of Managed Assets has been dominated by money
market and other fixed income assets where Federated continues to be among the
leading mutual fund managers based on assets under management. More recently,
in response to market demand and to diversify its managed assets, Federated has
emphasized growth of its equity fund business and has broadened its range of
equity products to include international, aggressive growth, and small
capitalization equity products. Federated established a New York-based
investment management unit to develop global and international investment
products. Within Federated's managed asset categories, equity fund assets have
been the fastest growing asset class. Federated has increased its market share
of equity fund managed assets by growing at a faster rate than the overall
industry as measured by growth rates over the last three years, according to
Investment Company Institute ("ICI") data.
5
<PAGE>
Federated's assets under management at December 31, 1997 were $92.5 billion,
primarily in funds managed, distributed and administered by Federated and in
other non-fund products ("Managed Assets"), of which $2.1 billion were in
separately managed accounts. Federated provided investment advisory services to
61 pooled investment entities, primarily registered investment companies with
124 funds ("mutual funds" or "funds") and 238 share classes. In addition, at
year end 1997 Federated provided administration services to mutual funds
sponsored by third parties, primarily banks, having $47.0 billion of assets
("Administered Assets"). These Administered Assets were in 59 registered
investment companies with 206 funds and 267 share classes.
BUSINESS STRATEGY
Federated's long range strategy has three objectives:
. To be widely recognized as a world class investment management company
that offers highly competitive performance and disciplined risk
management while consistently adhering to its investment objectives
across a broad spectrum of investment management products.
. To profitably expand Federated's market penetration by increasing its
assets under management in each market where it chooses to apply its
substantial distribution resources.
. To use its substantial expertise in mutual fund administration to
provide superior customer services and to profitably expand its customer
relationships.
Federated pioneered the use of money market funds by institutions for cash
management purposes and ranks in the top one percent of money market fund
managers. Federated believes that its substantial money market fund business
provides a revenue base that is generally stable and recurring. From this base,
Federated intends to continue to expand its Managed Assets in areas such equity
and international investments which generally produce higher fee revenue and
have experienced substantial growth. Federated believes that its history as an
excellent investment manager combined with the size and quality of the
distribution network it has developed will enable it to continue to expand its
business in these key areas. Federated is also a leading provider of mutual
fund administration and strategic marketing services which support the growth
of Administered Assets. In addition to these efforts to increase Managed and
Administered Assets, Federated also continues to actively seek acquisitions
which fit within its long range growth strategy by expanding assets under
management.
CONCURRENT MERGER AND OFFERING
After consummation of the Merger of the Trust, a Delaware business trust,
into the Company, a Pennsylvania corporation and wholly owned subsidiary of the
Trust, the Company as the surviving company, through its subsidiaries and
affiliates, will continue to provide the same investment management products
and related financial services. The Merger is conditioned upon, among other
matters, the consummation by the Company of an underwritten public offering of
shares of Class B Common Stock of the Company, including certain shares held by
existing shareholders of the Trust (the "Offering"). See "The Merger
Agreement--Conditions." There is currently no trading market for Trust Class A
Common Shares or Trust Class B Common Shares or the Company's Common Stock. The
number of shares of Class B Common Stock to be offered and the timing of the
Offering have not yet been determined. As a result of the Merger and the
Offering, the Company will become subject to the informational requirements of
the Exchange Act, and, subject to certain restrictions in sales by affiliates
of Federated, shares of Class B Common Stock will be eligible for sale in the
public market. See "The Merger--Resale Restrictions."
Upon the consummation of the Merger, the executive officers, directors and
principal shareholders of the Company and their affiliates will own
approximately % of the outstanding Class B Common Stock of the Company,
without giving effect to the Offering. All of the issued and outstanding shares
of Class A Common
6
<PAGE>
Stock will be owned by a trust (the "Voting Trust"), the trustees of which are
John F. Donahue, Chairman and Chief Executive Officer of the Trust, his wife,
and his son, J. Christopher Donahue, President and Chief Operating Officer of
the Trust. See "Principal Shareholders." The entire voting power of the
Company's capital stock shall be vested in the holders of Class A Common Stock,
except as provided in the Restated Articles of Incorporation of the Company
("Restated Articles") or as otherwise required by applicable law.
The Trust is a Delaware business trust with its principal executive offices
located at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and
its telephone number is (412) 288-1900. The Trust owns all of the issued and
outstanding capital stock of the Company. The Company is a Pennsylvania
corporation, also with its principal executive offices located at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and its telephone number
is (412) 288-1900.
THE SPECIAL MEETING
DATE, PLACE AND TIME
The Special Meeting of the Trust is scheduled to be held on , April ,
1998 at Federated Investors Tower, 27th Floor, Pittsburgh, Pennsylvania
commencing at 10:00 a.m., local time.
RECORD DATE; SHARES ENTITLED TO VOTE
Only holders of record of Trust Class A Common Shares and holders of record
of Trust Class B Common Shares at the close of business on April , 1998 are
entitled to notice of and to vote at the Special Meeting. As of April , 1998
(after giving effect to the stock dividend to be paid on April 15, 1998), there
were 4,000 Trust Class A Common Shares outstanding, held by one holder of
record and 55,618,000 Trust Class B Common Shares outstanding by approximately
243 holders of record. The holder of record of Trust Class A Common Shares on
the record date is entitled to cast one vote per share on each matter to be
acted upon or which may properly come before the Special Meeting. Each holder
of record of Trust Class B Common Shares on the record date is entitled to cast
one vote per share on each matter to be acted upon or which may properly come
before the Special Meeting.
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby and to consider and vote upon such other matters as may properly be
brought before the Special Meeting.
VOTE REQUIRED
Pursuant to the Restated Declaration of Trust, as amended, of Federated (the
"Restated Declaration of Trust"), the approval and adoption by the Trust of the
Merger Agreement and the transactions contemplated thereby will require the
affirmative vote of the holders of a majority of the Trust Class A Common
Shares then outstanding and the holders of a majority of the Trust Class B
Common Shares then outstanding, each voting separately as a class. As of April
, 1998, the Voting Trust was the beneficial owner of all of the outstanding
Trust Class A Common Shares. As of such date, the trustees and executive
officers of the Trust and their affiliates were the beneficial owners of Trust
Class B Common Shares representing approximately 36.7% of the outstanding Trust
Class B Common Shares which are entitled to vote upon the Merger Agreement. See
"The Special Meeting" and "The Merger--Security Ownership of the Company After
the Merger."
7
<PAGE>
THE MERGER
EFFECTS OF THE MERGER
Pursuant to the Merger Agreement, at the Effective Time (as defined in the
Merger Agreement) (i) the Trust will be merged with and into the Company, which
will continue as the surviving corporation after the Merger, and (ii) each
issued and outstanding Trust Class A Common Share will be converted into the
right to receive one share of Class A Common Stock, and each issued and
outstanding Trust Class B Common Share (other than shares held in the Trust's
treasury immediately prior to the Effective Time) will be converted into the
right to receive one share of Class B Common Stock.
Upon consummation of the Merger, the holders of Common Shares of the Trust
will become shareholders of the Company holding the same proportionate
beneficial interest in the Company as such holders held in the Trust. Presently
there is no trading market for the capital stock of either the Trust or the
Company.
As provided in the Merger Agreement, at the Effective Time the Company will
assume the rights and obligations of the Trust regarding the Trust's existing
Restricted Stock Plan, Stock Appreciation Rights Plan and Stock Incentive Plan
(the "Prior Stock Plans"). The Company will treat as having been issued under
its Stock Incentive Plan all shares of restricted stock, stock appreciation
rights ("SARs") and stock options issued under Prior Stock Plans. As of April
, 1998 (after giving effect to the stock dividend to be paid on April 15,
1998), there were outstanding 2,822,000 restricted shares of Trust Class B
Common Shares and 2,664,800 shares of Trust Class B Common Shares issuable
primarily under outstanding stock options.
Pursuant to the Merger Agreement, the directors and officers of the Company
immediately prior to the Effective Time shall be the directors and officers of
the Company following the Merger. At the Effective Time the Board of Directors
of the Company will be comprised of certain members of the Board of Trustees of
the Trust and the executive officers of the Company will be certain executive
officers of the Trust, in each case as set forth under "The Merger" and
"Management."
REASONS FOR THE MERGER; RECOMMENDATIONS
The Trust was organized as a Delaware business trust in order to facilitate
the acquisition of all of the outstanding stock of the Company and the assets
of the Federated Research Division from an affiliate of Aetna Life and Casualty
Company ("Aetna"). In 1996 all the outstanding shares of Federated held by
Aetna were repurchased. The Board of Trustees has determined that the
continuation of the business trust as the parent of the Company serves no
essential business purpose. The purpose of the Merger is to convert the
organization of Federated from a Delaware business trust into a Pennsylvania
corporation in order to streamline the organizational structure by eliminating
the parent holding company and by utilizing a corporate entity, where the
rights and liabilities of the equity holders are well established and where
corporate equity securities may be used in connection with possible future
acquisitions. As a result of the Offering contemplated by the Merger Agreement,
the Company's Class B Common Stock will be publicly traded and is expected to
be listed on a national securities exchange. This will provide access to public
equity and debt capital markets for the Company as well as provide a trading
market and liquidity for the investments of Company shareholders. For a
discussion of the factors considered by the Board of Trustees of the Trust in
reaching their decisions with respect to the Merger, the Merger Agreement and
the transactions contemplated thereby, see "The Merger--Reasons for the Merger;
Recommendation of the Board of Trustees."
The Board of Trustees of the Trust, by unanimous vote, has determined that
the Merger is in the best interests of the Trust and its shareholders, has
approved the Merger Agreement and recommends a vote FOR approval and adoption
of the Merger Agreement and the transactions contemplated thereby.
8
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Upon consummation of the Merger, certain of the executive officers and
trustees of the Trust will continue as executive officers and directors of the
Company, as set forth under "Management." Under the terms of the Merger, all
existing holders of interests of Common Shares of the Trust will hold the same
proportionate interest in the Common Stock of the Company, except that the
number of shares of Class B Common Stock held by such persons and their
respective percentage ownership interests will be affected by the Offering, the
consummation of which is a condition to the Merger. The number of shares of
Class B Common Stock to be offered by the Company and by existing shareholders
has not been determined.
EFFECTIVE TIME OF THE MERGER
It is anticipated that the Merger will become effective after the requisite
Trust shareholder approval has been obtained and after all conditions to the
Merger have been satisfied or waived, including (i) the consummation of the
Offering on terms satisfactory to the Company and the Trust and (ii) the
absence of written demands for appraisal rights by dissenting shareholders
holding at least 2/3 of the total outstanding Trust Class B Common Shares held
by all holders entitled to seek appraisal rights under Section 8.7 of the
Restated Declaration of Trust. See "The Merger Agreement--Conditions."
CONDITIONS TO THE MERGER; TERMINATION OF THE MERGER AGREEMENT
The obligations of the Company and the Trust to consummate the Merger are
subject to the satisfaction of certain conditions, including obtaining
requisite Trust shareholder approval; the absence of written demands for
appraisal rights by dissenting shareholders holding at least 2/3 of the total
outstanding Trust B Common Shares held by all holders who are entitled to seek
appraisal rights under Section 8.7 of the Restated Declaration of Trust; the
consummation of the Offering on terms satisfactory to the Company and the
Trust; the receipt of any material third party and governmental consents; and
the absence of an injunction, order or other legal restraint preventing the
consummation of the Merger.
The Merger Agreement is subject to termination at any time prior to the
Effective Time by mutual consent of the Company and the Trust or by either
party if the requisite shareholder approval has not been obtained or if the
Offering shall have been abandoned or not otherwise consummated. See "The
Merger Agreement--Conditions" and "The Merger Agreement--Termination;
Expenses."
EXCHANGE OF STOCK CERTIFICATES
Upon consummation of the Merger, each holder of a certificate or certificates
representing Trust Class A Common Shares or Trust Class B Common Shares
outstanding immediately prior to the Merger, upon the surrender thereof (duly
endorsed, if required) to Boston EquiServe, an agent designated by the Company
(the "Exchange Agent"), will be entitled to receive a certificate or
certificates representing the number of shares of Class A Common Stock or Class
B Common Stock into which such Trust Class A Common Shares or Trust Class B
Common Shares will have been automatically converted as a result of the Merger.
The Exchange Agent will mail a letter of transmittal with instructions to all
holders of record of Trust Class A Common Shares or Trust Class B Common Shares
as of the Effective Time for use in surrendering their stock certificates in
exchange for certificates representing shares of Class A Common Stock or Class
B Common Stock. CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. The holder of an unexchanged
certificate will not be entitled to receive any dividends or other
distributions payable by the Company or to vote the shares represented by such
certificate until such certificate has been surrendered for exchange. See "The
Merger Agreement--Conversion of Securities."
9
<PAGE>
APPRAISAL RIGHTS
Holders of Trust Class A Common Shares or Trust Class B Common Shares are not
entitled to appraisal rights in connection with the Merger as a matter of law.
However, under Section 8.7 of the Restated Declaration of Trust, a conditional
right of appraisal may be found to exist for certain holders of Trust Class B
Common Shares in connection with the Merger, provided that at least 2/3 of the
total Trust Class B Common Shares held by such holders have duly requested such
rights. A total of 8,763,752 outstanding Trust Class B Common Shares (as of
April , 1998, after giving effect to the stock dividend to be paid on April
15, 1998) could be eligible to request appraisal rights.
Section 8.7 of the Restated Declaration of Trust provides that in
implementing this provision Section 262 of the Delaware General Corporation Law
(the "DGCL") shall apply. Under Section 262 of the DGCL, a holder of Trust
Class B Common Shares (i) who delivers to the Trust a written demand for
appraisal prior to the Special Meeting, (ii) whose shares are not voted in
favor of the Merger, and (iii) who follows certain other procedural
requirements, would be entitled to appraisal rights under Section 262 of the
DGCL. Failure of at least 2/3 of the total Trust Class B Common Shares held by
such holders entitled to request appraisal rights will result in the inability
of such stockholders to perfect dissenters' appraisal rights with respect to
Trust Class B Common Shares owned by them. See "The Merger--Appraisal Rights."
The position of the Trust is that Section 8.7 of the Restated Declaration of
Trust should not be construed to apply to the Merger. If dissenters' appraisal
rights are perfected as required under Section 8.7 of the Restated Declaration
of Trust and Section 262 of the DGCL, the Merger will not be consummated unless
the Trust and the Company waive this condition. See "The Merger--Conditions."
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that no gain or loss will be recognized by the Trust and no gain
or loss will be recognized by Trust shareholders on the exchange of shares of
Trust Class A Common Shares or Trust Class B Common Shares for Class A Common
Stock or Class B Common Stock pursuant to the Merger Agreement. For a further
discussion of certain federal income tax consequences of the Merger, see "The
Merger--Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Merger will be accounted for on an "as-if pooling of interests" basis for
accounting and financial reporting purposes. See "The Merger--Accounting
Treatment."
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, the holders of Common Shares of the Trust
will become holders of Common Stock of the Company. For a discussion of certain
differences between the Restated Declaration of Trust, the Bylaws of the Trust
as amended (the "Trust Bylaws") and the Delaware Business Trust Act, and the
Restated Articles of Incorporation of the Company in the form attached hereto
as Appendix B (the "Restated Articles"), the Restated Bylaws of the Company in
the form attached hereto as Appendix C (the "Company Bylaws") and the
Pennsylvania Business Corporation Law of 1988, as amended, to be in effect at
the Effective Time of the Merger, see "Comparison of Shareholder Rights."
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenue..................... $265,977 $271,190 $279,831 $321,793 $403,719
-------- -------- -------- -------- --------
Operating Expenses:
Compensation and related......... 81,542 90,003 101,534 126,966 139,373
Other operating.................. 91,936 115,077 104,885 134,308 141,004
Amortization and revaluation of
intangible assets............... 30,823 105,868 10,445 8,886 13,715
-------- -------- -------- -------- --------
Total Operating Expenses........ 204,301 310,948 216,864 270,160 294,092
-------- -------- -------- -------- --------
Operating income (loss)........... $ 61,676 $(39,758) $ 62,967 $ 51,633 $109,627
======== ======== ======== ======== ========
Net income (loss)................. $ 31,216 $(39,336) $ 28,531 $ 12,619 $ 50,577
Dividends on preferred shares(1).. 8,176 6,108 6,000 3,025 0
-------- -------- -------- -------- --------
Net income (loss) applicable to
Common Shares.................... $ 23,040 $(45,444) $ 22,531 $ 9,594 $ 50,577
======== ======== ======== ======== ========
Cash dividends per Common
Share(2)......................... $ 0.00 $ 0.00 $ 0.25 $ 0.0625 $ 0.0875
======== ======== ======== ======== ========
Earnings (loss) per Common Share--
basic Income before extraordinary
item(2).......................... $ 0.40 $ (0.79) $ 0.38 $ 0.19 $ 0.93
======== ======== ======== ======== ========
Earnings (loss) per Common Share--
assuming dilution Income before
extraordinary item(2)............ $ 0.40 $ (0.79) $ 0.35 $ 0.19 $ 0.92
======== ======== ======== ======== ========
BALANCE SHEET DATA AT PERIOD END:
Intangible assets, net........... $165,560 $ 74,413 $ 63,703 $ 69,105 $ 67,880
Total assets..................... 286,304 178,150 185,402 247,377 274,072
Long-term debt--Recourse......... 135,394 88,690 68,062 244,125 98,950
Long-term debt--Nonrecourse(3)... 0 0 0 0 122,304
Total liabilities................ 222,251 156,284 155,883 333,485 314,716
Shareholders' equity............. 63,700 20,733 28,692 (86,922) (41,110)
MANAGED AND ADMINISTERED ASSETS
AT PERIOD END (IN MILLIONS):
Managed.......................... $ 57,204 $ 50,818 $ 61,713 $ 74,842 $ 92,540
Administered..................... 19,505 21,304 22,089 35,574 46,999
</TABLE>
- --------
(1) Termination dividend paid in January 1996 in connection with the conversion
of all outstanding Trust Series A Preferred Shares into Trust Class B
Common Shares and the repurchase of the converted shares by the Trust. See
Note 10 to the Consolidated Financial Statements.
(2) Reflects the one for one stock dividend paid in 1996 and the one for one
stock dividend declared on February 20, 1998 to be paid on April 15, 1998.
(3) See Note 6 to the Consolidated Financial Statements for information
concerning nonrecourse debt.
Comparative Per Common Share Data
The Merger will have no effect on the consolidated financial position, net
income or cash flows of the Company or earnings or cash dividends per share.
Net income, cash dividends declared and book value per common share data of the
Company and the Trust on both an historical and unaudited pro forma combined
basis and on a per share equivalent unaudited pro forma basis are identical.
11
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Trust Class
A Common Shares and Trust Class B Common Shares in connection with the
solicitation of proxies by the Board of Trustees of the Trust for use at the
Special Meeting to be held on , April , 1998, commencing at 10:00 a.m.,
local time, and at any adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Special Meeting, holders of Trust Class A Common Shares and Trust
Class B Common Shares will consider and vote separately upon a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby and consider and vote upon such other matters as may properly be
brought before the Special Meeting.
The Board of Trustees of the Trust have determined that the Merger is in the
best interests of the Trust and its shareholders, has approved the Merger
Agreement and recommends that shareholders of the Trust vote FOR approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
VOTING AT THE MEETING; RECORD DATE
The Board of Trustees of the Trust has fixed April , 1998 as the record
date for the determination of Trust shareholders entitled to notice of and to
vote at the Special Meeting. Accordingly, only holders of record of Trust
Class A Common Shares and Trust Class B Common Shares on that record date will
be entitled to notice of and to vote at the Special Meeting. As of April ,
1998 (after giving effect to the stock dividend to be paid on April 15, 1998),
there were 4,000 Trust Class A Common Shares outstanding held by one holder of
record and 55,618,000 Trust Class B Common Shares outstanding held by
approximately 243 holders of record. Each holder of record of shares of Trust
Class A Common Shares and Trust Class B Common Shares on the record date is
entitled to cast one vote per share on the proposal to approve and adopt the
Merger Agreement and the transactions contemplated thereby and on any other
matters properly submitted for the vote of Trust shareholders, exercisable in
person or by properly executed proxy, at the Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
voting power represented by outstanding Trust Class A Common Shares and Trust
Class B Common Shares entitled to vote at the Special Meeting is necessary to
constitute a quorum at the Special Meeting. Shares represented by duly
completed proxies submitted by nominee holders on behalf of beneficial owners
will be counted as present for purposes of determining the existence of a
quorum for all purposes (even if some such proxies reflect broker non-votes).
In addition, abstentions will be counted as present for purposes of
determining the existence of a quorum.
The approval and adoption by shareholders of the Trust of the Merger
Agreement and the transactions contemplated thereby will require the
affirmative vote of the holders of a majority of the outstanding Trust Class A
Common Shares and Trust Class B Common Shares voting thereon, each voting
separately as a class. Abstentions will be counted as shares present at the
Special Meeting for purposes of determining the existence of a quorum, but
will not be recorded as votes cast on the proposal. Accordingly, abstentions
will have no effect either on the minimum number of affirmative votes
necessary to approve the proposal or on the outcome of voting on the proposal.
As of April , 1998, the Voting Trust was the beneficial owner of all
outstanding Trust Class A Common Shares. As of such date, the trustees and
executive officers of the Trust and their affiliates were the beneficial
owners of Trust Class B Common Shares representing approximately 36.7% of the
outstanding Trust Class B Common Shares which are entitled to vote upon the
Merger Agreement.
12
<PAGE>
PROXIES
All Trust Class A Common Shares and Trust Class B Common Shares that are
entitled to vote and are represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, and not revoked,
will be voted in accordance with the instructions indicated on such proxies.
If no instructions are indicated, such proxies will in each case be voted FOR
approval and adoption of the Merger Agreement and the transactions
contemplated thereby.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, a motion to adjourn the meeting
to another time and/or place (including, without limitation, for the purpose
of soliciting additional proxies), the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Trust, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Trust, before the taking of the vote at
the Special Meeting, or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Federated Investors,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, Attention:
Secretary, or hand delivered to the foregoing representative of the Trust, at
or before the taking of the vote at the Special Meeting.
All expenses of this solicitation, excluding the cost of mailing this Proxy
Statement/Prospectus and the filing fee paid to the Commission in connection
with filing the Registration Statement, will be paid by the Company. See "The
Merger Agreement--Termination; Expenses." In addition to solicitation by use
of the mails, proxies may be solicited by directors, officers and employees of
the Trust in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and the Trust will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
HOLDERS OF COMMON SHARES OF THE TRUST SHOULD NOT SEND ANY SHARE CERTIFICATES
WITH THEIR PROXY CARD.
13
<PAGE>
THE MERGER
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF TRUSTEES
The Trust is organized as a Delaware business trust. The purpose of the
Merger is to convert the organization of Federated from a Delaware business
trust into a Pennsylvania corporation in order to streamline the
organizational structure by eliminating the parent holding company and by
utilizing a corporate entity, where the rights and liabilities of the equity
holders are well established and where corporate equity securities may be used
in connection with possible future acquisitions. Federated was organized as a
Delaware business trust in 1989 in order to facilitate the acquisition of all
of the outstanding stock of the Company and the assets of the Federated
Research Division from an affiliate of Aetna. Aetna retained approximately a
27% interest in Federated until 1996, at which time all of the outstanding
shares of Federated held by Aetna were repurchased. As a consequence of this
repurchase, the Board of Trustees has determined that the continuation of the
business trust as the parent of the Company serves no essential business
purpose.
On February 20, 1998, the Board of Trustees of the Trust unanimously
determined that the Merger is in the best interests of the Trust and its
holders and approved the Merger Agreement and resolved to recommend approval
and adoption of the Merger Agreement and the transactions contemplated thereby
to the holders of the Trust. The Board of Trustees of the Trust believes that,
as a result of the Merger, the Company will be able to pursue more effectively
opportunities for growth through acquisitions. As a corporate entity, the
Company's equity securities, including "blank check" preferred stock and Class
B Common Stock, can be used in connection with possible future acquisitions
and in capital raising activities to promote growth.
The provisions in the Restated Articles to permit the holders of Class B
Common Stock to vote in the election of a majority of the Board of Directors
in the event the Company enters into a definitive agreement with respect to a
business combination in which Class B Common Stock would be issued in a
transaction to be treated as a "pooling of interests" for accounting purposes,
are also intended to facilitate growth by acquisition. In other respects,
holders of Class A Common Stock and Class B Common Stock of the Company to be
received in the Merger will have substantially the same rights as holders of
Class A Common Shares and Class B Common Shares of Federated in respect of
dividends and distribution and voting rights. See "Description of Securities"
and "Comparison of Shareholder Rights."
The Merger is conditioned upon the consummation of the Offering. As a result
of the Offering, the Company's Class B Common Stock will be publicly traded
and is expected to be listed on a national securities exchange. This will
provide access to public equity and debt capital markets for the Company as
well as provide a trading market and liquidity for the Company's shareholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Upon consummation of the Merger, certain of the executive officers and
trustees of the Trust will continue as executive officers and directors of the
Company, as set forth under "Management." Under the terms of the Merger, all
existing holders of Common Shares of the Trust will hold the same
proportionate interest in the Common Stock of the Company, except that the
number of shares of Class B Common Stock held by existing holders and their
respective percentage ownership interests in the Company will be affected by
the Offering, the consummation of which is a condition to the Merger.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AFTER THE MERGER
Pursuant to the Merger Agreement, the directors and officers of the Company
immediately prior to the Effective Time shall be the directors and officers of
the Company following the Merger. At the Effective Time the Board of Directors
of the Company will be comprised of certain persons who are members of the
Board of Trustees of the Trust, and the executive officers of the Company will
be comprised of certain executive officers of the Trust as set forth under
"Management."
14
<PAGE>
SECURITY OWNERSHIP OF THE COMPANY AFTER THE MERGER
Upon consummation of the Merger, the shareholders of the Trust will become
shareholders of the Company, with each shareholder holding the same
proportionate beneficial interest in the Company as held in the Trust, without
giving effect to the concurrent Offering. The Voting Trust will beneficially
own all of the outstanding Class A Common Stock of the Company.
STOCK OPTION AND BENEFIT PLANS
As provided in the Merger Agreement, at the Effective Time the Company will
assume the rights and obligations of the Trust regarding the Prior Stock
Plans. The Company will treat as having been issued under its Stock Incentive
Plan all shares of restricted stock, SARs and stock options issued under Prior
Stock Plans. As of April , 1998 (after giving effect to the stock dividend
to be paid on April 15, 1998), there were outstanding 2,822,000 restricted
shares of Trust Class B Common Shares and 2,664,800 shares of Trust Class B
Common Shares issuable primarily under outstanding stock options.
ACCOUNTING TREATMENT
The Merger will be accounted for by the Company on an "as-if pooling of
interests" basis, as such term is used under generally accepted accounting
principles.
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that no gain or loss will be recognized by the Trust and no
gain or loss will be recognized by Trust shareholders on the exchange of
shares of Trust Class A Common Shares or Trust Class B Common Shares for Class
A Common Stock or Class B Common Stock pursuant to the Merger Agreement.
RESALE RESTRICTIONS
All shares of Class A Common Stock and Class B Common Stock issued in
connection with the Merger will be freely transferable, except for certain
contractual restrictions on shares held by certain shareholders and except
that shares of Class A Common Stock and Class B Common Stock held by persons
who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of the Trust prior to the Merger may be resold by them
pursuant to the Offering or in transactions permitted by the resale provisions
of Rule 145 promulgated under the Securities Act (or Rule 144 in case of such
persons who become affiliates of the Company) or as otherwise permitted under
the Securities Act. Executive officers and directors of the Company and their
affiliates will hold approximately 36.7% of the Class B Common Stock
outstanding upon the consummation of the Merger, without giving effect to the
Offering.
APPRAISAL RIGHTS
Holders of Trust Class A Common Shares or Trust Class B Common Shares are
not entitled to appraisal rights in connection with the Merger as a matter of
law. However, under Section 8.7 of the Restated Declaration of Trust, a
conditional right of appraisal may be found to exist for certain holders of
Trust Class B Common Shares in connection with the Merger, provided that at
least 2/3 of the total Trust Class B Common Shares held by such holders have
properly requested such rights. The position of the Trust is that Section 8.7
of the Restated Declaration of Trust should not be construed to apply to the
Merger. However, if and to the extent that Section 8.7 is declared by a court
of competent jurisdiction to be applicable to the Merger, holders of a total
of 8,763,752 outstanding Trust Class B Common Shares (as of April , 1998,
after giving effect to the stock dividend to be paid on April 15, 1998) could
be eligible to demand appraisal rights.
15
<PAGE>
Section 8.7 of the Restated Declaration of Trust provides that if there has
been a conversion of Trust Series A Preferred Shares into Trust Class B Common
Shares, any holder of Trust Class B Common Shares (other than any member of
the Trust's "management circle", as defined in the Shareholders Rights
Agreement dated August 1, 1989, as amended ("Shareholders Rights Agreement"),
or any employee of the Trust or any of its subsidiaries) who has not voted in
favor of a merger or consolidation of the Trust with or into another entity
shall have the right to obtain an appraisal of the fair value of such shares
(exclusive of any element of value arising from the accomplishment or
expectation of such merger or consolidation) together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value;
provided, that the right to obtain an appraisal of fair value shall apply only
if such holders holding at least 2/3 of the total Trust Class B Common Shares
held by such holders have requested such rights. Such a holder shall be
entitled to receive out of the assets of the Trust, in exchange for such Trust
Class B Shares, the fair value of such shares determined pursuant to such
appraisal. Section 8.7 of the Restated Declaration of Trust further provides
that in determining such fair value and in otherwise implementing Section 8.7,
Section 262 of the DGCL shall apply. The term "management circle" as used in
the Shareholders Rights Agreement means the original members of the management
group of Federated at August 1, 1989 and any replacement managers, as more
fully set forth in Appendix D hereto.
It is the Trust's position that Section 8.7 of the Restated Declaration of
Trust was intended to provide protection only to the original holder of the
Series A Preferred Shares in the event such shares were converted into Trust
Class B Common Shares and thereafter held by such holder. In January 1996
Federated entered into an agreement with Aetna, the sole holder of the Trust
Series A Preferred Shares, to convert all 1,000 outstanding Trust Series A
Preferred Shares into Trust B Common Shares and to sell the converted shares
back to Federated at a mutually agreed upon price. Further, it is arguable
that the Merger, which involves the merger of the Trust into its wholly owned
subsidiary, was a transaction that was contemplated by Section 8.7 of the
Declaration. Under Delaware corporation law, a merger of a parent corporation
into its subsidiary does not give rise to appraisal rights except as
specifically provided by agreement.
In view of the requirements of Section 8.7 of the Restated Declaration of
Trust, unless holders of at least 2/3 of the Class B Common Shares held by all
those who are entitled to appraisal rights thereunder properly request
appraisal rights, no Dissenting Shareholder will be entitled to appraisal
rights. Furthermore, the Merger Agreement provides, as a condition to the
consummation of the Merger, that there shall not be written demands or
objections made and not withdrawn or otherwise lost by Dissenting Shareholders
who in the aggregate hold at least 2/3 of the total outstanding Trust B Common
Shares held by all holders entitled to request appraisal rights under Section
8.7 of the Restated Declaration of Trust. Therefore, if appraisal rights are
requested by the requisite minimum number of dissenting holders of Trust Class
B Common Shares, the Merger will not be consummated unless the Trust and the
Company waive this condition. See "The Merger Agreement--Conditions."
For the purposes of Section 8.7 of the Restated Declaration of Trust, in
determining "fair value" of the Dissenting Shares (as defined in the Merger
Agreement) and in otherwise implementing Section 8.7 of the Restated
Declaration of Trust, Section 262 of the DGCL shall apply. Section 262 of the
DGCL entitles any holder of record of shares of Trust Series B Common Shares
who makes a written demand prior to the taking of the vote at the Special
Meeting and who follows the procedures prescribed by Section 262, to an
appraisal of the "fair value" of all, but not less than all, of such shares by
the Delaware Court of Chancery (the "Court"), and to the payment of such fair
value by the Company, in lieu of receiving the consideration provided under
the Merger Agreement.
Set forth below is a summary of the procedures relating to the exercise of
appraisal rights as provided in Section 262 of the DGCL. Failure to comply
with any of the required steps may result in termination of any appraisal
rights Dissenting Shareholders may otherwise have under Section 8.7 of the
Restated Declaration of Trust.
Subject to the provisions of Section 8.7 of the Restated Declaration of
Trust and the Merger Agreement, all eligible Dissenting Shareholders who
follow the procedures set forth in Section 262 of the DGCL may receive a cash
payment from the Company equal to the fair value of their Dissenting Shares,
determined exclusive of any element of value arising from the accomplishment
or expectation of the Merger in the event the Merger is
16
<PAGE>
consummated. Unless the conditions of Section 8.7 of the Restated Declaration
of Trust and all the procedures set forth in Section 262 are followed by a
shareholder who wishes to exercise appraisal rights, such shareholder will be
bound by the terms of the Merger.
A VOTE AGAINST THE ADOPTION OF THE MERGER AGREEMENT WILL NOT SATISFY THE
REQUIREMENT FOR A WRITTEN DEMAND FOR APPRAISAL.
Each shareholder electing to demand the appraisal of his or her shares must
(i) deliver to the Trust, prior to the Special Meeting, a written demand for
appraisal of the shareholder's shares, setting forth the shareholder's intent
to demand an appraisal and giving the stockholder's identity and (ii) not vote
such shareholder's shares in favor of the approval and adoption of the Merger
Agreement.
Assuming that the Merger has been consummated, within 10 days after the
Effective Time, the Company shall notify each shareholder who has complied
with these requirements that the Merger has become effective. Within 120 days
after the Effective Time, a Dissenting Shareholder, upon written request,
shall be entitled to receive a statement from the Company, setting forth the
aggregate number of shares which were not voted in favor of the Merger and
with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. The Company shall then mail such
written statement to the Dissenting Shareholder as set forth in Section 262 of
the DGCL. Within 120 days after the Effective Time, a Dissenting Shareholder
who has perfected rights of appraisal as set forth in Section 262 of the DGCL
and who is otherwise entitled to appraisal rights may file a petition in the
Court demanding a determination of the value of all of such Dissenting Shares.
Upon the filing of any such petition by a Dissenting Shareholder, such
Dissenting Shareholder is required to serve a copy thereof upon the Company.
At the hearing on such petition, the Court shall determine the Dissenting
Shareholders that have complied with the provisions of Section 262 of the DGCL
and have become entitled to appraisal rights. The Court may require the
shareholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock to the
Delaware Register in Chancery for notation thereon of the pendency of the
appraisal proceedings. Failure to comply with such a demand by the Court could
result in dismissal of the proceedings as to such shareholder. The Delaware
Register in Chancery, if so ordered, shall give notice of the time and place
fixed for the hearing of the petition by registered or certified mail to the
Company and to the shareholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the Company. Notice shall also be given by one or more publications at least
one week before the day of the hearing in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by publication shall be
approved by the Court, and the costs thereof shall be borne by the Company.
After determining the Dissenting Shareholders entitled to an appraisal, the
Court shall appraise the Dissenting Shares by determining their fair value
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining fair
value, the Court is to take into account all relevant factors. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings and that "fair price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
has stated that, in making this determination of fair value, the Court must
consider "market value, asset value, dividends, earnings prospects, the nature
of the enterprise and any other facts which were known or which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merger corporation." The Delaware Supreme Court has also held
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." The Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon
the appraisal before a final determination of all shareholders entitled to an
appraisal.
17
<PAGE>
The Court shall direct the payment of the fair value of the shares, together
with interest thereon, if any, by the Company to the stockholders entitled to
payment. Payment shall be made to the holders of Dissenting Shares only upon
the surrender to the Trust of the certificates representing such Dissenting
Shares. The costs of the proceedings shall be allocated between the parties in
the manner that the Court deems equitable in the circumstances. Upon
application of a Dissenting Shareholder, the Court may order all or a portion
of the expenses incurred in connection with the appraisal proceeding,
including reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all of the shares entitled to an
appraisal.
From and after the Effective Time, no Dissenting Shareholder shall be
entitled to vote or to receive payment of dividends or other distributions on
his or her Dissenting Shares (except for dividends or other distributions
payable to stockholders of record as of a date prior to the Effective Time).
Any Dissenting Shareholder may, within 60 days after the Effective Time,
withdraw such demand and accept the terms of the Merger. No such demand may be
withdrawn after the expiration of the 60 day period, however, unless the
Company shall consent thereto. If no petition for an appraisal of such
Dissenting Shares by the Court shall have been filed within the time provided
in Section 262(e) of the DGCL, or if the Dissenting Shareholder delivers a
written withdrawal of his or her demand for an appraisal and an acceptance of
the Merger, either within 60 days after the Effective Time or thereafter with
the written approval of the Company, the right of such Dissenting Shareholder
to an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court shall be dismissed as to any Dissenting Shareholder
without the approval of the Court, which may be conditioned upon such terms as
the Court deems just.
Exercise of the right to an appraisal under Section 8.7 of the Restated
Declaration of Trust and Section 262 of the DGCL may result in a judicial
determination that the "fair value" of Dissenting Shares is higher or lower
than the value of the shares of Class B Common Stock to be received in respect
thereof pursuant to the Merger Agreement. If the Trust complies with the
requirements of the DGCL, any shareholder who fails to comply with the
requirements of the DGCL will be without a statutory remedy for the recovery
of the value of his or her shares or for money damages to the shareholder with
respect to the Merger.
Reference is made to Appendix D attached hereto for the complete text of the
provisions of Section 8.7 of the Restated Declaration of Trust and Section 262
of the DGCL relating to the rights of Dissenting Shareholders. Statements made
in this Proxy Statement/Prospectus summarizing those provisions are qualified
in their entirety by reference to Appendix D. The provisions are technical in
nature and complex. It is suggested that any shareholder who desires to
exercise rights to an appraisal of shares of Trust Class B Common Shares
consult counsel. Failure to comply strictly with the provisions of the statute
may defeat a shareholder's right to an appraisal even if Section 8.7 of the
Restated Declaration would otherwise be deemed to apply and the Merger shall
have been consummated by the Trust and the Company. See "The Merger
Agreement--Conditions," "--Termination; Expenses."
18
<PAGE>
THE MERGER AGREEMENT
Following is a summary of the material terms of the Merger Agreement, a copy
of which is attached as Appendix A to this Proxy Statement/Prospectus and is
incorporated herein by reference. Such summary is qualified in its entirety by
reference to the Merger Agreement. Shareholders of the Trust are urged to read
the Merger Agreement in its entirety for a more complete description of the
Merger and the Restated Articles of the Company and the Company Bylaws in
their entirety for a more complete description of their rights as shareholders
of the Company.
THE MERGER
The Merger Agreement provides that, following the approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the
shareholders of the Trust and the satisfaction or waiver of the other
conditions to the Merger, including the consummation of the Offering, the
Trust will be merged with and into the Company.
If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing of a duly executed Certificate of Merger
with the Secretary of State of the State of Delaware and duly executed
Articles of Merger with the Secretary of State of the Commonwealth of
Pennsylvania, or at such time thereafter as is provided therein.
At the Effective Time, the Restated Articles of Incorporation and the
Company Bylaws set forth in Appendices B and C attached hereto, respectively,
will become effective.
CONVERSION OF SECURITIES
Upon consummation of the Merger, pursuant to the Merger Agreement, each
issued and outstanding Trust Class A Common Share will be converted into the
right to receive one share of Class A Common Stock, and each Trust Class B
Common Share (other than shares held in the Trust's treasury immediately prior
to the Effective Time, all of which will be canceled) will be converted into
the right to receive one share of Class B Common Stock. The shares of Class A
Common Stock and Class B Common Stock to be issued in the Merger will have the
relative rights and provisions set forth in the Restated Articles of the
Company.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail transmittal forms and exchange instructions to the holder of
record of Trust Class A Common Shares and each holder of record of Trust Class
B Common Shares to be used to surrender and exchange certificates evidencing
shares of Trust Class A Common Shares and Trust Class B Common Shares for
certificates evidencing the shares of Class A Common Stock or Class B Common
Stock of the Company to which such holder has become entitled. After receipt
of such transmittal forms, each holder of certificates formerly representing
Trust Class A Common Shares and Trust Class B Common Shares will be able to
surrender such certificates to the Exchange Agent, and each such holder will
receive in exchange certificates evidencing the number of shares of Class A
Common Stock or Class B Common Stock of the Company to which such holder is
entitled. Such transmittal forms will be accompanied by instructions
specifying other details of the exchange. HOLDERS OF COMMON SHARES OF THE
TRUST SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL
FORM.
After the Effective Time, each certificate evidencing Trust Class A Common
Shares or Trust Class B Common Shares, until so surrendered and exchanged,
will be deemed, for all purposes, to evidence only the right to receive the
number of shares of Class A Common Stock or Class B Common Stock of the
Company which the holder of such certificate is entitled to receive, without
interest. The holder of such unexchanged certificate will not be entitled to
receive any dividends or other distributions payable by the Company or to vote
the shares represented by such certificate until the certificate has been
exchanged. Following such exchange, such dividends or other distributions will
be paid to the holder entitled thereto, without interest.
19
<PAGE>
REPRESENTATIONS AND WARRANTIES
Because of the nature of this parent-subsidiary transaction, the Merger
Agreement contains only limited representations and warranties of the Company
and the Trust (which representations and warranties will terminate upon
consummation of the Merger) relating to, among other things, (a) the corporate
organization and qualification of each of the Company and the Trust and
certain similar organizational matters; (b) the capital structure of each of
the Company and the Trust; (c) the authorization, execution, delivery and
enforceability of the Merger Agreement and the consummation of the
transactions contemplated thereby and related matters; and (d) required
governmental filings and absence of violations under charters, bylaws,
material agreements, certain instruments and laws.
ADDITIONAL AGREEMENTS
As soon as practicable following the date of the Merger Agreement, the
Company and the Trust agree to prepare and file with the Securities and
Exchange Commission (the "Commission") this Proxy Statement/Prospectus and, as
soon as practicable following the effectiveness of the Registration Statement
(on Form S-4), duly call and hold a special meeting of the shareholders for
the purpose of approving the Merger Agreement and the transactions
contemplated hereby.
In addition, the Company, with the cooperation of the Trust, shall prepare
and file with the Commission a registration statement on Form S-1 with respect
to the Offering. The timing and size of the Offering will be subject to
prevailing market conditions and other conditions as may be taken into account
by the Board of Directors of the Company. Neither the Trust nor the Company
shall be obligated to cause the registration statement relating to the
Offering to be declared effective by the Commission if in either party's
judgment the Offering should not proceed.
STOCK OPTION AND BENEFIT PLANS
At the Effective Time, the Company shall assume the rights and obligations
of the Trust under the Trust's Prior Stock Plans. The Company shall treat as
having been issued under its Stock Incentive Plan all shares of restricted
stock, stock appreciation rights and stock options under the Prior Stock
Plans. At the Effective Time, each share of restricted stock, stock
appreciation right and stock option issued or granted under the Prior Stock
Plans shall be converted automatically into a share of restricted stock, stock
appreciation right or stock option, as the case may be, or with respect to
Class B Common Stock of the Company. The Company shall, as soon as practicable
following the Effective Time, register on Form S-8 or other appropriate form
the securities to be issued by the Company in connection with the assumption
of the Trust's obligations under the Prior Stock Plans.
CONDITIONS
The respective obligations of the Company and the Trust to effect the Merger
are subject to the following conditions, among others: (a) the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the holder of the outstanding Trust Class A Common Shares and a majority of
the outstanding Trust Class B Common Shares, each voting separately as a
class, and by the Trust as the sole shareholder of the Company; (b) the
absence of written demands for appraisal rights (or objections made and not
withdrawn or otherwise lost) by Dissenting Shareholders (as defined in the
Merger Agreement) who in the aggregate hold at least 2/3 of the total
outstanding Trust Class B Common Shares held by all holders who are entitled
to seek appraisal rights under Section 8.7 of the Restated Declaration of
Trust; (c) the absence of injunctions, orders or other legal restraint
preventing the consummation of the Merger; (d) the receipt of all material
governmental authorizations, consents, orders or approvals; (e) the
effectiveness of the Registration Statement relating to the Merger, which
shall not be the subject of a stop order or proceedings seeking a stop order;
and (f) the consummation of the Offering on terms and conditions (including
size and price) satisfactory to the Company and the Trust.
20
<PAGE>
TERMINATION; EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time:
(a) by mutual consent of the Company and the Trust;
(b) by either the Company or the Trust if a court of competent jurisdiction
or other governmental entity shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;
(c) by either the Company or the Trust, if at the Special Meeting (including
any adjournment or postponement), the requisite vote of the holders of the
Trust Class A Common Shares and Trust Class B Common Shares in favor of the
Merger Agreement and the Merger shall not have been obtained; or
(d) by either the Company or the Trust, if the registration statement
relating to the Offering shall not have become effective under the Securities
Act of 1933, as amended, or the Offering shall have been abandoned or not
otherwise consummated.
In the event of any termination of the Merger Agreement by either the
Company or the Trust as provided above, the Merger Agreement will become void
and there will be no liability or obligation on the part of the Company, the
Trust, or their respective officers, directors, trustees, shareholders or
affiliates.
All fees, costs and expenses incurred by the Trust and the Company in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the Trust if the Merger does not occur and by the Company if
the Merger does occur.
AMENDMENT AND WAIVER
The Merger Agreement may be amended at any time by action taken or
authorized by the Board of Trustees of the Trust and the Board of Directors of
the Company, but after approval by the holders of the Common Shares of the
Trust of the Merger Agreement and the transactions contemplated thereby, no
amendment shall be made which by law requires further approval by such holders
without such further approval. The Company and the Trust, by action taken or
authorized by the Board of Directors or the Board of Trustees, respectively,
may extend the time for performance of the obligations or other acts of the
other parties to the Merger Agreement, may waive inaccuracies in the
representations or warranties contained in the Merger Agreement and may waive
compliance with any agreements or conditions contained in the Merger
Agreement.
21
<PAGE>
FEDERATED
Overview. Federated is a leading provider of investment management products
and related financial services. Federated sponsors, markets and provides
investment advisory, distribution and administrative services primarily to
mutual funds. Federated has been in the mutual fund business for over 40 years
and is one of the ten largest mutual fund managers in the United States.
Federated manages assets across a wide spectrum of asset categories
including substantial participation in fast-growing areas such as equity and
international investments. Federated ranks among the industry leaders for
money market and fixed income funds, based on assets under management, and
offers one of the most comprehensive product lines in the industry. Many of
Federated's products are ranked highly by recognized industry sources based on
investment performance relative to peer funds. As of December 31, 1997,
Federated had 80 managed funds eligible for Morningstar, Inc. ratings. Of
these funds, 73 (or 91%) are rated "three," "four" or "five" stars, and 39 (or
49%) are rated "four" or "five" stars, placing Federated among the leaders in
the mutual fund industry for percentage of top-rated funds.
Federated has built a national reputation as a high quality provider of a
broad range of investment management products and related financial services.
Federated distributes its products through financial intermediaries such as
banks, brokers and other investment advisers who use them to meet the needs of
their customers; these customers include retail investors, corporations, and
retirement plans. Federated employs one of the largest sales forces directed
to financial intermediaries and institutions in the industry with more than
175 sales representatives and managers across the United States. Through
substantial investments in distribution over the last 20 years, Federated has
developed an extensive network of over 3,500 financial institutions which sell
Federated's products to their customers. Federated also directly sells its
products to more than 500 institutions such as corporations and government
entities.
Federated pioneered the use of money market funds by institutions for cash
management purposes and ranks in the top one percent of money fund managers.
Federated believes that its substantial money market fund business provides a
revenue base that is generally stable and recurring. From this base, Federated
intends to continue to expand its Managed Assets in areas such as equities and
international investments which generally produce higher fee revenue and have
experienced substantial growth. Federated believes that its history as an
excellent investment manager combined with the size and quality of the
distribution network it has developed will enable it to continue to expand its
business in these key areas. Federated is also a leading provider of mutual
fund administration and strategic marketing services which support the growth
of Administered Assets. In addition to these efforts to increase Managed and
Administered Assets, Federated also continues to actively seek acquisitions
which fit within its long range growth strategy by expanding assets under
management.
Managed Assets at December 31, 1997 were $92.5 billion, primarily in funds
managed, distributed and administered by Federated and in other non-fund
products, of which $2.1 billion were in separately managed accounts. Federated
provided investment advisory services to 61 pooled investment entities,
primarily registered investment companies with 124 funds and 238 share
classes. In addition, at year end 1997 Federated provided administration
services to mutual funds sponsored by third parties, primarily banks, having
$47.0 billion of assets. These Administered Assets were in 59 registered
investment companies with 206 funds and 267 share classes.
Background. Federated and its predecessors have engaged in the mutual fund
business since 1955 when the Company was founded by John F. Donahue and
Richard B. Fisher, who continue to be actively involved. The Company was a
publicly-traded company until 1982, when Aetna acquired the Company. In 1989
the Trust was formed and acquired the business of the Company from Aetna for
cash and 1,000 Series A Preferred Shares of the Trust. In January 1996
Federated entered into an agreement with Aetna to convert all 1,000 Trust
Series A Preferred Shares into Trust Class B Common Shares and to sell the
converted shares back to Federated at a
22
<PAGE>
mutually agreed upon price. These share repurchases were financed with
borrowings under the Trust's current credit facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 10 to the Consolidated Financial Statements.
On February 20, 1998, the Board of Trustees of the Trust unanimously
determined that the Merger is in the best interests of the Trust and its
holders and approved the Merger Agreement and recommended approval and
adoption of the Merger Agreement and the transactions contemplated thereby to
the holders of the Trust. The purpose of the Merger is to convert the
organization of Federated from a Delaware business trust into a Pennsylvania
corporation in order to streamline the organizational structure by eliminating
the parent holding company and by utilizing a corporate entity, where the
rights and liabilities of the equity holders are well established and where
corporate equity securities may be used in connection with possible future
acquisitions. See "The Merger--Reasons for the Merger; Recommendation of the
Board of Trustees."
Upon the consummation of the Merger, the executive officers, and directors
and principal shareholders of the Company and their affiliates will own
approximately 36.7% of the outstanding Class B Common Stock of the Company,
without giving effect to the Offering. After the consummation of the Merger,
all of the outstanding shares of Class A Common Stock of the Company will
continue to be owned by the Voting Trust, the trustees of which are John F.
Donahue, his wife and his son, J. Christopher Donahue, for the benefit of the
members of the family of Mr. John F. Donahue. The entire voting power of the
Company will be vested in the holders of the outstanding shares of Class A
Common Stock, except as otherwise provided in the Restated Articles or
required by applicable law. See "Principal Shareholders."
Federated is a Delaware business trust with its principal executive offices
located at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and
its telephone number is (412) 288-1900. Federated owns all of the issued and
outstanding capital stock of the Company. The Company is a Pennsylvania
corporation, also with its principal executive offices located at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and its telephone number
is (412) 288-1900.
23
<PAGE>
DIVIDEND POLICY
Since 1989, the ability of Federated to pay common and preferred share
dividends has been restricted by provisions of its debt agreements, which
provided that such distributions could be made only if certain conditions and
financial ratios were maintained. In 1995 Federated amended the debt
agreements to allow for the payment of the preferred share dividend and common
share dividend. A special cash dividend of $.25 per share was paid in 1995 to
holders of Common Shares; a cash dividend of $.0625 per share was paid in 1996
to holders of Common Shares; and a cash dividend of $.0875 per share was paid
in 1997 to holders of Trust Class A and Class B Common Shares. In addition, a
one for one stock dividend was paid in 1996 to record holders of Trust Class A
and Class B Common Shares and a one for one stock dividend was declared on
February 20, 1998 for payment on April 15, 1998 to record holders of Trust
Class A and Class B Common Shares on March 17, 1998. All cash dividend per
share amounts reflect the effects of the 1996 and the 1998 stock dividends.
For further information regarding dividends, see Note 10 to the Consolidated
Financial Statements.
Beginning in 1998 the Trust adopted a policy to declare and pay cash
dividends on a quarterly basis. A cash dividend of $.03125 per share was paid
on January 31, 1998. After the Merger, the declaration and payment by the
Company of dividends on its Common Stock and the amount thereof will depend
upon the Company's results of operations, financial condition, cash
requirements, restrictions imposed by lenders, future prospects and other
factors deemed relevant by the Company's Board of Directors. The Company is a
holding company and, as such, its ability to pay dividends is subject to the
ability of subsidiaries of the Company to provide cash to the Company. Under
the Trust's existing debt agreements which will be assumed by the Company
under the terms of the Merger, the Company will not be able to make dividend
payments on its Common Stock in excess of $5,000,000 in any fiscal year nor
exceed of the sum of $5,000,000 plus 50% of the net income of the Company
during the period from January 1, 1996 to and including the date of payment.
The Company will seek to amend these provisions to permit the payment of
regular quarterly cash dividends at a level comparable to that paid in the
first quarter of 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity--Debt
Facilities" and Note 10 to the Consolidated Financial Statements.
24
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Trust
and the Company as adjusted to give effect to the Merger as of December 31,
1997. The table does not give effect to the issuance by the Company of
authorized but unissued shares of its Class B Common Stock (the number of
which has not yet been determined) in the Offering, which is a condition to
the consummation of the Merger.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
COMPANY AFTER
FEDERATED MERGER
ACTUAL AS ADJUSTED
--------- -------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt-recourse........... $ 280 $ 280
--------- --------
Long-term debt (less current portion):(1)
Recourse debt
Bank loans(2)....................................... 0 0
7.96% Notes......................................... 98,000 98,000
Other debt.......................................... 950 950
--------- --------
Total long-term debt-recourse...................... 98,950 98,950
--------- --------
Non-recourse debt(1)................................. 122,304 122,304
--------- --------
Total long-term debt............................... 221,254 221,254
--------- --------
Minority Interest..................................... 466 466
--------- --------
Shareholders' equity:
TRUST
PREFERRED SHARES:
Series A Cumulative Convertible, $1.00 stated value, 0 --
1,000 shares authorized, no shares issued and
outstanding........................................
Series B Cumulative, no par value, 125,000 shares 0 --
authorized, no shares issued and outstanding.......
Series C, no par value, 75,000 shares authorized, no 0 --
shares issued and outstanding......................
COMMON SHARES:
Class A (voting), $1.00 stated value, 99,000 shares 4 --
authorized, 4,000 shares issued and outstanding....
Class B (non-voting), $.01 stated value, 149,700,000 623 --
shares authorized, 55,618,000 shares issued and
outstanding(3)(4)..................................
COMPANY
PREFERRED STOCK: none authorized prior to the -- 0
Merger; as adjusted for the Merger, no par value
per share, 100,000,000 shares authorized, no shares
issued and outstanding.............................
COMMON STOCK:
Common Stock, $.05 par value per share, 10,000,000
shares authorized and 5,095,512 shares issued and
outstanding prior to the Merger; as adjusted for
the Merger, no par value per share, 900,020,000
shares authorized, 55,622,000 shares issued and
outstanding (divided into Class A and Class B
Common Stock)......................................
Class A (voting), no par value per share, 20,000 -- 4
shares authorized, 4,000 shares issued and
outstanding........................................
Class B (non-voting), no par value per share, -- 623
900,000,000 shares authorized, 55,618,000 shares
issued and outstanding(3)..........................
Additional paid-in capital.......................... 28,574 28,574
Retained earnings................................... 55,419 (67,954)
Treasury stock...................................... (123,373) --
Other equity adjustments(5)......................... (2,357) (2,357)
--------- --------
Total shareholders' equity......................... (41,110) (41,110)
--------- --------
Total capitalization............................... $ 180,890 $180,890
========= ========
</TABLE>
- --------
(1) See Notes 5 and 6 to the Consolidated Financial Statements for additional
information concerning long-term debt and information concerning
restructuring of debt as a result of the B share financing in October 1997
under which Federated entered into a transaction with a third party to
market the rights to the future revenue stream associated with the 12b-1,
shareholder service and contingent deferred sales charge ("CDSC") fees of
the B shares of various mutual funds managed by Federated.
(2) No amounts are currently outstanding; approximately $148,961,000 is
available to be borrowed.
(3) Excludes Class B Common Shares issuable under the Trust's existing
Restricted Stock Plan, Stock Appreciation Rights Plan and Stock Incentive
Plan and any such shares that may be subject to issuance pursuant to the
Company's Stock Incentive Plan described under "Management--Compensation
Pursuant to Plans."
(4) Adjusted for the one for one stock dividend declared on February 20, 1998
to be paid on April 15, 1998.
(5) Includes equity adjustments for unrealized gain on marketable securities
net of tax, employee restricted stock plan, and equity adjustment for
foreign currency translation.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below should be read in conjunction
with Federated's Consolidated Financial Statements and notes thereto. The
selected consolidated financial data (except Managed and Administered Assets)
of Federated for the five years ended December 31, 1997 have been derived from
the audited Consolidated Financial Statements of Federated. See "Consolidated
Financial Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenue.................. $265,977 $271,190 $279,831 $321,793 $403,719
-------- -------- -------- -------- --------
Operating Expenses:
Compensation and related...... 81,542 90,003 101,534 126,966 139,373
Other operating............... 91,936 115,077 104,885 134,308 141,004
Amortization and revaluation
of intangible assets......... 30,823 105,868 10,445 8,886 13,715
-------- -------- -------- -------- --------
Total Operating Expenses.... 204,301 310,948 216,864 270,160 294,092
-------- -------- -------- -------- --------
Operating income (loss)........ 61,676 (39,758) 62,967 51,633 109,627
Non-operating expenses......... 11,441 10,116 9,826 20,287 20,060
Minority interest.............. 4,656 4,070 5,801 6,811 7,584
Income tax provision (benefit). 14,363 (14,608) 18,809 10,930 30,957
-------- -------- -------- -------- --------
Income (loss) before
extraordinary item............ 31,216 (39,336) 28,531 13,605 51,026
Extraordinary item, net of tax. 0 0 0 986 449
-------- -------- -------- -------- --------
Net income (loss).............. 31,216 (39,336) 28,531 12,619 50,577
Dividends on Preferred
Shares(1)..................... 8,176 6,108 6,000 3,025 0
-------- -------- -------- -------- --------
Net income (loss) applicable to
Common Shares................. $ 23,040 $(45,444) $ 22,531 $ 9,594 $ 50,577
======== ======== ======== ======== ========
Cash dividends per Common
Share(2)...................... $ 0.00 $ 0.00 $ 0.25 $ 0.0625 $ 0.0875
======== ======== ======== ======== ========
Earnings (loss) per Common
Share--basic
Income before extraordinary
item(2)....................... $ 0.40 $ (0.79) $ 0.38 $ 0.19 $ 0.93
======== ======== ======== ======== ========
Earnings (loss) per Common
Share--assuming dilution
Income before extraordinary
item(2)....................... $ 0.40 $ (0.79) $ 0.35 $ 0.19 $ 0.92
======== ======== ======== ======== ========
BALANCE SHEET DATA AT PERIOD
END:
Intangible assets, net........ $165,560 $ 74,413 $ 63,703 $ 69,105 $ 67,880
Total assets.................. 286,304 178,150 185,402 247,377 274,072
Long-term debt--Recourse...... 135,394 88,690 68,062 244,125 98,950
Long-term debt--
Nonrecourse(3)............... 0 0 0 0 122,304
Total liabilities............. 222,251 156,284 155,883 333,485 314,716
Shareholders' equity.......... 63,700 20,733 28,692 (86,922) (41,110)
BOOK VALUE PER COMMON SHARE.... $ 1.09 $ 0.34 $ 0.47 $ (1.55) $ (0.74)
======== ======== ======== ======== ========
MANAGED AND ADMINISTERED ASSETS
AT PERIOD END
(IN MILLIONS):
Managed....................... $ 57,204 $ 50,818 $ 61,713 $ 74,842 $ 92,540
Administered.................. 19,505 21,304 22,089 35,574 46,999
</TABLE>
- --------
(1) Termination dividend paid in January 1996 in connection with the
conversion of all outstanding Trust Series A Preferred Shares into Trust
Class B Common Shares and the repurchase of the converted shares by the
Trust. See Note 10 to Consolidated Financial Statements.
(2) Reflects the one for one stock dividend paid in 1996 and the one for one
stock dividend declared on February 20, 1998 to be paid on April 15, 1998.
(3) See Note 6 to the Consolidated Financial Statements for information
concerning nonrecourse debt.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements of Federated and the related notes thereto
included in this Proxy Statement/Prospectus.
OVERVIEW
Federated, through its direct and indirect subsidiaries, is a leading
provider of investment management products and related financial services.
Federated sponsors, markets and provides investment advisory, distribution and
administrative services primarily to mutual funds.
Managed Assets at December 31, 1997 were $92.5 billion, primarily in funds
managed, distributed and administered by Federated and in other non-fund
products, of which $2.1 billion were in separately managed accounts. Federated
provided investment advisory services to 61 pooled investment entities,
primarily registered investment companies with 124 funds and 238 share
classes. In addition, at year end 1997 Federated provided administration
services to mutual funds sponsored by third parties, primarily banks, having
$47.0 billion of assets. These Administered Assets were held in 59 registered
investment companies with 206 funds and 267 share classes.
Since late 1996, Federated has been conducting a comprehensive review of its
business strategies in order to position itself for increased profitability,
long term sustainable growth and enhanced shareholder value. This review
includes the products, markets and operations of Federated. The financial
results of the initiatives undertaken by management during this period have
been positive. Net income increased by $38.0 million or 300.8% when comparing
1997 results to 1996 in substantial part as a result of these initiatives.
Managed Assets have increased from $74.8 billion at the end of 1996 to $92.5
billion at the end of 1997, an increase of 23.6%. Administered Assets
increased by $11.4 billion in this same period, an increase of 32.1%. However,
due to the relatively lower revenues, changes in the amount of Administered
Assets generally have less impact on Federated's results of operations than
changes in the amount of Managed Assets.
The business review generated major initiatives to more rapidly grow assets
under management while maintaining or further enhancing the service levels to
customers in a manner which increases the profitability of Federated and
reaffirmed Federated's commitment to its equity and international fund
strategy. These major initiatives include (1) refocusing the marketing of
Federated's service capabilities to emphasize fund administration and
strategic marketing which support the growth of Administered Assets rather
than selling individual services such as transfer agent and fund accounting as
stand alone products, (2) an increase in the fee structure coupled with
improved efficiency as a result of a more standardized product offering
related to the retirement plan recordkeeping unit, (3) a reengineering of the
shareholder servicing activities to provide more effective, efficient and
seamless service to fund shareholders, (4) a strategic alliance commencing in
the fourth quarter of 1997 with State Street Corporation ("State Street") to
provide portfolio accounting services to both Federated and third party
administered funds, (5) a continued emphasis on equity and international fund
management including the further development of its international management
unit in New York City and expanding marketing efforts including an advertising
campaign to enhance the awareness of the "Federated" brand name, (6)
increasing assets under management through acquisitions, (7) acceleration of
Federated's investment in the development of an improved management
information system and support resources to improve its ability to analyze
customer, product and market profitability, and (8) utilizing the capital
markets as a means to fund advance commissions paid to broker/dealers on the B
share class of funds, increasing liquidity as well as removing the risks and
uncertainties associated with the recapture of these commission assets.
27
<PAGE>
PROFITABILITY TREND SUMMARY
This discussion on "Profitability Trend Summary" should be read in
conjunction with the tables presented below.
MANAGED AND ADMINISTERED ASSETS, PERCENTAGE OF REVENUE AND KEY RATIOS
MANAGED AND ADMINISTERED ASSETS (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Money Market Funds..................... $31,856 $31,528 $40,610 $51,163 $63,622
Fixed Income Funds..................... 19,967 14,106 14,330 14,109 15,067
Equity Funds........................... 4,244 3,927 5,287 7,594 11,710
Separate Accounts...................... 1,137 1,257 1,486 1,976 2,141
------- ------- ------- ------- -------
Total Managed Assets................. $57,204 $50,818 $61,713 $74,842 $92,540
======= ======= ======= ======= =======
Total Administered Assets............ $19,505 $21,304 $22,089 $35,574 $46,999
======= ======= ======= ======= =======
</TABLE>
AVERAGE MANAGED AND ADMINISTERED ASSETS (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Managed Assets.......................... $55,513 $54,011 $55,847 $66,138 $81,580
Administered Assets..................... 16,104 20,405 23,284 26,197 42,965
</TABLE>
MANAGED ASSETS (PERCENTAGE OF TOTAL)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Funds........................... 55.7% 62.0% 65.8% 68.4% 68.8%
Fixed Income Funds........................... 34.9 27.8 23.2 18.9 16.3
Equity Funds................................. 7.4 7.7 8.6 10.1 12.6
Separate Accounts............................ 2.0 2.5 2.4 2.6 2.3
------ ------ ------ ------ ------
Total Managed Assets....................... 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
28
<PAGE>
PERCENTAGE OF REVENUE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Managed Assets....................................... 90% 84% 82% 86% 86%
Administered Assets.................................. 9 13 15 11 12
Other Income......................................... 1 3 3 3 2
--- --- --- --- ---
Total Revenue...................................... 100 100 100 100 100
--- --- --- --- ---
Compensation and Related Expenses.................... 31 33 36 39 35
Amortization of Deferred Sales Commissions........... 5 6 3 4 5
Amortization and Revaluation of Intangible Assets.... 11 39 4 3 3
Other Operating Expenses............................. 30 37 34 38 30
--- --- --- --- ---
Total Operating Expenses........................... 77 115 77 84 73
--- --- --- --- ---
Operating Income (Loss).......................... 23% (15)% 23% 16% 27%
=== === === === ===
</TABLE>
KEY RATIOS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Federated Managed Product Fees as a
Percentage of
Average Managed Assets......................... 0.43% 0.42% 0.41% 0.42% 0.43%
Non-Federated Fund Administrative and Other
Service Fees as a
Percentage of Average Administered Assets...... 0.15% 0.17% 0.18% 0.14% 0.11%
</TABLE>
Managed Assets. For the period from December 31, 1993 through December 31,
1997, total Managed Assets increased $35.3 billion, or 61.8%. The increase in
Managed Assets is attributed primarily to the $31.8 billion (99.7%) increase
in money market funds and a $7.5 billion (175.9%) increase in equity funds
offset by a $4.9 billion (24.5%) decrease in fixed income funds.
The increase in money market assets is largely due to Federated's success in
expanding its distribution of cash management products for both institutional
and retail applications. The changes in the equity and fixed income managed
asset mix are primarily due to changes in market demand for mutual funds,
market conditions, and Federated's investment management and distribution
efforts.
Market demand for mutual fund products has shifted, reflecting a strong
preference for equity funds. At the end of 1993, total industry assets
(excluding money market funds) were approximately 50% equity and 50% fixed
income. By the end of 1997, this mix had shifted to 71% equity and 29% fixed
income. Market conditions contributed to this shift as relatively higher
returns in the equity markets created a favorable sales environment and led to
net asset value appreciation in equity funds. Conversely, in 1994 rapidly
rising interest rates led to reduced returns and reduced net asset values of
most fixed income mutual funds.
Driven by these patterns, Federated has increased its efforts to raise
equity fund Managed Assets by developing new products, increasing investments
in distribution, and by expanding its investment management capabilities, most
notably by forming a New York-based global investment management group in
1995.
Federated's managed product fees per dollar of average Managed Assets during
this period reflect these trends. These fees decreased from 0.43% of average
Managed Assets in 1993 to 0.41% in 1995 due largely to the decrease in fixed
income fund Managed Assets. Since 1995, these fees have increased back to
0.43% due principally to the growth of equity fund Managed Assets.
Administered Assets. For the period from December 31, 1993 through December
31, 1997, total Administered Assets increased $27.5 billion, or 141.0%. During
this period, Federated developed its service
29
<PAGE>
businesses to provide administration, transfer agency, portfolio accounting,
retirement plan recordkeeping and administration, and other services to third
party funds, retirement plans and other customers. While the level of assets
has increased over the period discussed, competition has forced the fees
realized from these service lines downward over the past few years. In
addition, some third-party mutual fund sponsors have developed the ability to
internalize fund administration functions. Internalization of certain of these
services has resulted in reductions in the level of services provided by
Federated to certain customers. The combination of price competition and
reduced service levels has resulted in overall lower fees per dollar
administered. Recently, Federated has received notice from a client for which
it provides limited administrative services that the client has decided to
internalize such services and therefore will end its service arrangement with
Federated in mid-1998. This client had administered assets of $17.4 billion as
of December 31, 1997; however, due to the limited administrative services
provided, revenues associated with such assets represented less than 0.5% of
Federated's 1997 total revenue.
RESULTS OF OPERATIONS
General
Federated derives nearly all of its revenue through advising, distributing
and servicing of proprietary and third party mutual funds, separately managed
accounts and other related products. Investment advisory fees are the largest
source of revenue and are derived by providing investment advice to the
various proprietary funds and other products. Distribution related fees are
earned as a result of marketing the funds through Federated's bank trust
department, broker/dealer, institutional and other sales channels. Servicing
fees include administration services, portfolio accounting and shareholder
servicing of the funds. In addition to services provided for the funds and
separate accounts, Federated also provides recordkeeping and administration to
retirement plans as well as clearing services to bank trust departments for
their investments in registered investment companies.
Investment advisory, distribution and the majority of the servicing fees are
based on the net asset value of the investment portfolios managed or
administered by Federated. As such, these revenues are dependent upon factors
including market conditions and the ability to attract and maintain assets.
Accordingly, revenues will fluctuate with changes in the total value and
composition of the assets under management or administration. Investment
advisory and administration related service fees are generally paid daily,
while distribution fees are paid to Federated on a monthly basis. Portfolio
accounting related service fees are also generally asset based, however they
incorporate certain flat fees for additional share classes. Transfer agency
related service fees are based principally on the level of shareholder
accounts maintained by each of the funds. Both portfolio accounting and
transfer agency fees are paid on a monthly basis.
Federated's expenses are largely centered around employee and related office
support expenditures, marketing related costs, the amortization of deferred
sales commissions and the amortization of intangible assets. Federated's
largest operating expenses are employee related. These expenses include
employee salaries, incentives, benefits, travel and related entertainment,
office space, and office related services and supplies. These expenses
generally rise and fall in relative proportion to the number of employees
retained by Federated. Marketing costs generally vary based on the type and
level of marketing or sales programs in operation. Amortization of deferred
sales commissions will fluctuate based on the overall level of sales of
certain shares of funds in which Federated advances a commission to brokers,
while amortization of intangible assets will vary based on the overall level
of intangible assets recorded and their estimated useful life.
Over the past five years, investments have been made in new products and
services which have resulted in a steady increase in the number of Federated
employees. These investments include new fund offerings, in particular equity
and international funds, the expansion of sales efforts in the broker/dealer
and institutional markets, the increased investment in advisory personnel, and
the expansion or introduction of transfer agency, portfolio accounting,
retirement plan recordkeeping and administration, and clearing services.
As part of management's review of the business strategies and resulting
initiatives, in November 1997, Federated entered into an alliance with State
Street, the largest provider of portfolio accounting services to the mutual
fund industry, to provide portfolio accounting and financial information
analysis services for both the
30
<PAGE>
Federated sponsored and third party funds on a sub-contracted basis. Federated
will continue to directly provide tax and certain treasury functions to the
funds. This alliance is part of Federated's strategy to focus resources on its
core business of asset management and enables Federated to (1) benefit by
partnering with a firm that is committed to the future investments required to
continue providing outstanding portfolio accounting services, (2) reduce the
risk associated with providing portfolio accounting services, and (3) improve
cost management. This alliance is not anticipated to materially alter
Federated's revenues or expenses; however, Federated has significantly reduced
the number of its employees engaged in these services.
The amortization of deferred sales commissions to brokers is a result of a
marketing program in which Federated pays a commission to unaffiliated
securities broker/dealers at the time they generate a sale into certain
classes of funds managed by Federated. The upfront payment to the broker is
based on a percentage of the original purchase into the mutual fund. These
payments are capitalized and recorded as deferred sales commissions and are
amortized on a straight line basis over estimated periods of benefit not to
exceed contingent deferred sales charge periods. If shares are redeemed before
a certain time period, the shareholder is normally required to pay to
Federated a contingent deferred sales charge ("CDSC") based on a percentage of
assets at the time of redemption, which diminishes over a recovery schedule
not to exceed six years. Upon receipt, CDSCs are treated as a reduction of the
related deferred sales commissions asset. In October 1997, Federated sold its
rights to certain future revenue streams associated with its existing B share
advance commissions. Federated received $165.4 million which was utilized to
repay the outstanding balance of a revolving line of credit and bank term
debt, providing an increase in liquidity in the form of credit availability
from approximately $44 million prior to the transaction to $149 million. The
agreement also provides for Federated to sell, in regular intervals, the
rights to such future revenue streams during a three year contract period.
Amortization of intangible assets is primarily the result of Federated's
acquiring 100% of the outstanding stock of the Company and certain assets from
Aetna in August 1989 as well as the acquisition of customer relationships from
other fund companies in 1996 and 1997.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Net Income. Federated's consolidated net income applicable to Common Stock
for the year ended December 31, 1997 was $50.6 million ($0.91 per diluted
Common Share) as compared to 1996 of $9.6 million ($0.17 per diluted Common
Share), an increase of $41.0 million ($0.74 per diluted Common Share) or
427.2%. The improved performance was the result of revenue growth of $81.9
million, largely generated from higher levels of managed and administered
assets, coupled with expense management.
Revenue. Federated's consolidated revenue for the year ended December 31,
1997 was $403.7 million as compared to the year ended December 31, 1996 of
$321.8 million, an increase of $81.9 million or 25.5%. The primary reason
behind the overall increase in revenue was the enhanced revenue generated by
the management and servicing of the Federated funds and other products which
accounted for $71.9 million, or 87.7% of the total increase. This was
principally the result of an increase in average managed assets of $15.5
billion (23.3%) from $66.1 billion for the year ended December 31, 1996 to
$81.6 billion for 1997. In addition, asset composition changed from 18.9%
fixed income funds and 10.1% equity funds at December 31, 1996 to 16.3% fixed
income funds and 12.6% equity funds at December 31, 1997. Generally equity
funds produce higher revenues as a percentage of assets than fixed income
funds. An increase in average administered assets of $16.8 billion (64.0%)
accounted for the additional servicing revenue of $9.0 million, or 10.9% of
the total increase in revenue. Managed assets increased due principally to new
assets from customers and increases in the market value of existing assets
under management. The increase in average administered assets was due
principally to the full year impact of Federated's obtaining in late 1996
administration, sub-administration and distribution agreements and increases
in the assets of existing customers.
In October 1997, Federated structured a transaction to sell the rights to
certain future revenue streams associated specifically with the B share
advance commissions for both prior advancements and those from future product
sales. As a result of this transaction, Federated receives revenue in three
forms (program collection
31
<PAGE>
revenue, gains on the sale of future cash flows and program servicer agent
revenue) which together comprise Securitization Revenue on the Consolidated
Statements of Income. Program collection revenue is derived from the cash
flows related to certain B share assets which were purchased by a special
purpose entity which is consolidated into the financial statements of
Federated, gains on the sale of future cash flows are related to the sale of
certain cash flows related to B share assets to third parties, and program
servicer agent revenue is related to fees associated with the continued
servicing of the B share securitization program. See Note 6 to the
Consolidated Financial Statements for further information related to the
securitization of B share assets.
Operating Expenses. Total operating expenses increased from $270.2 million
for the year ended December 31, 1996 to $294.1 million for 1997, an increase
of $23.9 million or 8.9%.
Compensation and related expenses for the year ended December 31, 1997 were
$139.4 million as compared to 1996 of $127.0 million, an increase of $12.4
million or 9.8%. This increase was primarily due to the average number of
employees increasing between these two periods by 141 or 7.4%, as well as an
increase in incentive compensation expense as a result of increased sales and
favorable investment performance as compared to benchmarks and improved
financial performance of Federated. This change does not reflect the reduction
in the number of employees due to the strategic alliance with State Street.
Staff growth was experienced in the areas of investment research, with
continued emphasis in domestic and global portfolio management, and in various
service areas.
Amortization of deferred sales commissions was $20.9 million for the year
ended December 31, 1997, an increase of $8.6 million (69.1%) over the 1996
amount of $12.3 million. This increase was due to the continued sale of shares
of funds which require Federated to advance a commission to the broker/dealer
and the related growth in the deferred sales commissions which totaled $101.5
million and $85.9 million as of December 31, 1997 and 1996, respectively. In
October 1997, Federated structured a transaction to sell the rights to certain
future revenue streams associated specifically with the B share advance
commissions for both prior advancements and those from future product sales.
Office and occupancy expense was $28.6 million for the year ended December
31, 1997, a decrease of $1.3 million or 4.2% as compared to the $29.9 million
recorded for the year ended December 31, 1996. This decrease was primarily due
to the reduction of rent expense as the result of the early termination of
leased space, a reduction in leasehold improvement depreciation and a
reduction in other office expenses.
Systems and communications expense increased from $22.3 million for the year
ended December 31, 1996 to $23.4 million for 1997, an increase of $1.1 million
or 4.9%. This was principally due to an increase in costs related to third
party system vendors.
Advertising and promotional expenses were $35.0 million for the year ended
December 31, 1997 as compared to $31.0 million for 1996, an increase of $4.0
million or 12.9%. The primary reason for this increase was an increase in the
level of assets of various funds, resulting in higher levels of marketing
allowances being paid to brokers and bank clients for retail marketing
efforts.
Travel and related expenses decreased by $1.1 million or 6.9% from $15.9
million for the year ended December 31, 1996 to $14.8 million for the year
ended December 31, 1997. The reduction in cost was principally the result of
management's initiative to reduce discretionary spending in this expense
category by negotiating more favorable discount arrangements with travel
related vendors and improved overall expense management.
Other expense consists of corporate insurance, professional service fees
such as auditing, legal and consulting expenditures, bad debt expense and
other miscellaneous expenditures. This category experienced a decrease of $4.6
million or 20.0% from $22.9 million for the year ended December 31, 1996 to
$18.3 million for 1997. This reduction was principally the result of the
decreased utilization of professional services, the reduction of taxes other
than income taxes and the reduction of reserves for errors related to the
various service businesses.
Amortization of intangible assets increased by $4.8 million (54.3%) to $13.7
million for the year ended December 31, 1997 as compared to $8.9 million for
1996. This expense increased as a result of the purchase of
32
<PAGE>
several customer relationships in late 1996 and throughout 1997 and the
resulting allocation of a portion of the purchase price to intangible assets
on Federated's balance sheet.
Nonoperating Expenses. Nonoperating expenses decreased by $227 thousand or
1.1% to $20.1 million for the year ended December 31, 1997 as compared to
$20.3 million for 1996. Interest expense increased by $299 thousand or 1.6%
from $18.6 million for the year ended December 31, 1996 to $18.9 million for
1997. Other debt expense was $1.2 million for the year ended December 31,
1997, a decrease of $526 thousand (30.5%) from the $1.7 million recorded for
the year ended December 31, 1996. The decrease was due to the early prepayment
of term debt as a result of a debt restructuring in mid-1996 as well as the
prepayment of the remaining term debt in October 1997. In both instances, the
allocable unamortized portions of the debt issuance costs related to the term
debt which was prepaid was recorded as an extraordinary item, net of tax.
Minority Interest. The minority interest increased from $6.8 million for the
year ended December 31, 1996 to $7.6 million for 1997, an increase of $773
thousand or 11.3%. This increase was a result of a higher level of net income
of the subsidiary for which Federated acts as the general partner with a
majority interest of 50.5%.
Income Taxes. The income tax provision for the year ended December 31, 1997
was $30.9 million, an increase of $20.0 million or 183.2% as compared to the
$10.9 million recorded in 1996. This increase was due principally to the $57.4
million or 234.1% increase in the level of income before income taxes and
extraordinary item recorded for the year ended December 31, 1997 as compared
to 1996. The effective tax rate for Federated was 37.8% and 44.5% for the
years ended December 31, 1997 and 1996, respectively. The increased rate above
the statutory rate of 35% for both periods was primarily the result of the
nondeductible amortization of goodwill and the statutory limitation on the
deductibility of meals and entertainment.
Dividends on Preferred Shares. There were no dividends on preferred shares
for the year ended December 31, 1997 as compared to $3.0 million for the year
ended December 31, 1996 as a result of the purchase of Federated's preferred
shares from the shareholder in 1996.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
Net Income. Federated's consolidated net income applicable to common stock
for the year ended December 31, 1996 was $9.6 million ($0.17 per diluted
Common Share) as compared to the year ended December 31, 1995 of $22.5 million
($0.35 per diluted Common Share), a decrease of $12.9 million ($0.18 per
diluted Common Share) or 57.4%.
Revenue. Federated's consolidated revenue for the year ended December 31,
1996 was $321.8 million as compared to the year ended December 31, 1995 of
$279.8 million, an increase of $42.0 million or 15.0%. The net increase in
revenue was due to the enhanced revenue generated by the management and
servicing of the Federated funds and other products which accounted for $45.1
million, or 107.4% of the total increase. This was principally the result of
an increase in average managed assets of $10.3 billion (18.4%) from $55.8
billion for the year ended December 31, 1995 to $66.1 billion for 1996. While
Federated experienced an increase in average administered assets of $2.9
billion or 12.5% for the year ended 1996 versus 1995, the combination of the
composition of customers, the relatively lower level of services provided to
these customers and market forces reducing fees within the servicing lines of
business resulted in a net decrease in servicing revenue to administered
assets of $3.9 million, or 9.5%. In addition, asset composition changed from
23.2% fixed income funds, 65.8% money market funds and 8.6% equity funds at
December 31, 1995 to 18.9% fixed income funds, 68.4% money market funds and
10.1% equity funds at the end of 1996. Federated product asset increases
resulted from new assets from customers, increases in the market value of
existing assets under management, and the purchase of certain customer
relationships. The increase in average administered assets was due principally
to increases in the assets of existing customers.
Operating Expenses. Total operating expenses experienced an increase from
$216.9 million for the year ended December 31, 1995 to $270.2 million for
1996, an increase of $53.3 million or 24.6%.
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<PAGE>
Compensation and related expenses for the year ended December 31, 1996 were
$126.9 million as compared to the year ended December 31, 1995 of $101.5
million, an increase of $25.4 million or 25.0%. This increase was primarily
due to the average number of employees increasing between these two periods by
197 or 11.1% as well as an increase in the average salary per employee of
11.9%. Increases in employment levels were experienced across the
organization, with emphasis in investment research and various service areas.
The average salary per employee increased principally as a result of increases
in compensation levels of certain employees for competitive purposes.
Amortization of deferred sales commissions was $12.3 million for the year
ended December 31, 1996, an increase of $2.8 million (29.3%) over the year
ended December 31, 1995 amount of $9.5 million. This increase was due to the
continued sale of shares of funds which require Federated to advance a
commission to the broker/dealer and the related growth in the deferred sales
commissions which totaled $85.9 million and $36.8 million as of December 31,
1996 and 1995, respectively.
Office and occupancy expense was $29.9 million for the year ended December
31, 1996, an increase of $6.6 million or 28.3% over the $23.3 million recorded
for the year ended December 31, 1995. This increase was primarily due to
increased rental costs and depreciation of leasehold improvements related to
the addition of rental property in January 1996 to accommodate the growing
retirement plan services division, depreciation expense on computer related
hardware and software purchased throughout 1995 and 1996 and the overall
increase in general office expenses related to the higher level of employment.
Systems and communications expense decreased from $22.8 million for the year
ended December 31, 1995 to $22.3 million for the year ended December 31, 1996,
a decrease of $0.5 million or 2.4%.
Advertising and promotional expenses were $31.0 million for the year ended
December 31, 1996 as compared to $21.5 million for the year ended December 31,
1995, an increase of $9.5 million or 44.3%. The primary reason for this
increase was an increase in the level of assets of various funds, resulting in
higher levels of marketing allowances being paid to brokers and bank clients
for retailing efforts of marketing these funds. Additionally, in 1996
Federated launched a nationwide campaign to increase brand recognition of the
Federated funds.
Travel and related expenses increased by $3.1 million or 24.2% from $12.8
million for the year ended December 31, 1995 to $15.9 million for the year
ended December 31, 1996. The increase was due principally to increased travel
related to the marketing and sales efforts of the various products.
Other expense experienced an increase of $8.0 million or 53.4% from $14.9
million for the year ended December 31, 1995 to $22.9 million for the year
ended December 31, 1996. This increase was principally the result of the
increased utilization of professional services in 1996, specifically in
relation to the consulting expenditures related to management's review of its
business strategies, an increase in taxes other than income taxes, the
expensing of obsolete marketing related material and an increase in bad debt
expense and the impairment of assets related to the retirement plan unit.
Amortization of intangible assets decreased by $1.5 million or 14.9% to $8.9
million for the year ended December 31, 1996 as compared to $10.4 million for
1995 as a result of certain intangible assets being fully amortized.
Nonoperating Expenses. Nonoperating expenses increased by $10.5 million or
106.5% to $20.3 million for the year ended December 31, 1996 as compared to
$9.8 million for the year ended December 31, 1995. Interest expense increased
by $9.2 million or 97.2% as a result of an increase in the average debt
outstanding from $115 million in 1995 to $249 million in 1996. This increase
was primarily due to the issuance of long term debt to fund the purchase of
Federated's stock from major shareholders and the use of a line of credit to
fund the higher levels of deferred sales commissions specifically related to
the B share class of funds. Other debt expense
34
<PAGE>
was $1.7 million for the year ended December 31, 1996, an increase of $1.3
million or 317.4% from the $0.4 million recorded in 1995 due principally to
the increased amortization related to the issuance costs of the long term debt
acquired in 1996.
Minority Interest. The minority interest increased from $5.8 million for the
year ended December 31, 1995 to $6.8 million for the year ended December 31,
1996, an increase of $1.0 million or 17.4%. This increase was a result of a
higher level of net income of the subsidiary for which Federated acts as the
general partner with a majority interest of 50.5%.
Income Taxes. The income tax provision for the year ended December 31, 1996
was $10.9 million, a decrease of $7.9 million or 41.9% as compared to the
$18.8 million recorded for 1995 primarily due to the $22.8 million or 48.2%
decrease in the level of income before income taxes and extraordinary item
recorded for the year ended December 31, 1996 as compared to the year ended
December 31, 1995. The effective tax rate for Federated was 44.5% and 39.7%
for the years ended December 31, 1996 and 1995, respectively. The increased
rate above the statutory rate of 35% for both periods was primarily the result
of the nondeductible amortization of goodwill and the statutory limitation on
the deductibility of meals and entertainment.
Dividends on Preferred Shares. Dividends on preferred shares were $3.0
million for the year ended December 31, 1996 compared to $6.0 million for the
year ended December 31, 1995, a decrease of $3.0 million or 49.6% as a result
of the purchase of Federated's preferred shares from the shareholder in 1996.
CAPITAL RESOURCES AND LIQUIDITY
Cash Flow. Historically, Federated generally financed its business from the
cash flow generated from operating activities and through a bank line of
credit. Cash provided by operating activities totaled $12.7 million, $27.5
million and $23.7 million for the years ended December 31, 1997, 1996 and
1995, respectively. The cash flow from operating activities along with a
revolving line of credit is primarily utilized for the financing of deferred
commissions to brokers, purchases of equipment, acquisitions, dividend
payments, as well as payments on long term debt.
The recourse debt held by Federated decreased $160.6 million and increased
$129.0 million and $21.0 million for the years ended December 31, 1997, 1996
and 1995, respectively. In 1997, proceeds from the sale of certain future cash
streams related to the B shares was utilized to reduce recourse debt by $159.6
million. Federated utilized debt in 1996 to purchase a portion of its stock
from major shareholders for $123.7 million as well as to fund the growth in
deferred sales commissions.
The deferred sales commissions paid to broker/dealers on certain shares of
funds totaled $111.8 million, $69.6 million and $40.1 million for 1997, 1996
and 1995, respectively. In October 1997, Federated sold for $110.2 million the
rights to certain future revenue streams associated with the B share advance
commissions as of March 31, 1997. An agreement was entered into with a special
purpose entity whose sole purpose was to purchase Federated's future rights to
the 12b-1, CDSC and shareholder service fees of the B shares of certain funds
from the inception of the B share program through sales incurred through March
31, 1997. In order to fund this purchase from Federated, the special purpose
entity issued two debt securities, Class A and Class B, for $104.4 million and
$9.7 million, respectively. These debt securities will be repaid solely from
the 12b-1, CDSC and shareholder service fee cash flows generated by these B
share assets and there is no recourse to Federated. The Class A debt carries a
fixed interest rate of 7.44% while the Class B debt has a fixed interest rate
of 9.80%. The special purpose entity is consolidated onto the books of
Federated. Also in October 1997, Federated sold for $55.2 million the rights
to certain future revenue streams associated with the B share advance
commissions for sales from April 1, 1997 through September 30, 1997.
Additionally, a three year agreement provides for the sale of similar revenue
streams from future B share activity. On an ongoing basis, Federated will
initially advance the commissions to the broker/dealer and, in regular
intervals, sell the future rights of these cash inflows to a third party.
Payments made by the special purpose entity and other payments made with
respect to related nonrecourse debt totaled $7.4 million in 1997.
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<PAGE>
The October 1997 sales of certain future cash flows related to the advanced
commissions made by Federated through September 1997 was utilized to eliminate
bank debt held within a revolving line of credit and term debt. Under the debt
agreement with the bank, the term debt is considered prepaid and cannot be
reborrowed. The revolving line of credit will provide an increase in liquidity
for Federated in the form of credit availability of $149.0 million and is in
place through January 31, 2001.
Capital Expenditures. Capital expenditures totaled $3.1 million, $12.4
million and $7.4 million for the years ended December 31, 1997, 1996 and 1995,
respectively. Capital expenditures include the investment in technology,
furniture and equipment, and leasehold improvements. Management expects
capital expenditures in 1998 to exceed $10 million, exclusive of Year 2000
project costs described under "Year 2000 Disclosure".
Debt Facilities. Federated has the following recourse debt facilities:
Senior Secured Credit Agreement and Note Purchase Agreement. The Senior
Secured Credit Agreement consists of two separate facilities, the term loan
and the revolving credit facility, with a maturity date of January 31, 2001.
The outstanding balance and amount available to borrow under the Senior
Secured Credit Agreement at March 2, 1998 was zero and $149.0 million,
respectively. The term loan facility was prepaid and eliminated in October
1997 as part of the transaction related to the B share financing. Federated
continues to maintain a $150 million line of credit which may be utilized for
working capital purposes and to fund possible acquisitions. The Senior Secured
Note Purchase Agreement debt totaled $98.0 million as of December 31, 1997 and
is due in seven annual installments beginning June 27, 2000, and maturing June
27, 2006. The Note carries a fixed interest rate of 7.96%.
Federated also has nonrecourse debt obligations, aggregating $122.3 million
at December 31, 1997, incurred in connection with the sale of rights to
certain future revenue streams associated with the B share advance
commissions. See Note 6 to the Consolidated Financial Statements.
Concurrent Public Offering. As a condition to the consummation of the
Merger, Federated is required to complete an underwritten public offering of
shares of Class B Common Stock of the Company, including shares held by
certain existing shareholders of the Trust. The number of shares to be offered
and the timing of the Offering have not yet been determined. The net proceeds
to be received by the Company will be used for working capital and other
general corporate purposes.
YEAR 2000 DISCLOSURE
Federated utilizes software and related technologies throughout its
businesses including both proprietary systems as well as those provided by
outside vendors. Significant functions such as portfolio
accounting/recordkeeping and shareholder services rely on systems provided by
outside vendors. It is anticipated that these systems will be affected by the
date change in the year 2000. The year 2000 issue exists because many computer
systems and applications currently use two-digit date fields to designate a
year. As the century date change occurs, certain date-sensitive systems may
recognize the year 2000 as 1900, or not at all. This inability to recognize or
properly treat the year 2000 may cause systems to process critical financial
and operational information incorrectly. Federated, like many other companies,
is expected to incur expenditures over the next two years to address this
issue.
Federated formed a team of employees in 1997 to determine the full scope and
related costs to ensure both proprietary and third party vendor systems will
be year 2000 compliant, meeting both internal needs and those of our
customers. Federated's assessment of internal systems is substantially
complete and plans are in place for all proprietary applications within
Federated to be renovated or replaced. Completion of renovation or replacement
and the subsequent testing and implementation are scheduled for 1998, with
1999 being reserved for industry-wide, cooperative testing. The assessment
process is in progress for the related infrastructure and third party desktop
software products. Based on management's identification of resource
requirements for both plan implementation and overall project management, it
is anticipated that the Year 2000 costs, which are being expensed as incurred,
will be, at a minimum, $10 million for internal systems and do not reflect the
impact of outside vendors to become year 2000 compliant. Accordingly, a final
cost estimate cannot be determined at this time.
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<PAGE>
INTEREST RATE SENSITIVITY
Federated's revenues are derived almost exclusively from fees which are
based on the values of assets managed or administered. Such values are
affected by changes in the broader financial markets which are, in part,
affected by changing interest rates. In a period of rapidly rising interest
rates, Federated's investment advisory fee revenue from fixed income funds may
be negatively impacted by reduced asset values and redemptions in those funds,
and institutional investors may redeem shares in money market funds to invest
directly in market issues offering higher yields. These redemptions would
reduce Managed Assets, thereby reducing Federated's advisory fee and certain
other revenue.
ECONOMIC AND MARKET CONDITIONS
The financial markets and the investment management industry in general have
experienced record performance and record growth in recent years. For example,
between January 1, 1995 and December 31, 1997, the S&P 500 Index appreciated
at a compound annual rate in excess of 25% while, according to the Investment
Company Institute, equity mutual fund assets under management grew at a
compound annual rate of approximately 40% for the period January 1, 1995 to
December 31, 1997. The financial markets and businesses operating in the
securities industry, however, are highly volatile and are directly affected
by, among other factors, domestic and foreign economic conditions and general
trends in business and finance, all of which are beyond the control of
Federated. There can be no assurance that broader market performance will be
favorable in the future. Any decline in the financial markets or a lack of
sustained growth may result in a corresponding decline in performance by
Federated and may adversely affect Managed and Administered Assets and related
fees.
IMPACT OF INFLATION
The major sources of revenue for Federated are based on the value of Managed
and Administered Assets. There is no predictable relationship between the rate
of inflation and the value of assets managed or administered by Federated,
except as inflation may affect interest rates. Inflation has affected the cost
of operations in the past and could continue to do so in the future. See
"Interest Rate Sensitivity".
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal
years beginning after December 15, 1997. This statement establishes standards
for reporting and display of comprehensive income and its components.
Comprehensive income includes net income and all other changes in
shareholders' equity except those resulting from investments and distributions
to owners.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning
after December 15, 1997. This statement requires financial and descriptive
information about an entity's operating segments to be included in the annual
financial statements.
Federated believes that the impact of the adoptions of SFAS No. 130 and SFAS
No. 131 will not have a material impact on its Consolidated Financial
Statements.
37
<PAGE>
BUSINESS
OVERVIEW
Federated is a leading provider of investment management products and
related financial services. Federated sponsors, markets and provides
investment advisory, distribution and administrative services primarily to
mutual funds. Federated has been in the mutual fund business for over 40 years
and is one of the ten largest mutual fund managers in the United States.
Federated manages assets across a wide spectrum of asset categories
including substantial participation in fast-growing areas such as equity and
international investments. Federated ranks among the industry leaders for
money market and fixed income funds, based on assets under management and
offers one of the most comprehensive product lines in the industry. Many of
Federated's products are ranked highly by recognized industry sources based on
investment performance relative to peer funds.
Federated has built a national reputation as a high quality provider of a
broad range of investment management products and related financial services.
Federated distributes its products through financial intermediaries such as
banks, brokers and other investment advisers who use them to meet the needs of
their customers; these customers include retail investors, corporations, and
retirement plans. Federated employs one of the largest sales forces directed
to financial intermediaries and institutions in the industry with more than
175 sales representatives and managers across the United States. Through
substantial investments in distribution over the last 20 years, Federated has
developed an extensive network of over 3,500 financial institutions which sell
Federated's products to their customers. Federated also directly sells its
products to more than 500 institutions such as corporations and government
entities.
Federated pioneered the use of money market funds by institutions for cash
management purposes and ranks in the top one percent of money fund managers.
Federated believes that its substantial money market fund business provides a
revenue base that is generally stable and recurring. From this base, Federated
intends to continue to expand its Managed Assets in areas such as equities and
international investments which generally produce higher fee revenue and have
experienced substantial growth. Federated believes that its history as an
excellent investment manager combined with the size and quality of the
distribution network it has developed will enable it to continue to expand its
business in these key areas. Federated also continues to actively seek
acquisitions which fit within its long range growth strategy by expanding
assets under management.
The following table shows Federated's Managed Asset composition for the past
three years:
MANAGED ASSETS
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
----------------------- ---------------
3 YR.
1995 1996 1997 CAGR* 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Funds/Cash Equivalents.. $40,610 $51,163 $63,622 26% 24%
Fixed Income Funds................... 14,330 14,109 15,067 2% 7%
Equity Funds......................... 5,287 7,594 11,710 44% 54%
Separate Accounts.................... 1,486 1,976 2,141 19% 8%
------- ------- -------
Total Managed Assets............... $61,713 $74,842 $92,540 22% 24%
======= ======= =======
Reference: International/Global
Managed Assets...................... $ 421 $ 694 $ 1,172 35% 69%
======= ======= =======
</TABLE>
- --------
* Compound Annual Growth Rate.
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<PAGE>
Federated is also a leading provider of mutual fund administrative services
such as legal support and regulatory compliance, audit, fund accounting and
other financial services and transfer agency services. Federated provides
these services to its managed funds and markets these services to third
parties, primarily banks who sponsor mutual funds. Federated has refocused the
marketing of its service capabilities to emphasize fund administration and
strategic marketing, which support the growth of Administered Assets rather
than marketing individual services such as transfer agency and fund accounting
as stand-alone products. Federated believes that this refocus will better
support the efforts of its fund administration customers to increase their
assets, resulting in an increase in Federated's administrative fee revenue.
ADMINISTERED ASSETS
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
----------------------- ---------------
3 YR.
1995 1996 1997 CAGR 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Administered Assets................... $22,089 $35,574 $46,999 30% 32%
======= ======= =======
</TABLE>
BUSINESS STRATEGY
Federated's long range strategy has three objectives:
. To be widely recognized as a world class investment management company
that offers highly competitive performance and disciplined risk
management while consistently adhering to its investment objectives
across a broad spectrum of investment management products.
. To profitably expand Federated's market penetration by increasing its
assets under management in each market where it chooses to apply its
substantial distribution resources.
. To use its substantial expertise in mutual fund administration to provide
superior customer services and to profitably expand its customer
relationships.
Investment Management. Federated intends to achieve its investment
management strategy by seeking above average returns with below average risk
in multiple asset classes across the investment spectrum and by consistently
following its style disciplines. Federated has structured its investment
process to meet the requirements of fiduciaries and others who use Federated's
products to meet the needs of their customers. Fiduciaries typically have
stringent demands related to portfolio composition, risk and investment
performance. Federated follows a disciplined investment process consistent
with these requirements. Many of Federated's fund products have been ranked
among the leaders in their respective categories by recognized industry
sources.
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<PAGE>
Historically, Federated's mix of Managed Assets has been dominated by money
market and other fixed income assets where Federated continues to be among the
leading mutual fund managers based on assets under management. More recently,
in response to market demand and to diversify its managed assets, Federated
has emphasized growth of its equity fund business and has broadened its range
of equity products to include international, aggressive growth, and small
capitalization equity products. Within Federated's managed asset categories,
equity fund assets have been the fastest growing asset class. Federated has
increased its market share of equity fund managed assets by growing at a
faster rate than the overall industry as measured by growth rates over the
last three years, according to Investment Company Institute ("ICI") data.
EQUITY FUND GROWTH RATES THROUGH YEAR END 1997
<TABLE>
<CAPTION>
3 YR. 2 YR.
CAGR CAGR 1997
----- ----- ----
<S> <C> <C> <C>
Federated................................................ 44% 49% 53%
Industry................................................. 40% 38% 37%
</TABLE>
Distribution. Federated's distribution strategy is to provide products
geared to financial intermediaries, primarily banks, broker/dealers and
investment advisers, and directly to institutions such as corporations and
government entities. Through substantial investments in distribution over the
last 20 years, Federated has developed selling relationships with more than
3,500 institutions, including large and small banks, national and regional
broker/dealers and other financial advisors. Federated sells its product
directly to another 500 corporations and government entities. Federated
believes that these relationships in total form one of its most important
assets.
Federated seeks to expand its market penetration by committing extensive
resources to maintaining and expanding its customer relationships and to
developing mutual fund products which are responsive to market demands.
Through its large trained sales force of more than 175 sales representatives
and managers across the United States, Federated believes that it can continue
to broaden its distribution capacity both by adding new relationships and
strengthening existing relationships. Federated offers the sales
representatives of its client firms an extensive product line with attractive
pricing and compensation options, strong customer service, and marketing
support. Distribution resources are employed in areas determined by Federated
to offer the highest potential for profitable asset growth. Federated has
formed teams of dedicated sales representatives to focus on key financial
intermediaries who have demonstrated substantial growth in sales of
Federated's products. Federated has also increased its commitment to
advertising and media relations in order to better position Federated within
its various distribution channels. To supplement its distribution channel
growth, Federated has also developed an active acquisitions effort, resulting
in the completion of three transactions since November, 1996 that added
approximately $4.9 billion in managed assets. See "Recent Acquisitions."
Services. Federated has long been the provider of a broad range of mutual
fund services to support the operation, administration and distribution of
Federated-sponsored mutual funds. These services, for which Federated receives
a fee from the funds, include legal support and regulatory compliance, audit,
portfolio accounting and other funds financial services, transfer agency
services, and shareholder servicing and support. In 1988, in response to
demand from its important bank customer base, Federated began to offer these
services to institutions seeking to outsource all or part of their mutual fund
service and distribution functions. Through various subsidiaries, Federated
provides its depth, experience, and expertise in these areas to expand its
relationships with key financial intermediaries--primarily banks who sponsor
proprietary mutual funds.
Federated's business strategy is to use the unique knowledge base, service
expertise, distribution capability and products it has developed to help its
customers grow their mutual fund businesses, thereby positioning
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<PAGE>
Federated as a key partner in the mutual fund operation of the financial
intermediary. Federated receives fees from these bank-sponsored funds for
providing fund services. Typically, the services offered are part of a broad
relationship with the bank. Federated has over $7.2 billion in assets under
management from its bank services customers as of December 31, 1997. Over 90%
of Federated's bank services customers include Federated-sponsored mutual
funds on the menu of funds offered to their customers.
Recent Acquisitions. Federated has completed three acquisitions since
November, 1996 which together resulted in an increase of approximately $4.9
billion in managed assets. In November, 1996, Federated assumed the investment
management and distribution responsibilities from Lehman Brothers Holdings,
Inc. for nine mutual funds with approximately $4.1 billion in assets which
previously carried the Lehman Brothers brand name. Also in November 1996,
Federated assumed the investment management and distribution responsibilities
from ARM Financial Group for six mutual funds with approximately $237 million
of assets which previously carried the State Bond brand name. In May, 1997,
Federated assumed the investment management and distribution responsibilities
from the William Penn Company for seven mutual funds with approximately $548
million in assets which previously carried the William Penn brand name.
Federated believes that its disciplined investment management style, broad
product line, competitive fund performance, strong customer support and proven
operational capabilities offer an attractive package that addresses key
concerns of sellers. Federated also offers its substantial distribution
capacity to sellers who have developed attractive products but have been
unable to make the large ongoing investments necessary for successful product
distribution on a broad scale.
ORGANIZATION AND MARKETS
Federated organizes its operations into three principal functions:
investment management, distribution and services.
INVESTMENT MANAGEMENT
At December 31, 1997, Federated was ranked by Strategic Insight, a
recognized industry source, in the top one percent of money market fund
managers, in the top five percent of fixed income fund managers and in the top
six percent of equity fund managers among U.S. mutual fund managers ranked
according to fund assets managed. Federated was ranked in the top two percent
of all mutual fund managers based on total fund assets managed. Federated was
the ninth largest U.S. mutual fund manager based on fund assets as of December
31, 1997.
Federated manages assets across a wide spectrum of asset categories
including substantial participation in fast-growing areas such as equity and
international investments. Many of Federated's products are ranked highly by
recognized industry sources based on investment performance relative to peer
funds. As of December 31, 1997, Federated had 80 managed funds eligible for
Morningstar, Inc. ratings. Of these funds, 73 (or 91%) are rated "three,"
"four" or "five" stars, and 39 (or 49%) are rated "four" or "five" stars,
placing Federated among the leaders in the mutual fund industry for percentage
of top-rated funds.
Federated's principal source of revenue is investment advisory fees earned
by various subsidiaries and affiliates pursuant to investment advisory
contracts with the funds. These subsidiaries and affiliates are registered as
investment advisers under the Advisers Act. Investment advisers are
compensated for their services in the form of investment advisory fees. Each
fund has a contractual gross maximum investment advisory fee. In order to meet
the funds' statutory or voluntary expense cap, the adviser may waive a portion
or all of its investment advisory fee.
Federated provided investment advisory services to 124 funds as of December
31, 1997. Each of Federated's funds (with the exception of a collective
investment trust) is registered under the Investment Company Act and under
applicable state laws. Each of the funds enters into an advisory agreement
subject to periodic review by the directors or trustees of the respective
funds. A large portion of Federated's revenue is derived from advisory
agreements with mutual funds that are terminable generally upon 60 days'
notice.
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<PAGE>
Of these 124 funds, Federated's investment advisory subsidiaries managed 51
money market funds (and cash equivalents) totaling $63.6 billion in assets, 43
fixed income funds with $15.1 billion in assets and 30 equity funds with $11.7
billion in assets.
Due to the importance of investment performance to the mutual fund investor,
and to support its sophisticated and systematic research process, Federated
seeks to identify and retain high quality, experienced portfolio managers. The
portfolio management staff of more than 80 professionals includes more than 35
Chartered Financial Analysts. Federated's fund portfolio managers have an
average of 10 years of experience in investment management. The Company has
structured its salary and incentive compensation programs to be competitive
with market pay programs as measured by recognized industry sources. In 1995,
Federated made a major commitment to expanding its investment management
capability by establishing a New York-based global investment management unit
to focus, in particular, on the development of new global and international
equity and fixed income investment products. As of December 31, 1997, this
unit employed 19 investment professionals and managed approximately $1.2
billion in assets as compared to approximately $400 million at the inception
of the group in 1995.
Equity. Historically, Federated's mix of managed assets has been dominated
by money market and other fixed income assets where the Company continues to
be among the leading mutual fund managers based on assets under management.
More recently, in response to market demand and to diversify its managed
assets, Federated has emphasized growth of its equity fund business. Equity
fund assets comprised 44% of Federated's non-money market fund managed assets
at the end of 1997, as compared to 18% at year end 1993.
Federated has broadened its range of equity products to include
international, aggressive growth, and small capitalization funds. The number
of equity funds managed by Federated has increased from 18 at year end 1993 to
30 at year end 1997. Federated has made significant investments to increase
the size of its portfolio management staff, in particular by forming its
Global Research Division.
Within Federated's managed asset categories, equity fund assets have been
the fastest growing asset class. In 1997, Federated's equity fund assets
increased 54% compared to an industry growth rate of 37%, based on ICI data.
Since 1994, Federated's equity fund compound annual growth rate has been 44%,
compared to industry growth rate of 40%. In this period, Federated's equity
fund assets nearly tripled, increasing from $3.9 billion to $11.7 billion.
Approximately 42% of this increase was from net new sales (sales minus
redemptions), and 9% was from net fund exchanges, while market appreciation
accounted for most of the remaining increase. The composition of Federated's
growth in this period includes a greater percentage of net sales (42%) than
the industry composition (36%). In 1997, 44% of Federated's managed equity
fund asset growth was from net new sales compared to an overall industry
average of 34%. Federated believes that the quality and consistency of its
equity fund management style, its expanded menu of equity fund products, and
its substantial distribution capabilities have enabled it to gain market share
of equity fund managed assets.
In the equity management area, Federated's core style can be characterized
as a value style. Federated has also developed expertise in other sectors such
as growth, small-capitalization, and equity income. Federated combines first-
hand market knowledge with a highly structured, computer-assisted composite
equity selection and modeling system. Federated uses a team of portfolio
managers led by a senior portfolio manager for each fund. Federated's
investment research process combines disciplined quantitative screening along
with rigorous fundamental analysis to identify attractive securities.
Portfolios are continually reevaluated with respect to valuation, price and
earnings estimate momentum, company fundamentals, market factors, economic
conditions and risk controls in order to achieve specific investment
objectives.
As of December 31, 1997, Federated managed approximately $4.6 billion in
value-based securities, $3.8 billion in equity income/utility portfolios, $1.1
billion in growth products, $725 million in international equity portfolios,
$675 million in asset allocation/life cycle funds, and $1.7 billion in indexed
products that target key sectors of the stock market through max-cap, mid-cap,
and mini-cap strategies.
42
<PAGE>
International. Assets invested in international and global funds have
increased substantially in recent years. According to ICI, assets of
international and global equity and bond funds totaled $388 billion at the end
of 1997, up 69% from 1995. Federated believes that these investments will
continue to increase as investors continue to diversify portions of their
portfolios into non-U.S. securities. International products have become
increasingly important products for financial intermediaries to employ in
meeting the needs of their customers.
To address these trends, in 1995 Federated made a substantial commitment to
developing international investment products by starting its New York-based
unit to manage international equity and fixed-income assets. Prior to the
inception of this unit, Federated employed a subadvisor to assist in the
management of approximately $400 million in assets in two international funds.
Since the inception of this unit, as of December 31, 1997, these assets have
increased to approximately $1.2 billion; of this amount international equities
totaled approximately $725 million while international and global fixed income
assets were approximately $430 million.
Federated's international equity fund offerings cover the spectrum of
investments from developed to emerging markets and from large to small
capitalization stocks. Federated's international equity management style can
be characterized as a combination of growth and value. In the international
fixed income area, Federated manages both yield-oriented and total return
oriented funds. Federated's portfolio managers make extensive use of
quantitative techniques in the management of these funds and they travel
extensively around the world in both developed and emerging nations. These
portfolio managers average over 13 years of investment management experience.
Risk is managed through a combination of diversification across markets,
industries and currencies. Portfolios are actively managed through security
and country selection. Although currency hedging may be used on an occasional
basis, currency risk is not hedged under normal market conditions, and hedging
techniques are not used for speculative purposes.
Money Market Funds. Federated is the third largest U.S. manager of money
market funds with over $63 billion in assets under management as of December
31, 1997. The Company has developed expertise in managing cash for
institutions, which typically have stringent requirements for regulatory
compliance, relative safety, liquidity and competitive yields. Federated has
managed money market funds for over twenty years and created the first
institutional money market fund in 1976. Federated also manages retail money
market fund products which are typically distributed through broker dealers.
Federated manages money market fund assets in a variety of asset classes
including government ($35.5 billion), prime ($16.7 billion), and tax-free
($10.9 billion). Federated offers 16 state specific tax-free money market
funds, the largest number in the industry.
Money market funds have grown steadily over the past three years. For the
three years 1995 through 1997, industry money market fund assets as measured
by ICI have increased from $611 billion to $1.1 trillion, a compound annual
growth rate of approximately 20%. In this period, Federated's money market
fund managed assets have grown faster than the industry rate, increasing at
more than 26% compounded annually. Federated's managed money market fund
assets more than doubled in this period, increasing from $31.5 billion to
$63.6 billion.
Federated attributes its growth to multiple factors, including growth in the
number of customers, asset growth from existing customers, the acquisition of
money market fund assets, and an increase in retail money market fund assets
due largely to Federated's success at incorporating its retail money market
funds into the product line of many of its broker/dealer distributors.
Federated believes that its substantial money market fund business provides
a revenue base that is generally stable and recurring. In allocating
investments across various asset classes, institutional investors typically
maintain a portion of their portfolios in cash or cash equivalents, including
money market funds, irrespective of trends in stock or bond markets.
Therefore, Federated believes that money market funds are generally less
vulnerable to volatility in the capital markets than are equity and fixed
income funds.
43
<PAGE>
Management of large scale money market assets has become highly concentrated
and is subject to intense fee competition. Federated has developed its money
market fund operations and infrastructure over many years and believes that
its structure will enable it to continue to compete effectively for this
business.
Fixed Income. Federated managed over $15 billion in fixed income funds as of
December 31, 1997. These assets are managed in a wide range of sectors across
the fixed income investment spectrum including mortgage-backed ($5.9 billion),
high yield ($3.1 billion), tax-free ($2.1 billion), general investment grade
($1.8 billion), government ($1.5 billion) and international ($250 million).
Federated's fixed income funds offer fiduciaries and others a broad range of
highly defined products designed to meet many of their investment needs and
requirements. Fiduciaries typically have stringent requirements related to
portfolio composition, risk and investment performance. Federated follows a
disciplined investment process to produce highly defined products consistent
with these requirements. Many of the fixed income funds managed by Federated
are constrained by narrowly defined effective average maturity or duration
bands within specific yield curves. These funds are limited to investments in
specific areas such as municipal, government/government agency,
corporate/asset-backed or mortgage-backed securities. For example, the
Federated U.S. Government Securities Fund: 1-3 Years is constrained to direct
government and certain government agency debt issues with an average portfolio
maturity of 1.5-2 years.
In other funds, debt securities from various areas are combined to form
mixed category funds. For example, the Federated Bond Fund and Federated
Strategic Income Fund combines debt securities from the mortgage-backed,
domestic high quality, U.S. high yield corporate, and international bonds from
both emerging and developed countries. In general, these funds are also
constrained by an effective average maturity or duration range applied to the
blended portfolio. Through these funds, Federated offers products that provide
the benefit of diversification across fixed income areas while maintaining the
average maturities and duration ranges that are particularly important to
fiduciaries.
In the fixed income fund area, the mutual fund industry has experienced a
shift in demand for products. At the end of 1993, total industry assets in
fixed income funds was $761 billion, as compared to $749 billion in equity
funds. Through 1997, equity fund assets have increased by 220% to $2.4
trillion while fixed income bond and income funds have increased 35% to $1.0
trillion. Within the broad category of fixed income funds, certain asset
categories have experienced substantial asset decreases while others have
grown. Generally, funds invested in government bonds and mortgage-backed
securities decreased in assets while high yield, corporate, and mixed-category
funds increased. In 1993, Federated asset mix within fixed-income was weighted
towards the government and mortgage, which together comprised nearly 77% of
managed fixed income fund assets.
In response to these substantial changes in demand driven by unprecedented
bond market conditions, Federated diversified its fixed income offerings by
adding new mixed category products such as the Federated Strategic Income Fund
(rated "five" stars by Morningstar, Inc.), and by emphasizing its high yield
products such as Federated High Yield Trust and Federated High Income Bond
(each rated "five" stars by Morningstar, Inc.) where Federated has built a
long-term record of competitive returns since 1977. Federated has
substantially increased its assets under management in these areas, thereby
diversifying its fixed income fund Managed Assets. Since 1993, Federated's
Managed Assets in high yield, mixed and other fixed income fund categories
have increased 155% from $2.2 billion to $5.6 billion, while Managed Assets in
government and mortgage-backed municipal fixed income fund products decreased
53% from $15.4 billion to $7.2 billion.
Fund Performance. Although past performance is not necessarily indicative of
future results, among the most important factors affecting the marketability
of a mutual fund is its past performance. While consistently strong investment
performance may not be sufficient by itself to achieve marketing success in
the mutual fund industry, consistently poor performance would make it
difficult to increase or maintain market share.
Federated's managed funds have attained many favorable rankings by
independent evaluators of mutual fund performance. Funds in the growth and
income, equity income, high yield, international, mixed bond,
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<PAGE>
municipal, government and corporate bond areas have been consistently ranked
among the top performing funds in their respective categories by recognized
industry sources. Many of Federated's institutional money market and fixed
income funds have received the highest ratings given by national rating
agencies. As of December 31, 1997, Federated had 80 managed funds eligible for
Morningstar, Inc. ratings. Of these funds, 73 (or 91%) are rated "three,"
"four" or "five" stars, and 39 (or 49%) are rated "four" or "five" stars,
placing Federated among the leaders in the mutual fund industry for percentage
of top-rated funds.
DISTRIBUTION
Federated's distribution strategy is to provide products geared to financial
intermediaries, primarily banks, brokers/dealers and other investment
advisers, and directly to institutions such as corporations and government
entities. Through substantial investments in distribution over the last twenty
years, Federated has developed selling relationships with more than 3,500
institutions, including large and small banks, national and regional
brokers/dealers and other financial advisors. Federated sells its products
directly to another 500 corporations and government entities. Federated
believes that these relationships in total form one of its most important
assets.
Federated seeks to expand its market penetration by committing extensive
resources to maintaining and expanding its institutional customer
relationships and to developing mutual fund products which are responsive to
market demands. Through its large trained sales force of more than 175 sales
representatives and managers throughout the United States, Federated believes
that it can continue to increase its distribution capacity by both adding new
relationships and strengthening existing relationships. Federated offers the
sales representatives of its client firms an extensive product line with
attractive pricing and compensation options, strong customer service, and
marketing support. Distribution resources are employed in areas determined by
Federated to offer the highest potential for profitable asset growth.
Shares of the portfolios or classes of shares under management (or
administration) by Federated and its subsidiaries are distributed principally
by Federated Securities Corporation ("FSC"), a wholly-owned subsidiary of
Federated, which is registered as a broker/dealer under the Exchange Act and
under applicable state laws.
Federated's investment products are distributed within three principal
markets: the bank trust market, the broker/dealer market, and the
institutional market. The following chart shows Federated's Managed Assets by
market for the dates indicated:
MANAGED ASSETS BY MARKET
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
----------------------- ---------------
3 YR.
1995 1996 1997 CAGR 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Bank Trust Market..................... $32,430 $40,123 $49,662 20% 24%
Broker/Dealer Market.................. 19,992 22,098 28,256 24% 28%
Institutional Market.................. 5,910 9,750 11,343 44% 16%
Other Markets......................... 3,381 2,871 3,279 0% 14%
------- ------- -------
Total Managed Assets by Market...... $61,713 $74,842 $92,540 22% 24%
======= ======= =======
</TABLE>
BANK TRUST MARKET. As of December 31, 1997, Federated managed nearly $50.0
billion in assets for over 1,400 bank trust customers. Although primarily
composed of bank trust departments, Federated includes its savings and loan
and credit union customers in this market. The following table shows the
amount of Managed Assets by type of fund in the bank trust market for the
dates indicated:
45
<PAGE>
BANK TRUST MARKET
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
----------------------- ----------------
3 YR.
1995 1996 1997 CAGR 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Funds/Cash
Equivalent............. $24,717 $31,944 $40,897 25% 28%
Fixed Income Funds...... 5,748 5,336 5,070 (6%) (5%)
Equity Funds............ 1,965 2,843 3,695 33% 30%
------- ------- -------
Total Bank Trust
Market................. $32,430 $40,123 $49,662 20% 24%
======= ======= =======
</TABLE>
Federated pioneered the concept of providing cash management to bank trust
departments through mutual funds. In 1982, Federated initiated a strategy of
providing a broad range of non-money market funds, termed MultiTrust(TM), to
meet the evolving needs of bank trust departments.
Federated's bank trust customers invest the assets subject to their control,
or upon direction from their customers, in one or more funds managed by
Federated's subsidiaries. These funds are invested in securities that broadly
cover the investment spectrum. The bank trust department can make asset
allocation decisions among equity, fixed income and money market funds. In
addition to personal trust assets, bank trust departments control significant
pension-related assets enabling Federated's products to be applied in this
important area.
Money market funds contain the majority of Federated's Managed Assets in the
bank trust market. In allocating investments across various asset classes,
investors typically maintain a portion of their portfolios in cash or cash
equivalents, including money market funds, irrespective of trends in bond or
stock prices. Therefore, Federated believes that money market funds are
generally less vulnerable to volatility in the capital markets than are fixed
income and equity funds. However, management of large scale money market
assets has become highly concentrated and is subject to intense fee
competition. Federated also offers an extensive menu of equity and fixed
income mutual funds structured for use in the bank trust market. Assets in
these funds totaled over $8.7 billion as of December 31, 1997.
Federated's nationwide customer base includes nearly all of the largest bank
trust companies in the United States. Federated maintains a national sales
staff and regional administrative teams which work together to assist bank
trust departments in establishing and maintaining the administrative, legal
and computer systems required to utilize fully Federated's complete line of
services.
In addition to a broad menu of competitive mutual fund products suitable for
use by fiduciaries, Federated believes that providing value-added services in
key areas such as sales and marketing, operational, and legal support
differentiates Federated from many of its competitors in this market and is a
significant competitive advantage.
Sales and Marketing. Federated employs a dedicated sales force backed by a
staff of support personnel to facilitate the sales efforts of its bank trust
customers through services such as providing sales literature and product
comparisons, conducting seminars, offering mutual fund sales training and by
providing access to portfolio managers.
Systems and Technology. Federated has a long history of employing technology
to facilitate trust department operations. To facilitate the flow of account
information between Federated and its customers, Federated has developed its
EDGE(TM) computer system. The system, originally developed in 1982, enables
customers to conduct all trading and obtain current information on all
accounts and funds. Customers use the EDGE(TM) network to engage in over $2.5
billion in daily transactions with Federated.
In addition to the EDGE(TM) system, Federated has recently developed its
TrustConnect(TM) trade execution and clearing system through its wholly-owned
subsidiary Edgewood Services Company. This product provides highly
46
<PAGE>
automated trade execution and settlement services ("clearing") for bank trust
departments through electronic links from bank trust recordkeeping systems to
the National Securities Settlement Corporation's FundServ and Networking
Services. By utilizing this system, the bank trust department can conduct
mutual fund trading activity on an automated basis with over 135 fund
companies and have access to over 4,000 mutual funds. The system is linked to
most of the major trust accounting systems used by banks, thereby automating
the process of recording trade information to the bank's customer accounts.
This process results in significant efficiencies for the bank trust department
through automation of a complex manual process. Depending on the fund chosen
by the trust department, Federated receives either a transaction fee or an
asset-based fee for providing these services.
Legal. Federated has assisted bank trust departments in complying with the
complex regulations that govern trust departments. Federated played a
significant role in causing legislation to be enacted on a state-by-state
basis that deemed mutual funds to be equivalent to their underlying securities
from the perspective of the bank trust fiduciary.
Federated believes that these types of operational and legal solutions
differentiate Federated from its competitors by offering value-added services
in addition to its fund products and that these services are a competitive
advantage that enable Federated to strengthen and protect its customer
relationships.
Consolidation in the banking industry has affected the bank trust market in
recent years. Federated believes that it will be able to continue to increase
its Managed Assets in this market as consolidation continues because of the
composition of its customer base which includes nearly all of the largest U.S.
bank trust institutions, the strength of its reputation as a long standing
provider of excellent products and services, and the strength of its long-
standing customer relationships in this market. However, there can be no
assurance that future bank consolidation activity will not negatively impact
Federated.
BROKER/DEALER MARKET. Growth of assets in the broker/dealer market has been
and continues to be a major strategic initiative for Federated. Federated
distributes its products in this market through a large diversified group of
approximately 2,000 national, regional, independent, and bank broker/dealers.
Federated maintains a sales staff dedicated to this market. These sales
representatives develop and maintain relationships with both the management
and registered representatives of the broker/dealer. Over 30,000 of these
registered representatives have sold shares to investors in one or more of
Federated's managed funds in 1997. Brokers/dealers use Federated's products to
meet the needs of their customers, who are typically retail investors. Brokers
also may place fund products into retirement plan applications, including
defined contribution programs such as 401(k) plans. To meet these needs,
Federated offers a broad range of equity, fixed income and money market fund
products in this market.
The following table shows the amount of Managed Assets by type of fund in
the broker/dealer market for the dates indicated:
BROKER/DEALER MARKET
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
----------------------- ---------------
3 YR.
1995 1996 1997 CAGR 1997
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Funds/Cash Equivalent.... $11,700 $12,618 $15,293 26% 21%
Fixed Income Funds.................... 5,727 5,628 6,566 7% 17%
Equity Funds.......................... 2,565 3,834 6,376 51% 66%
Separate Accounts..................... 0 18 21 -- 17%
------- ------- -------
Total Broker/Dealer Market.......... $19,992 $22,098 $28,256 24% 28%
======= ======= =======
</TABLE>
47
<PAGE>
Within the broker/dealer market, Federated maintains a dedicated sales staff
for bank broker/dealers. Managed Assets from bank broker/dealers totalled
approximately $6.7 billion at December 31, 1997.
Although Federated has developed an extensive broker/dealer distribution
network, certain relationships are of particular significance. Federated has
had a long standing relationship with Edward Jones and maintains a dedicated
sales and broker support team to service brokers from Edward Jones.
Approximately 29% of the assets in this market are from retail customers of
Edward Jones. In addition, Federated participates in a limited partnership
(sharing income and expenses from two funds) with Edward Jones. Approximately
7% of the assets in this market are from retail customers of Merrill Lynch &
Co. through another long standing relationship. Federated employs dedicated
sales and broker support resources to service brokers from Merrill Lynch & Co.
Both of these firms, along with most other large broker/dealer firms, have
established or have the capability to establish their own proprietary mutual
funds.
Federated believes that brokers and other financial intermediaries choose
mutual fund products and providers for their customers based on certain key
criteria including fund performance, consistency of management style,
compensation structures offered, and brand image and quality of the fund
company, including level and quality of support services. Federated has
developed successful relationships with broker/dealers by offering funds with
competitive performance, attractive pricing and broker compensation features
and extensive sales and marketing support and allowances. Federated made a
substantial commitment to advertising and media relations in 1997 and plans to
continue this program. The purpose of this program is to better position
Federated in its various distribution channels. Federated has won numerous
awards from recognized industry sources for the quality of the sales and
support services it provides to financial intermediaries.
Federated offers products with a variety of commission structures that
enable brokers to offer their customers a choice of pricing options. During
August, 1994, Federated added a new broker/dealer B shares product to its
mutual fund product line. In order to provide an incentive to the retail
brokers to sell Federated's funds, while at the same time minimizing the
front-end load to the broker's customers, Federated pays an advance commission
to the broker and will receive a back-end fee from the proceeds if such shares
are redeemed prior to six years from the date of investment (contingent
deferred sales charge). Initially added as new share classes to three funds, B
shares have been expanded to 28 funds as of December 31, 1997. Assets in these
share classes were $4.1 billion at December 31, 1997. See Note 6 to the
Consolidated Financial Statements for a description of the financing
arrangement related to B-share sales.
INSTITUTIONAL MARKET. In 1993, Federated established a dedicated sales force
to expand its presence in the direct institutional market. Federated's
strategy is to focus on the distribution of its mutual fund and separate
account management expertise to a wide variety of users: corporations,
corporate and public pension funds, insurance companies, government entities,
foundations, endowments, hospitals, investment advisors, and non-Federated
investment companies. Federated seeks to leverage its customer relationships
and reputation in the market for short-term asset management products to
expand its share of both separate accounts and longer-term equity and fixed
income mutual fund products.
At the inception of this effort in 1993, Federated managed $2.6 billion in
assets from existing customers in that market. Assets have risen to over $11.3
billion at December 31, 1997. The following table shows Managed Assets by type
of fund in the institutional market for the dates indicated.
48
<PAGE>
INSTITUTIONAL MARKET
(Dollars in Millions)
<TABLE>
<CAPTION>
DECEMBER 31, GROWTH RATES
--------------------- ---------------
3 YR.
1995 1996 1997 CAGR 1997
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Funds/Cash Equivalent...... $2,968 $5,807 $ 6,698 67% 15%
Fixed Income Funds...................... 1,094 1,545 1,825 28% 18%
Equity Funds............................ 387 455 749 53% 65%
Separate Accounts....................... 1,461 1,943 2,071 18% 7%
------ ------ -------
Total Institutional Market............ $5,910 $9,750 $11,343 44% 16%
====== ====== =======
</TABLE>
Within this market, Federated maintains a dedicated sales staff to focus on
independent investment advisers. Independent investment advisers use
Federated's products to meet the needs of their customers who are typically
retail investors. Federated has developed successful relationships with
investment advisers by offering funds with competitive performance, by
providing sales and marketing support, and by making its funds available in
the major "supermarket" mutual fund marketplaces used by investment advisers.
Assets from investment advisers nearly doubled, increasing from approximately
$1.4 billion in at December 31, 1995 to $2.8 billion at December 31, 1997.
A separate sales staff focuses on providing short-term cash management and
separate account management for general account assets, and sub-advisory
services for multi-manager variable annuity products. Federated maintains a
sales staff dedicated to this segment. Assets under management within this
segment were approximately $2.9 billion at December 31, 1997, up from
approximately $1.2 billion at year end 1995.
Short-term fixed income investment management services are also marketed to
corporations and government entities through a dedicated sales force in this
market. These services include money market funds and other low duration fixed
income products for the management of operating funds. Assets managed in this
segment totaled over $4.0 billion at December 31, 1997.
As part of Federated's overall retirement asset management strategy, pension
plan assets are the focus of a dedicated unit within the institutional
distribution channel. While retirement plan assets are pursued through
intermediaries in the bank trust and broker/dealer markets, the pension plan
group in this channel sells investment advisory services directly to
corporations and other sponsors of defined contribution and defined benefit
pension plans. Federated markets bundled and unbundled pension plan services
including investment products and recordkeeping services to corporate and
public pension plan sponsors. Investment advisory services in these
applications may be in the form of separate accounts or mutual fund or other
pooled products, depending upon the specific requirements of the plan sponsor.
Managed assets in this segment totaled $1.7 billion at December 31, 1997.
OTHER MARKETS. Other markets includes primarily affinity group assets from
an historical arrangement with a large affinity group to provide a money
market fund for its members and miscellaneous assets which resulted from
marketing efforts earlier from Federated's history or from acquisitions which
resulted in the management of retail assets. Assets in these categories were
approximately $3.3 billion at December 31, 1997.
SERVICES
Federated has long been the provider of a broad range of mutual fund
services to support the operation, administration and distribution of
Federated-sponsored mutual funds. These services, for which Federated receives
a fee from the funds, include legal support and regulatory compliance, audit,
fund accounting and other funds financial services, transfer agency services,
and shareholder servicing and support. In 1988, in
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<PAGE>
response to demand from its important bank customer base, Federated began to
offer these services to institutions seeking to outsource all or part of their
mutual fund service and distribution functions. In 1997, Federated refocused
the marketing of its service capabilities to emphasize fund administration and
strategic marketing, which support the growth of Administered Assets, rather
than selling individual services such as transfer agency and fund accounting
as stand-alone products.
Federated's business strategy is to use the unique knowledge base, service
expertise, distribution capability, and products it has developed to help its
customers grow their mutual fund businesses, thereby positioning Federated as
a key partner in the mutual fund operation of the financial intermediary.
Federated receives fees from these third party-sponsored funds for providing
fund services. Typically, the services offered are part of a broad customer
relationship. Federated has over $7.2 billion in assets under management from
its mutual fund services customers as of December 31, 1997. Over 90% of
Federated's fund services customers include Federated-sponsored mutual funds
on the menu of funds offered to their customers.
Service revenues are generated primarily from providing fund administration,
shareholder servicing, trade execution and settlement, retirement plan
services, and information technology support.
Fund Administration Services. Federated offers a complete menu of services
necessary to operate and conduct the day-to-day business operation of a mutual
fund complex. The services include legal administration and compliance,
internal audit, marketing support, information management, product development
and business administration. Federated provides portfolio accounting services
in a strategic partnership with State Street Bank and Trust, the industry
leader in this area. Historically, most of Federated's customers have
contracted for the complete administrative services package offered by
Federated. Some banks have chosen to internalize certain fund administration
services or purchase individual service pieces from different vendors, thereby
reducing or eliminating the need to purchase those services from Federated.
Shareholder Services. Through its subsidiary which is a registered transfer
agent, Federated provides mutual fund shareholder recordkeeping and customer
service, including the processing of purchase and redemption orders, entering
trades into the shareholder recordkeeping system, providing trade information
to the portfolio managers and fund accountants, and issuing shareholder
statements and tax forms. These services are provided to investment companies,
retirement plan sponsors, brokers, registered investment advisers, and retail
shareholders.
Trade Execution and Settlement. Federated provides highly automated trade
execution and settlement services ("clearing") for bank trust departments.
Utilizing Federated's TrustConnect(TM) system, bank trust departments can link
their recordkeeping systems to the National Securities Settlement
Corporation's FundSERV(TM) and NETWORKING(TM) systems. This process
facilitates automated mutual funds trading and settlement, trade confirmation
and account position reconciliation.
Retirement Plan Services. Federated provides customers with a full range of
retirement plan services, including integrated recordkeeping and
administrative services and access to Federated's broad menu of funds suitable
for use in retirement plans. As of December 31, 1997, Federated's provided
retirement plan services to more than 600 plans and more than 120,000
participants. In 1997, Federated restructured its retirement plan
recordkeeping product for greater efficiency by developing a more standardized
product offering and by focusing on plans where funds managed by Federated are
used.
Federated believes that it has adopted a prudent approach in the areas of
risk management and technological infrastructure related to its provision of
mutual fund services. For example, in the portfolio accounting area Federated
has entered into a strategic partnership with State Street Bank to provide
these services for both the Federated-sponsored funds and third party funds
administered by Federated, which has allowed Federated to
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<PAGE>
reduce the number of employees required to provide such services. Federated
believes that this model provides for quality service delivery while
minimizing potential liability and exposure to the funds. For transfer agency
services and systems, Federated has positioned itself to provide value added
services while leveraging the capabilities of the DST recordkeeping system.
This model enables Federated to focus its resources on providing customer
services without the significant burden and cost of developing and maintaining
a proprietary recordkeeping system.
Other. Federated Bank & Trust, a state-chartered bank and a wholly-owned
subsidiary of Federated, acts as trustee for a collective investment fund and
for certain plans that use Federated's retirement plan services.
COMPETITION
The mutual fund industry is highly competitive. At the end of 1997, there
were over 6,800 registered open-end investment companies, of varying sizes and
investment policies, whose shares are currently being offered to the public
both on a load and no-load basis. In addition to competition from other mutual
fund managers and investment advisers, Federated and the mutual fund industry
compete with investment alternatives offered by insurance companies,
commercial banks, broker/dealers and other financial institutions.
Competition for sales of mutual fund shares is influenced by various
factors, including investment performance in terms of attaining the stated
objectives of the particular funds and in terms of fund yields and total
returns; advertising and sales promotional efforts; and type and quality of
services. Competition is especially strong for cash management products.
Changes in the mix of proprietary fund customers and the array of services
provided to them are expected to continue. Competition for fund administration
services is extremely high. In addition to competing with other service
providers, banks sponsoring mutual funds may choose to internalize certain
service functions. Consolidation within the banking industry also impacts the
fund administration business as merging bank funds typically choose a single
fund administration provider. Due to the relatively lower revenues, changes in
the amount of Administered Assets generally have less impact on Federated's
results of operations than changes in the amount of Managed Assets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
REGULATORY MATTERS
Substantially all aspects of Federated's business are subject to federal and
state regulation which, depending upon the nature of any non-compliance, may
result in the suspension or revocation of licenses or registration, including
broker/dealer licenses and registrations and transfer agent registrations, as
well as the imposition of civil fines and penalties. Federated's advisory
companies are registered with the Commission under the Advisers Act and with
certain states. All of the mutual funds managed, distributed, and administered
by Federated are registered with the Commission under the Investment Company
Act. Certain wholly owned subsidiaries of Federated, are registered as broker-
dealers with the Commission under the Exchange Act and with various states and
are members of the NASD. Their activities are regulated by the Commission, the
NASD, and the various states in which they are registered. These subsidiaries
are required to meet capital requirements established by the Commission
pursuant to the Exchange Act. Two other subsidiaries are registered with the
Commission as transfer agents. Federated Bank & Trust is regulated by the
State of New Jersey. Federated believes that it and its subsidiaries are in
substantial compliance with all applicable laws and regulations. Amendments to
current laws and regulations or newly-promulgated laws and regulations
governing Federated's operations could have a material adverse impact on
Federated.
Substantially all aspects of Federated's business are subject to various
federal and state laws and regulations. These laws and regulations are
primarily intended to benefit or protect Federated's customers and the funds
shareholders and generally grant supervisory agencies and bodies broad
administrative powers, including the power to limit or restrict Federated from
carrying on its business in the event that it fails to comply with such
51
<PAGE>
laws and regulations. In such event, the possible sanctions that may be
imposed include the suspension of individual employees, limitations on
engaging in certain lines of business for specified periods of time,
revocation of broker/dealer licenses and registrations and transfer agent
registrations, censure and fines.
EMPLOYEES
At December 31, 1997, Federated employed approximately 2,037 persons, which
number has since been reduced as a result of the alliance with State Street.
FACILITIES
Federated's facilities are concentrated in Pittsburgh, Pennsylvania where it
leases space sufficient to meet its operating needs. Federated's headquarters
is located in the Federated Investors Tower, where Federated occupies
approximately 368,000 square feet. Federated leases approximately 110,000
square feet at Centre City Tower, 60,000 square feet at the Pittsburgh Office
and Research Park and an aggregate of 50,000 square feet at other locations in
Pittsburgh. Federated maintains office space for a portion of its servicing
business in Rockland, Massachusetts; in Dublin, Ireland, where administrative
offices for offshore funds are maintained; in New York, New York, where
Federated Global Research Corp. conducts its business; and in Gibbsboro, New
Jersey, where Federated Bank and Trust is located. Additional offices in
Naples, Florida and Wilmington, Delaware are subleased by Federated.
LEGAL PROCEEDINGS
There is currently pending no litigation of a material nature involving
Federated or its subsidiaries.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and positions of the directors and executive officers of the
Company as of April , 1998 are set forth below. All such persons currently
serve in similar positions with the Trust. After the Merger and the Offering,
the Board of Directors of the Company also intends to select at least two
persons to serve as independent directors of the Company.
<TABLE>
<CAPTION>
YEARS OF
COMPANY
NAME POSITION AGE SERVICE
---- -------- --- --------
<C> <S> <C> <C>
John F. Donahue Chairman, Chief Executive Officer and 73 42
Director
J. Christopher Donahue President, Chief Operating Officer and 49 25
Director
John W. McGonigle Executive Vice President, Secretary and 59 31
Director
Arthur L. Cherry President, Federated Services Company 44 1
and Director
James F. Getz President--Retail Sales Division of 51 10
Federated Securities Corp. and Director
William D. Dawson III Executive Vice President and Chief 49 22
Investment Officer--Fixed Income of
Federated Advisory Companies*
Thomas R. Donahue Vice President, Chief Financial Officer 39 5
and Director
John B. Fisher President--Institutional Sales Division 41 18
of Federated Securities Corp. and
Director
Richard B. Fisher Executive Vice President 74 42
Henry A. Frantzen Executive Vice President and Chief 55 3
Investment Officer--Global Equity and
Fixed Income of Federated Advisory
Companies*
J. Thomas Madden Executive Vice President and Chief 51 20
Investment Officer--Equity, High Yield
and Asset Allocation of Federated
Advisory Companies*
Eugene F. Maloney Executive Vice President, Federated 53 25
Investors Management Company and
Director
</TABLE>
- --------
* Federated Advisory Companies include the following subsidiaries of the
Company: Federated Advisers, Federated Global Research Corp., Passport
Research Limited, Federated Management, Federated Research, Exchange Fund
Research Corp. and Federated Research Corp.
Mr. John F. Donahue has been Chief Executive Officer of Federated and a
trustee of the Trust since 1989. He served as President of Federated from 1989
until 1993 and was a founder of the predecessor to Federated. Mr. Donahue is
chief executive officer and a director, trustee, or managing general partner
of the investment companies managed by subsidiaries of the Company. Mr.
Donahue was a member of the Board of Directors of Aetna until April 1995. He
is the father of J. Christopher Donahue and Thomas R. Donahue, each of whom
serves as an executive officer and director of the Company. Mr. Donahue is a
graduate of the U.S. Military Academy, West Point, New York.
Mr. J. Christopher Donahue has been President and Chief Operating Officer of
Federated since 1993 and was previously Vice President. Mr. Donahue has been a
trustee of the Trust since 1989. He is President or Executive Vice President
of the funds and a director, trustee, or managing general partner of some of
the funds. Mr. Donahue is the son of John F. Donahue and the brother of Thomas
R. Donahue. Mr. Donahue is a graduate of Princeton University and the
University of Pittsburgh School of Law.
53
<PAGE>
Mr. John W. McGonigle has been Executive Vice President of Federated since
August 1995. He has served as Vice President, Secretary and General Counsel of
Federated and has been a trustee of the Trust since 1989. He is Executive Vice
President and Secretary of the funds. Mr. McGonigle is a graduate of Duquesne
University and Duquesne University School of Law.
Mr. Arthur L. Cherry is President of Federated Services Company. He has been
a trustee of the Trust since 1997. Prior to joining Federated in January 1997,
he was a managing partner of AT&T Solutions and former president of Scudder
Services Corporation. He also served as managing director of Scudder, Stevens
and Clark from 1984 to 1994. In addition, he has worked in various capacities
with The Boston Company, Boston Financial Data Services and EDS Consulting.
Mr. Cherry is a graduate of Northeastern University.
Mr. James F. Getz serves as President--Retail Sales Division of Federated
Securities Corp. and is responsible for the marketing and sales efforts in the
trust and broker/dealer markets. Mr. Getz is a graduate of King's College and
received his M.A. from Villanova University and his doctorate from Temple
University. Mr. Getz is also a Chartered Financial Analyst.
Mr. William D. Dawson, III serves as an Executive Vice President and Chief
Investment Officer--Fixed Income of Federated Advisory Companies. He has
served as a portfolio manager and held various other positions in the advisory
companies. He is responsible for the investment policy and management of
domestic fixed income funds. Mr. Dawson is a graduate of Union College with a
Masters in Business Administration from the University of Pittsburgh. He is
also a Chartered Financial Analyst.
Mr. Thomas R. Donahue has been Vice President of Federated since 1993 and a
trustee of the Trust since 1995. He currently serves as Vice President and
Chief Financial Officer of Federated. Prior to joining Federated, Mr. Donahue
was in the venture capital business, and from 1983 to 1987 was employed by PNC
Bank in its Investment Banking Division. Mr. Donahue is the son of John F.
Donahue and the brother of J. Christopher Donahue. Mr. Donahue is a graduate
of Boston University and the J.L. Kellogg Graduate School of Management at
Northwestern University.
Mr. John B. Fisher is President--Institutional Sales Division of Federated
Securities Corp. and is responsible for the distribution of the Company's
products and services to investment advisors, insurance companies, retirement
plans and corporations. He is the son of Richard B. Fisher, Executive Vice
President of Federated. Mr. Fisher is a graduate of the College of the Holy
Cross.
Mr. Richard B. Fisher has been Executive Vice President of Federated and a
trustee of the Trust since 1989 and was a founder of the predecessor to
Federated. Mr. Fisher is primarily responsible for developing, marketing, and
administering fund products in the broker/dealer market and for distributing
some of the funds. Mr. Fisher is President or Vice President of the funds and
director or trustee of some of the funds. Mr. Fisher is the father of John B.
Fisher, an officer of the Company. Mr. Fisher is a graduate of the College of
the Holy Cross.
Mr. Henry A. Frantzen serves as Executive Vice President and Chief
Investment Officer--Global Equity and Fixed Income of Federated Advisory
Companies and the institutional management division of Federated Investment
Counseling. Mr. Frantzen is primarily responsible for the management of global
equity and fixed income funds. Prior to joining Federated, Mr. Frantzen was
Managing Director of International Equities for Brown Brothers Harriman
Investment Management Ltd. and Manager and International Equity Chief
Investment Officer of Brown Brothers Harriman and Co., from 1992 to 1995.
Prior thereto he served in executive capacities for various investment
management companies, including Oppenheimer Management Corp., Yamaichi Capital
Management and CREF. Mr. Frantzen is a graduate of the University of North
Dakota.
Mr. J. Thomas Madden serves as Executive Vice President and Chief Investment
Officer--Equity, High Yield and Asset Allocation of Federated Advisory
Companies. Mr. Madden oversees the portfolio management
54
<PAGE>
in the domestic equity, high yield, and asset allocation areas. Mr. Madden
holds a B.A. from Columbia University and an M.B.A. from Colgate Darden School
of Business Administration, University of Virginia. He is also a Chartered
Financial Analyst.
Mr. Eugene F. Maloney serves as the Executive Vice President of Federated
Investors Management Company and has been a trustee of the Trust since 1989.
He provides legal, technical and management expertise to Federated's sales
divisions, including regulatory and legal requirements relating to a bank's
use of mutual funds in both trust and commercial environments. Mr. Maloney is
an adjunct Professor of Law at Boston University School of Law. Mr. Maloney is
a graduate of Holy Cross College and Fordham Law School.
ELECTION OF DIRECTORS
Each director of the Company serves a term from the date of such director's
election until the next annual meeting of the shareholders. Officers of the
Company are elected by, and serve at the discretion of, the Board of
Directors. After the Merger and the Offering, the Company will have 10
directors.
No director currently receives compensation for serving as a director of the
Company or as trustee of the Trust. Directors who are not employees of the
Company will receive options to purchase shares of Class B Common Stock under
the Stock Incentive Plan described below. Under the terms of the Merger, the
Company will assume the rights and obligations of the Trust regarding the
Trust's existing Restricted Stock Plan, Stock Appreciation Rights Plan and
Stock Incentive Plan. See "Compensation Pursuant to Plans--Stock Incentive
Plan" below.
The Company Bylaws provides for indemnification of officers and directors
consistent with the provisions of the Pennsylvania Business Corporation Law.
The Company is also authorized under the Company Bylaws to purchase and
maintain insurance for purposes of providing indemnification to officers,
directors, employees and agents of the Company, whether or not such
indemnification is provided for by the Pennsylvania Business Corporation Law.
The Company believes that these provisions are necessary for the Company to
continue to attract and retain qualified persons as directors and officers.
AUDIT COMMITTEE
After the Merger and the Offering, an Audit Committee will be formed and
consist of at least two directors, who will not be employees or officers (or
former employees or officers) of the Company or its subsidiaries. The Audit
Committee's duties will include reviewing internal financial information,
monitoring cash flow, budget variances and credit arrangements, reviewing the
audit program of the Company, reviewing with the Company's accountants the
results of all audits upon their completion, annually selecting and
recommending independent public accountants, overseeing the quarterly
unaudited reporting process and taking such other action as may be necessary
to assure the adequacy and integrity of all financial information distributed
by the Company.
COMPENSATION COMMITTEE
After the Merger and the Offering, a Compensation Committee will be formed
and consist of at least three directors, a majority of whom will not be
officers or employees (or former officers or employees) of the Company. The
Committee will recommend compensation levels of senior management, work with
senior management on benefit and compensation programs for Company employees
and monitor local and national compensation trends to ensure the Company's
compensation program is competitive within the mutual fund industry.
55
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
Prior to the Merger, the executive officers of the Company did not receive
cash compensation in respect of their services to the Company alone but rather
received compensation for services rendered to the Trust and its subsidiaries,
including the Company. The following table sets forth the cash compensation
paid to the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company whose cash compensation exceeded
$100,000, for services rendered to the Trust and its subsidiaries during the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------------------------
OTHER SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(1) STOCK AWARD($) OPTIONS/SARS(#) COMPENSATION($)(2)
- ------------------ --------- -------- ------------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
John F. Donahue, 1,600,000 800,000 83,894 -- -- 9,760
Chairman and Chief
Executive Officer
J. Christopher Donahue, 830,000 415,000 53,695 -- -- 13,432
President and Chief
Operating Officer
John W. McGonigle, 750,000 250,000 -- -- -- 15,102
Executive Vice
President and Secretary
Arthur L. Cherry, 600,000 300,000 73,924 197,500(3) 240,000(4) 1,350
President, Federated
Services Company
James F. Getz,
President, 350,000 550,000 -- --(3) 40,000(4) 8,920
Retail Sales Division
of Federated Securities
Corp.
</TABLE>
- --------
(1) In accordance with the applicable rules, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the named executive officer unless the aggregate value thereof exceeded
the lesser of $50,000 or 10% of the base salary and bonus reported for
such officer. Included in Mr. John F. Donahue's annual compensation are
perquisites and other personal benefits in fiscal year 1997, including
$36,885 for the use of Federated's corporate aircraft valued on the basis
of incremental cost to Federated. Included in Mr. J. Christopher Donahue's
annual compensation are perquisites and other personal benefits in fiscal
year 1997, including $23,435 for the use of Federated's corporate aircraft
valued on the basis of incremental cost to Federated. Included in Mr.
Cherry's annual compensation are perquisites and other personal benefits
in fiscal year 1997, including $72,924 in relocation expenses.
(2) Includes matching contributions under Federated's 401(k) Plan of $6,400
for Mr. John F. Donahue, $6,400 for Mr. J. Christopher Donahue, $6,400 for
Mr. McGonigle and $6,400 for Mr. Getz; and the present value of the
economic benefit to the executive of the corporate premiums paid to
purchase split dollar life insurance contracts of $1,212 for Mr. J.
Christopher Donahue, and $2,882 for Mr. McGonigle. In addition, Federated
paid annual premiums for life insurance with respect to Mr. John F.
Donahue of $3,360, Mr. J. Christopher Donahue of $5,820, Mr. McGonigle of
$5,820, Mr. Cherry of $1,350 and Mr. Getz of $2,520 in 1997. The split
dollar life insurance contract for Mr. John F. Donahue is fully paid and
the Company is entitled to recover all of the premiums paid by it through
the cash surrender value of such policy.
56
<PAGE>
(3) Based on the latest available independent valuation on the date of grant
in the case of Mr. Cherry with respect to the grant of 50,000 Trust Class
B Common Shares (after giving effect to the 1998 stock dividend), which
was fully vested in January 1998. No other restricted shares were held by
any of the named executive officers as of December 31, 1997, except for
an aggregate of 300,000 Trust Class B Common Shares (after giving effect
to the stock dividends) awarded to Mr. Getz in 1990 and 1993. All
restricted shares held by Messrs. Cherry and Getz had an aggregate value
of $3,150,000 as of the latest independent valuation.
(4) In the case of each of Mr. Cherry and Mr. Getz, includes 40,000 Trust
Class B Common Shares (after giving effect to the 1998 stock dividend)
subject to options which are not currently exercisable.
COMPENSATION PURSUANT TO PLANS
Employees' Profit Sharing Plan. The Trust has adopted a Profit Sharing Plan,
qualified under Section 401(a) of the Internal Revenue Code, for its employees
and employees of related entities who have completed four months of service.
The Profit Sharing Plan consists of a discretionary profit sharing plan
feature, and a cash or deferred feature qualified under Section 401(k) of the
Internal Revenue Code ("401(k) Plan") with an employer matching contribution
feature. The Plan is administered by a committee of employees. Distributions
are made upon termination of employment in the form of a lump sum cash
distribution. If a participant dies before termination of employment, the
entire value of the participant's account is paid to the beneficiary
designated by the participant.
The Trust may contribute to the Profit Sharing Plan in any year an amount up
to 15% of the eligible compensation of plan participants. The Trust has not
made discretionary Profit Sharing Plan contributions since 1990. Employees
become fully vested in their separate benefits after completing seven
consecutive years of service with the Trust or related entity, by a graduated
partial vesting in 20% increments, beginning on completion of three years of
service and continuing until completion of seven years of service. Profit
Sharing Plan assets are collectively invested by the Trustee, an officer of
the Company. Among other assets, as of the date of this Proxy
Statement/Prospectus, the Profit Sharing Plan owned 1,800,000 shares of Class
B Common Stock, after giving effect to the Merger. Benefits are provided at
death, disability, and termination of employment (including retirement).
Participants' benefits are equal to the total contributions for the
participant, plus the participant's share of any forfeitures and plus or minus
associated investment gains or losses, multiplied by the participant's vesting
percentage.
A Participant in the 401(k) Plan may elect to reduce his compensation from
the Company by any whole percentage from 1% to and including 15% and have that
amount contributed to the 401(k) Plan before deduction of federal income tax
("Salary Reduction Contributions"). The Trust will contribute on behalf of
each Participant an amount defined by the Company from time to time.
Currently, the matching contribution is equal to the first 2% contributed by
the Participant plus 50% of the next 4% contributed by the Participant
("Matching Contributions"). The maximum amount that a Participant may
contribute by salary reduction is limited by the Internal Revenue Code. For
1997 the maximum amount was $9,800. Participants are always 100% vested in
their Salary Reduction Contributions. Matching Contributions become fully
vested in accordance with the same schedule as the Profit Sharing
Contribution. Each Participant may choose the investments for his Salary
Reduction Contributions and Matching Contributions. The available investment
options are various mutual funds from Federated funds, chosen to provide a
range of investment alternatives with materially different risk and return
characteristics.
Stock Incentive Plan. Long-term incentive compensation for executives has
been provided under the Company's Stock Incentive Plan (the "Stock Incentive
Plan"), adopted as of February 20, 1998. All key employees of the Company and
its affiliates are eligible to participate in the Stock Incentive Plan. The
Stock Incentive Plan will continue in effect until terminated by its terms or
until terminated by the Board of Directors of the Company.
The Stock Incentive Plan permits the granting of any or all of the following
types of awards: (1) performance shares conditioned upon meeting performance
criteria; (2) restricted stock; (3) stock options,
57
<PAGE>
including nonqualified stock options ("NSOs") and incentive stock options
("ISOs"); (4) stock appreciation rights ("SARs"), in tandem with stock options
or freestanding; and (5) other awards valued in whole or in part by reference
to, or otherwise based on, Class B Common Shares. In connection with any
award, payment representing dividends or interest or their equivalent may be
made to Stock Incentive Plan participants. In addition, the Stock Incentive
Plan provides for automatic grants of stock options to trustees of the Trust
who are not employees of the Company or its subsidiaries.
Shares Subject to Stock Incentive Plan
A total of 9,000,000 shares of Class B Common Stock may be issued under the
Stock Incentive Plan. All of the shares are available for the grant of ISOs.
No participant shall receive awards in respect of more than 400,000 shares of
Class B Common Stock in any calendar year. The aggregate fair market value
(determined on the date of the grant) of shares of Class B Common Stock with
respect to which ISOs granted to a participant become exercisable for the
first time in any single calendar year will not exceed $100,000. In addition,
shares issued by the Company as a result of the assumption or substitution of
outstanding grants of an acquired company or entity (other than as a result of
the Merger, as described below) will not reduce the shares available for grant
under the Stock Incentive Plan. The shares of stock deliverable under the
Stock Incentive Plan may consist in whole or in part of authorized and
unissued shares, treasury shares, or any combination thereof. If any shares
subject to any award are forfeited, or the award is terminated without
issuance of shares or other consideration, the shares subject to such awards
will again be available for grant under the Stock Incentive Plan.
Under the terms of the Merger, the Company will assume the rights and
obligations of the Trust regarding the Trust's existing Restricted Stock Plan,
Stock Appreciation Rights Plan and Stock Incentive Plan (the "Prior Stock
Plans"). The Company will treat as having been issued under its Stock
Incentive Plan all shares of restricted stock, SARs and stock options issued
under the Prior Stock Plans. This will include, based on the number of
restricted shares, SARs and stock options outstanding under the Prior Stock
Plans on April , 1998 (after giving effect to the stock dividend to be paid
on April 15, 1998), 2,822,000 restricted shares of Class B Common Stock and
SARs and stock options relating to 2,664,800 shares of Class B Common Stock.
After giving effect to the assumption of the Prior Stock Plans, as of April
, 1998 (after giving effect to the stock dividend to be paid on April 15,
1998), the Company would have had 3,513,200 shares of Class B Common Stock
reserved for future issuance under its Stock Incentive Plan.
Option Grants
The following table sets forth as to persons named in the Summary
Compensation Table additional information with respect to stock options
granted during 1997:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE PER GRANT DATE
OPTIONS EMPLOYEES SHARE EXPIRATION PRESENT
NAME GRANTED(1) IN 1997 ($/SHARE)(2) DATE VALUE($)(3)
- ---- ---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Arthur L. Cherry........ 200,000 17.8% 4.65 03/01/07 254,000
40,000 3.6% 9.00 12/01/07 113,600
James F. Getz........... 40,000 3.6% 9.00 12/01/07 113,600
</TABLE>
- --------
(1) Reflects the one for one stock dividend declared on February 20, 1998 to
be paid on April 15, 1998.
(2) The exercise price per share, as adjusted for the 1998 stock dividend, was
based on the latest available independent valuation on the date of grant.
58
<PAGE>
(3) The Minimum Value option pricing model was used to determine the grant
date present value. The information in the table is provided in accordance
with the rules of the Securities and Exchange Commission regarding the
disclosure of compensation of executive officers, and is not intended to
forecast possible future stock price appreciation, if any.
Administration
The Stock Incentive Plan is administered by a committee of the Board of
Directors (the "Board Committee"). The Board Committee is constituted such
that awards under the Stock Incentive Plan will, to the extent practicable,
qualify for exemption under Rule 16b-3 of the Commission and as performance-
based compensation under Section 162(m) of the Internal Revenue Code. The
Board Committee may delegate some or all of its authority and responsibility
under the Stock Incentive Plan with respect to awards to participants who are
not subject to Section 16(b) of the Exchange Act to the Chief Executive
Officer of the Company. The Board Committee has the authority to select
employees to whom awards are granted, to determine the types of awards and the
number of shares subject thereto, and to set the terms, conditions and
provisions of such awards. The Board Committee is authorized to interpret the
Stock Incentive Plan, to establish, amend and rescind any rules and
regulations relating to the Stock Incentive Plan, to determine the terms and
provisions of any agreements entered into under the Stock Incentive Plan, and
to make all other determinations which may be necessary or advisable for the
administration of the Stock Incentive Plan.
Performance Awards
Performance awards are grants of shares of Class B Common Stock subject to
the attainment of performance goals established by the Board Committee in
connection with such grants and such other terms and conditions as the Board
Committee shall determine. Except as otherwise determined by the Board
Committee, recipients of performance awards will not be required to provide
consideration other than the rendering of services. Subject to the provisions
of the applicable award agreement, during the performance period dividends and
other distributions with respect to shares covered by a performance award
shall, in the discretion of the Board Committee, either be paid to the
recipient or held in escrow by the Company and paid when the performance award
is earned.
Restricted Stock
Restricted stock may not be disposed of by the recipient until the lapse of
certain restrictions established by the Board Committee. Upon termination of
employment of the participant during the restriction period, all restricted
stock not then vested will be forfeited, subject to such exceptions, if any,
authorized by the Board Committee. Except as otherwise determined by the Board
Committee, recipients of restricted stock are not required to provide
consideration other than the rendering of services. Recipients will have, with
respect to restricted stock, all of the rights of a shareholder of the Company
including the right to receive any dividends to the extent permitted by
applicable law, unless the Board Committee determines otherwise.
Stock Options
The exercise price per share of Class B Common Stock of stock options
granted to a participant is determined by the Board Committee as of the date
of grant; provided, however, that (i) in the case of ISOs granted to a
participant who on the grant date is not a more than 10% stockholder of the
Company ("Ten Percent Holder"), such price shall not be less than 100% of the
fair market value of a share of a Class B Common Share on the grant date, (ii)
in the case of an ISO granted to a participant who on the grant date is a Ten
Percent Holder, such price shall be not less than 110% of the fair market
value of a share of Class B Common Stock on the grant date, and (iii) in the
case of NSOs such price shall be not less than 85% of the fair market value of
a share of Class B Common Stock on the grant date. The term of each such
option, the time or times when it may be exercised, and the other applicable
terms and conditions will be fixed by the Board Committee. Options may be
exercised by payment of the purchase price in cash or, at the discretion of
the Board Committee, in shares of
59
<PAGE>
Class B Common Stock having a fair market value on the date the option is
exercised equal to the option exercise price or in such other manner as the
Board Committee may approve.
Stock Appreciation Rights
An SAR may be granted in connection with an option or independent of an
option. Upon exercise of an SAR, the holder thereof is entitled to receive the
excess of the fair market value of the shares for which the right will be
exercised over the grant price of the SAR. The grant price (which will not be
less than 100% of the fair market value of the shares on the date of grant)
and other terms of the SAR will be determined by the Board Committee. Payment
by the Company upon such exercise will be in cash.
Other Stock-Based Awards
In order to enable the Company to respond quickly to significant legislative
and regulatory developments and to trends in executive compensation practices,
the Board Committee will also be authorized to grant to participants, either
alone or in addition to other awards granted under the Stock Incentive Plan,
awards of stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, shares of Class B Common Stock
("other stock-based awards"). Other stock-based awards may be paid in shares
of Class B Common Stock or other securities of the Company, cash or any other
form of property as determined by the Board Committee.
The Board Committee will determine the employees to whom other stock-based
awards are to be made, the times at which such awards are to be made, the
number of shares to be granted pursuant to such awards and all other
conditions of such awards. The provisions of such awards need not be the same
with respect to each recipient. Securities granted pursuant to other stock-
based awards may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law. If purchase rights are
granted pursuant to other stock-based awards, the Board Committee will
determine the purchase price of stock, which price will not be less than the
fair market value of such stock on the date of grant.
Directors' Stock Options
The Stock Incentive Plan provides that directors of the Company who are not
employees of the Company shall receive options to purchase shares of Class B
Common Stock. Such directors will receive options with respect to 6,000 shares
upon their initial election to the Board of Directors and with respect to
2,000 shares annually thereafter.
All such options will be NSOs and will have a term of 10 years and an
exercise price equal to 100% of the fair market value of the underlying shares
on the date of grant. The initial grants of options to a director vest in
equal installments over a three year period. The annual grants are fully
vested as of the date of grant. In the event of a director's death, the
options which are exercisable at the date of death will be exercisable for the
next succeeding twelve months. Except as set forth below under "Adjustments,"
neither the Board of Directors of the Company nor the Board Committee will
have any discretion with respect to options granted to such directors pursuant
to the Stock Incentive Plan.
Nonassignability of Awards
The Stock Incentive Plan provides that no award granted under the Stock
Incentive Plan may be sold, assigned, transferred, pledged or otherwise
encumbered by a participant, otherwise than by will or by the laws of descent
and distribution or, if authorized by the Board Committee in limited
circumstances, by gift. Each award will be exercisable, during the
participant's lifetime, only by the participant, or if permissible under
applicable law, by the participant's agent, guardian or attorney-in-fact.
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Adjustments
The Stock Incentive Plan provides that, in the event of any change affecting
the Class B Common Stock by reason of any stock dividend or split,
recapitalization, reorganization, merger, consolidation, combination or
exchange of shares, spin-off or any other change in corporate structure such
that Class B Common Stock are changed into or exchangeable for a larger or
smaller number of shares, the Board Committee will make such substitution or
adjustment in the aggregate number or class of shares which may be distributed
under the Stock Incentive Plan and in the number, class and option price or
other price of shares subject to the outstanding awards granted under the
Stock Incentive Plan as it deems to be appropriate in order to maintain the
purpose of the original grant.
The Board Committee will be authorized to make adjustments in performance
award criteria or in the terms and conditions of other awards in recognition
of unusual or non-recurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or accounting
principles, provided no such adjustment shall impair the rights of any
participant without his consent. The Board Committee will be able to correct
any defect, supply any omission or reconcile any inconsistency in the Stock
Incentive Plan or any award in the manner and to the extent it shall deem
desirable to carry it into effect.
Federal Income Tax Aspects of the Stock Incentive Plan
The following is a summary of the federal tax consequences generally arising
with respect to awards to be granted under the Stock Incentive Plan.
The grant of an ISO has no tax consequences to the Company or to the
participant. In addition, the participant recognizes no taxable income at the
time of exercise of an ISO. However, upon exercise, the difference between the
fair market value of the shares of Class B Common Stock and the exercise price
of the ISO is includable in the participant's income for alternative minimum
tax purposes. If the participant holds the shares acquired upon exercise of an
ISO for at least two years from the date of the grant of the ISO and at least
one year from the date of exercise, he or she will recognize taxable long-term
capital gain or long-term capital loss upon a subsequent sale of the shares at
a price different from the option exercise price. In either of these events,
no deduction would be allowed to the Company for federal income tax purposes.
If the participant disposes of the shares acquired upon exercise of an ISO
within either of the holding periods described above (i) the participant will
recognize taxable ordinary income in the year of such disposition in an amount
equal to the fair market value of the shares on the exercise date minus the
exercise price of the ISO, provided that if the disposition is a sale or
exchange with an unrelated party, then the ordinary income will be limited to
the excess of the amount realized upon the sale or exchange of the shares over
the exercise price; (ii) the Company will be entitled to a deduction for such
year equal to the amount of taxable ordinary income recognized by the
participant; (iii) the participant will recognize capital gain or loss, short-
term or long-term, as the case may be, in an amount equal to the difference
between (a) the amount realized by the participant upon such sale or exchange
of the shares and (b) the option exercise price paid by the participant
increased by the amount of ordinary income, if any, recognized by the
participant upon such disposition.
The grant of an NSO has no tax consequences to the Company or to the
participant. Upon exercise of an NSO, however, the participant will recognize
taxable ordinary income in the amount of the excess of the fair market value
on the date of exercise of the shares of the Class B Common Stock acquired
over the exercise price of the NSO, and such amount will be deductible for
federal income tax purposes by the Company. The holder of such shares will,
upon a subsequent disposition of the shares, recognize short-term or long-term
capital gain or loss, depending on the holding period of the shares.
In general, a grant of restricted stock has no tax consequences to the
Company or the participant. Except as discussed below, the then fair market
value of the shares of Class B Common Stock issued as restricted stock will be
taxed as ordinary income to the participant as the restrictions on the stock
lapse. The Company will receive a corresponding tax deduction at the same
time. Dividends received by the participant during the restriction period
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are treated as compensation income and therefore are taxed as ordinary income
to the participant and are deductible by the Company. Any gain realized upon a
taxable sale or exchange of the stock will be recognized as short-term or
long-term capital gain or loss, depending on the holding period of the shares
after the restrictions lapse. The Company receives no additional deduction at
the time of disposition of the stock by the participant.
The participant may, under Section 83(b) of the Internal Revenue Code, elect
to report the current fair market value of restricted stock as ordinary income
in the year the award is made, even though the stock is subject to
restrictions. In such a case, the Company will receive an immediate tax
deduction for such fair market value of the shares in the year of grant, but
will receive no deduction for any subsequent appreciation during or after the
restriction period. In addition, dividends paid during or after the
restriction period would be treated as dividends rather than compensation
income to the participant and, therefore, would not be deductible by the
Company. If a Section 83(b) election is made, any appreciation in the value of
the stock after the date of grant will not be recognized as capital gain by
the participant until such time as the participant disposes of the stock in a
taxable transaction. Any capital gain then realized will be long-term capital
gain provided that the required holding period, measured from the date of
grant, is met. If the participant forfeits the stock (i.e., because he or she
has not met the requirements for lapse of restrictions), the participant will
receive no refund or deduction on account of taxes paid in the year of grant
as a result of the Section 83(b) election.
The grant of an SAR has no tax consequences to the Company or the
participant. To the extent that an SAR is exercised, the amount paid to the
participant will be taxed to him or her as ordinary income, and the Company
will receive a corresponding deduction at the same time.
With respect to other stock-based awards granted under the Stock Incentive
Plan that are settled either in cash or in stock or other property that is
either transferable or not subject to substantial risk of forfeiture, the
participant must recognize ordinary income equal to the cash or the fair
market value of shares or other property received, and the Company will be
entitled to a deduction for the same amount. With respect to awards that are
settled in stock or other property that is restricted as to transferability
and subject to substantial risk of forfeiture, the participant must recognize
ordinary income equal to the fair market value of the shares or other property
received, at the first time the shares or other property become transferable
or not subject to substantial risk of forfeiture, whichever occurs earlier.
The Company will be entitled to a deduction for the same amount. A participant
who makes an election under Section 83(b) of the Internal Revenue Code will be
taxed on the excess of the fair market value of the stock or other property at
exercise over the purchase price. Special tax rules may apply to officers and
directors who are subject to Section 16 of the Exchange Act.
Executive Annual Incentive Plan. The Company adopted an Executive Annual
Incentive Compensation Plan (the "Incentive Compensation Plan"). Under this
Plan, a pool equal to 7.5% of the Company's consolidated operating profits (as
defined in the Plan) may be set aside each year for the payment of cash awards
to the five most highly compensated executive officers of the Company
(including the Chief Executive Officer and such other officers as the Chief
Executive Officer may designate). Shares of the pool will be allocated to
participants designated by the Chief Executive Officer. Such allocations are
intended to be made before the 90th day of the fiscal year to which the
incentive pool relates. No more than 40% of the pool will be allocated to any
participant. At any time before or after the close of the fiscal year and
prior to the payment of cash awards for the fiscal year, the Chief Executive
Officer may reduce or eliminate the incentive pool or the amount thereof
granted to any participant. Upon the death of a participant, the award will be
paid to his or her estate or beneficiary. Awards will be forfeited upon
termination of employment unless the Chief Executive Officer determines
otherwise.
The Incentive Compensation Plan may be terminated or amended at any time by
action of the Company's Board of Directors. The Incentive Compensation Plan is
intended to be an unfunded plan and as such the participants shall have no
rights with respect to amount payable under the Plan that are greater than
those of a general creditor of the Company.
For Federal income tax purposes, cash awards will be taxable to participants
as ordinary compensation income as of the date of payment of such awards, and
the Company will be entitled to a corresponding tax deduction in the year
accrued.
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CERTAIN TRANSACTIONS
RELATIONSHIP WITH AETNA AND WESTINGHOUSE PENSION PLAN
Aetna. In January 1996, Federated entered into an agreement with Aetna to
convert 1,000 shares of Trust Series A Preferred Shares into Trust Class B
Common Shares and to sell the converted shares back to the Trust at a mutually
agreed upon price. Each Series A Preferred Share was converted into
approximately 5,303 Class B Common Shares (without adjusting for subsequent
stock dividends). Immediately thereafter, these shares were repurchased from
Aetna for $101,233,000. Aetna has no continuing equity interest in Federated.
See Note 10 to Consolidated Financial Statements.
Westinghouse Pension Plan. Under the Stock Purchase Agreement dated as of
August 1, 1989 (the "Stock Purchase Agreement") between the Company and
Westinghouse Credit Corporation ("Westinghouse"), Westinghouse originally
acquired 1,200,000 Trust Class B Common Shares (4,800,000 shares after giving
effect to subsequent stock dividends). On September 14, 1993, Westinghouse
transferred these shares to Mellon Bank N.A., as Trustee. Pursuant to the
terms of the Stock Purchase Agreement, the Westinghouse Pension Plan is
entitled to participate in any public offering pro rata with all other
existing holders of Class A Common Shares and Class B Common Shares to the
extent any such holders are entitled to participate in any such public
offering. In addition, if the Company offers to issue any Class A Common
Shares or Class B Common Shares to specified senior executives of the Company,
Westinghouse Pension Plan is entitled to purchase its pro rata share at the
same price as such executive. This right does not extend to shares issued
under the Profit Sharing Plan or other employee stock arrangements.
Westinghouse Pension Plan's percentage ownership of Federated is to be diluted
on the same basis as the percentage ownership of all other holders of Class A
Common Shares and Class B Common Shares in the event Federated issues any such
shares to an unrelated third party or pursuant to a public offering. Under the
terms of the Stock Purchase Agreement, Westinghouse Pension Plan cannot
transfer any of its Class B Common Shares to any direct competitor of the
Company or a person owning 50% or more of a competitor. Pursuant to the
Merger, the obligations of Federated under the Stock Purchase Agreement will
be assumed by the Company.
OTHER TRANSACTIONS
Following the repurchase of Trust Class B Common Shares from Aetna described
above, in February 1996 Federated also purchased 1,180,000 (without adjusting
for subsequent stock dividends) Trust Class B Common Shares from other
existing shareholders at a comparable per share price to that paid to Aetna,
for a total purchase price of $22,420,000. See Note 10 to Consolidated
Financial Statements. Among the Trust Class B Common Shares repurchased
(without adjusting for subsequent stock dividends) were shares beneficially
owned by certain directors and executive officers of the Company, as follows:
22,000 shares ($418,000) owned by Comax Company, a limited partnership of
which Comax, Inc. is the general partner in which Mr. John F. Donahue is the
sole shareholder as to which shares Mr. Donahue disclaims beneficial
ownership; 23,000 shares ($437,000) owned by Mr. Eugene F. Maloney; and 50,500
shares ($959,500) owned by Fairview Partners, a limited partnership of which
Mr. John W. McGonigle is the sole general partner. In addition, the Federated
Profit Sharing Plan sold 150,000 shares ($2,850,000) to Federated.
Investment advisory, administrative, distribution and shareholder services
are provided to the Federated group of funds pursuant to various contracts
among subsidiaries of Federated. Terms of the contracts, including fees, are
approved by the directors and trustees of the funds, including independent
directors and trustees of the funds, none of whom are officers, trustees or
employees of Federated.
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PRINCIPAL SHAREHOLDERS
The beneficial ownership of the Common Shares of the Trust at the time of
the Merger and the Common Stock of the Company immediately after the
consummation of the Merger will be the same, without giving effect to the
Offering, because each shareholder of the Trust will receive one share of
Class A Common Stock or Class B Common Stock of the Company in exchange for
each Trust Class A Common Share or Trust Class B Common Share, as the case may
be. Accordingly, the following table sets forth certain information regarding
the beneficial ownership of the Company's Class A and Class B Common Stock as
of April , 1998 (after giving effect to the stock dividend declared on
February 20, 1998 for payment on April 15, 1998), by (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding
shares of Class A or Class B Common Stock, (ii) each of the directors of the
Company, (iii) named executive officers of the Company, and (iv) all directors
and executive officers of the Company as a group.
All of the outstanding shares of Class A Common Stock are held by the Voting
Trust, the trustees of which are John F. Donahue, his wife and his son J.
Christopher Donahue, for the benefit of members of the family of John F.
Donahue. The entire voting power of the Company is vested in the holders of
the outstanding shares of Class A Common Stock, except as otherwise provided
in the Restated Articles or required by applicable law. See "Description of
Securities."
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
CLASS A OR B
COMMON STOCK(2)
-----------------
NUMBER OF SHARES OF CLASS A PRIOR TO AFTER
NAME(1) OR B COMMON STOCK OWNED(2) OFFERING OFFERING
- ------- --------------------------- -------- --------
<S> <C> <C> <C>
Voting Trust............ 4,000 shares of Class A Common Stock 100.0% 100.0%
John F. Donahue(3)...... 7,030,356 shares of Class B Common Stock 12.6
J. Christopher
Donahue(4)............. 3,990,132 shares of Class B Common Stock 7.2
John W. McGonigle(5).... 3,640,000 shares of Class B Common Stock 6.5
Arthur L. Cherry(6)..... 316,000 shares of Class B Common Stock *
James F. Getz........... 360,000 shares of Class B Common Stock *
William D. Dawson III... 80,000 shares of Class B Common Stock *
Thomas R. Donahue(7).... 1,102,824 shares of Class B Common Stock 2.0
John B. Fisher.......... 200,000 shares of Class B Common Stock *
Richard B. Fisher....... 3,200,000 shares of Class B Common Stock 5.8
Henry A. Frantzen....... 120,000 shares of Class B Common Stock *
J. Thomas Madden........ 100,000 shares of Class B Common Stock *
Eugene F. Maloney(8).... 360,000 shares of Class B Common Stock *
James J. Dolan(9)....... 3,216,824 shares of Class B Common Stock 5.8
John A. Staley, IV(10).. 5,084,000 shares of Class B Common Stock 9.1
Westinghouse Pension
Plan(11)............... 4,800,000 shares of Class B Common Stock 8.6
All directors and
executive officers as a
group (12 persons)..... 20,449,312 shares of Class B Common Stock 36.7%
</TABLE>
- --------
* Less than 1%.
(1) Except as indicated in the footnotes below, the address of each five
percent shareholder is in care of the Company at its principal executive
office.
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(2) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Unless stated
below, each such person has sole voting and investment power with respect
to all such shares.
(3) Includes 3,100,000 shares owned by The Beechwood Company, a limited
partnership of which Mr. Donahue and Oyster Bay Properties, Inc., of which
Mr. Donahue is the sole shareholder, are general
partners (Mr. Donahue disclaims beneficial ownership of 1,550,000 shares
owned by The Beechwood Company); 3,044,248 shares owned by Comax Company, a
limited partnership of which Comax, Inc. is the general partner; John F.
Donahue is the sole shareholder of Comax, Inc. (Mr. Donahue disclaims
beneficial ownership of substantially all of the 3,044,248 shares owned by
Comax Company); and 886,108 shares owned by Shamrock Partners LP, a limited
partnership of which Mr. Donahue and Shamrock Properties, Inc., of which
Mr. Donahue is the sole shareholder, are general partners.
(4) Includes 1,112,000 shares owned by or on behalf of Mr. Donahue's children.
(5) All of the shares are owned by Fairview Partners, a limited partnership of
which Mr. McGonigle is the sole general partner.
(6) Includes 200,000 shares subject to options which are currently
exercisable. Includes 11,600 shares owned by or on behalf of Mr. Cherry's
children.
(7) Includes 376,306 shares owned by or on behalf of Mr. Donahue's children.
(8) Includes 70,000 shares owned by Mrs. Maloney.
(9) Mr. Dolan's address is c/o The Beechwood Company, Bigelow Corporate
Center, Suite 718, Pittsburgh, Pennsylvania 15219. Includes 403,740 shares
owned by Mrs. Dolan and 1,852,092 shares owned on behalf of Mr. Dolan's
children.
(10) Mr. Staley's address is 537 Glen Arden Drive, Pittsburgh, Pennsylvania
15208. Includes 2,048,000 shares owned by Glen Arden Associates, a
limited partnership of which Mr. Staley is the sole general partner.
(11) The address for Westinghouse Pension Plan is c/o Mellon Equity
Associates, 500 Grant Street, Suite 3700, Pittsburgh, Pennsylvania 15258.
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DESCRIPTION OF SECURITIES
The authorized share capital of the Company consists of 20,000 shares of
Class A Common Stock, no par value per share ("Class A Common Stock"),
900,000,000 shares of Class B Common Stock, no par value per share ("Class B
Common Stock") and 100,000,000 shares of preferred stock, no par value per
share ("Preferred Stock"). Following consummation of the Merger and without
giving effect to the Offering, there will be issued and outstanding 4,000
shares of Class A Common Stock, 55,618,000 shares of Class B Common Stock and
no shares of Preferred Stock.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights
The entire voting power of the Company shall be vested in the holders of the
outstanding shares of Class A Common Stock until the occurrence of the
Agreement Date (as defined below). Except as otherwise provided in the
Restated Articles or by applicable law, the holders of the outstanding Class B
Common Stock shall have no voting rights. On all matters upon which
shareholders are entitled to vote or give consent, each holder of a share of
Class A Common Stock shall be entitled to cast thereon one vote in person or
by proxy for each share of Class A Common Stock held of record by such holder.
After consummation of the Merger, the Voting Trust will have control of the
Company through its ownership of all of the outstanding shares of the Class A
Common Stock of the Company.
With respect to any proposed amendment of the Restated Articles that would
increase or decrease the number of authorized shares of either the Class A
Common Stock or the Class B Common Stock, or alter or change the powers,
preferences, relative voting power or special rights of the shares of the
Class A Common Stock or the Class B Common Stock so as to affect them
adversely, the approval of a majority of the votes entitled to be cast by the
holders of the class affected by the proposed amendment, voting separately as
a class, shall be obtained in addition to the approval of a majority of the
votes entitled to be cast by the holders of the Class A Common Stock and the
Class B Common Stock voting together as a single class as provided above.
Notwithstanding the foregoing, the Company shall not, prior to the Agreement
Date, take any of the following actions without the consent of the holders of
a majority of the then outstanding shares of Class B Common Stock:
(a) merge, consolidate with or otherwise acquire any corporation or other
business entity; provided, however, that, in a transaction (i) in which the
Company is the surviving entity and (ii) pursuant to which the Restated
Articles have not been amended, altered, repealed or superseded, the Company
may, without such consent, merge, consolidate with or otherwise acquire any
corporation or other business entity;
(b) sell, lease, exchange or otherwise dispose of all or substantially all
of the assets of the Company or any subsidiary thereof to other than a wholly
owned subsidiary of the Company; provided, however, that, (i) in any
transaction or series of related transactions not exceeding in value
$100,000,000 in the aggregate (taking into account all liabilities assumed by
the Company or its subsidiaries in any such transaction or transactions)
involving all or substantially all of the assets of any subsidiary, or (ii) in
any transaction or series of transactions involving a securitization or other
receivables sales transaction, the Company may, without such consent, sell,
lease, exchange or otherwise dispose of all or substantially all of the assets
of such subsidiary;
(c) effect any amendment to the Restated Articles or Company Bylaws that
adversely affects the rights, powers or preferences of the shares of Class B
Common Stock; or
(d) liquidate, dissolve or otherwise wind up the affairs of the Company.
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The "Agreement Date" is the first date on which the Company shall execute
and deliver, and enter into, a legally binding and enforceable agreement
providing for the issue by the Company of shares of Class B Common Stock in a
transaction constituting a business combination which, for financial reporting
purposes, shall be accounted for as a pooling of interests in accordance with
generally accepted accounting principles.
From and after the Agreement Date, the holders of the outstanding shares of
Class A Common Stock and the holders of the outstanding shares of Class B
Common Stock, except as provided below, shall vote together as a single class,
and every holder of the outstanding shares of the Class A Common Stock shall
be entitled to cast 1,000 votes for each share of Class A Common Stock held of
record by such holder, and every holder of the outstanding shares of the Class
B Common Stock shall be entitled to cast one vote for each share of Class B
Common Stock held of record by such holder. Notwithstanding the foregoing,
from and after the Agreement Date the holders of the Class A Common Stock,
voting separately as a class with each holder of the outstanding shares of
Class A Common Stock being entitled to one vote in person or by proxy for each
share of the Class A Common Stock held of record by such holder, shall have
the right to elect that number of directors so that four-tenths ( 4/10)
(calculated to the next highest whole number) of the total number of directors
of the Company fixed from time to time by, or in the manner provided for in,
the Bylaws of the Company, shall have been elected by the holders of the Class
A Common Stock separately. Neither holders of the Class A Common Stock nor
holders of the Class B Common Stock shall be entitled to cumulate their votes
for election of directors of the Company.
Directors elected by the holders of the Class A Common Stock voting
separately as a class may be removed, with or without cause, only by the vote
or consent of a majority of the votes then entitled to be cast by the holders
of the Class A Common Stock, voting separately as a class. Directors elected
by the holders of the Class A Common Stock and the Class B Common Stock voting
together without regard to class, and directors filling vacancies and newly
created directorships, may be removed, with or without cause, only by the vote
or consent of a majority of the votes then entitled to be cast by the holders
of the Class A Common Stock and the Class B Common Stock, voting together
without regard to class. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by holders of
the Class A Common Stock or the Class B Common Stock, as the case may be,
shall be filled by a majority vote of the remaining directors, so elected by
the (x) holders of the Class A Common Stock or (y) the holders of the Class B
Common Stock, as the case may be, then if office, even though less than a
quorum.
At any time, when there shall be no shares of either Class A Common Stock
but there shall be shares of Class B Common Stock outstanding, without any
action by the Board of Directors or the holders of the shares of Class B
Common Stock, the entire voting power of the Company shall then be vested in
the holders of the outstanding shares of Class B Common Stock and each of such
holders shall be entitled to cast one vote for each share of Class B Common
Stock held by such holder. In such event, the provisions of the Restated
Articles that provide for differing voting rights for the Class A Common Stock
shall be of no further effect. All shares of either the Class A Common Stock
or the Class B Common Stock that are then outstanding shall have equal and
general voting power in the election of directors and in all other matters
upon which shareholders of the Company are entitled to vote or give consent.
Dividends and Distributions
Under Pennsylvania law, the Board of Directors may authorize, and the
Company may pay, dividends or make other distributions to shareholders unless,
as a result (i) the Company would be unable to pay its debts as they become
due in the usual course of business or (ii) the total assets of the Company
would be less than the sum of its total liabilities plus the amount that would
be needed, if the Company were to be dissolved at the time of such
distribution, to satisfy the preferential rights of holders of Preferred
Stock. Dividends must be paid on both the Class A Common Stock and the Class B
Common Stock at any time that dividends are paid on either.
Shares of Class A Common Stock and shares of Class B Common Stock rank on a
parity with respect to dividends and distributions; provided, however, that in
the case of dividends or other distributions payable in
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stock of the Company (other than Preferred Stock), including distributions
pursuant to stock split-ups or divisions, only shares of the Class A Common
Stock shall be distributed with respect to the Class A Common Stock, and only
shares of Class B Common Stock shall be distributed with respect to the Class
B Common Stock.
At any time shares of both the Class A Common Stock and the Class B Common
Stock are outstanding, the Board of Directors may issue shares of the Class B
Common Stock in the form of a distribution or distributions pursuant to a
stock dividend on, or a split-up of, shares of the Class B Common Stock only
to the then holders of the outstanding shares of the Class B Common Stock and
in conjunction with and in the same ratio as a stock dividend on, or a split-
up of, the shares of the Class A Common Stock.
Except as otherwise required by applicable law or otherwise provided in the
Restated Articles, each share of Class A Common Stock and each share of Class
B Common Stock shall have identical powers, preferences and rights, including
rights in liquidation. Upon liquidation of the Company, holders of Class A
Common Stock and holders of Class B Common Stock are entitled to share ratably
in the assets thereof that may be available for distribution after
satisfaction of creditors. In addition, in connection with a Company Sale (as
hereinafter defined), the holders of the Class A Common Stock and the Class B
Common Stock shall receive the same amount of consideration per share,
notwithstanding any differences in voting rights. The term "Company Sale"
shall be deemed to include the following: (A) the acquisition of the Company
by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger,
consolidation or stock purchase) and (B) a sale of all or substantially all of
the assets of the Company. In any Company Sale, if the consideration received
by the Company or its stockholders, as the case may be, is other than cash,
its value, as determined in good faith by the Board of Directors will be
deemed its fair market value.
Preemptive Rights
The holders of the Class B Common Stock shall have no preemptive rights to
subscribe for any shares of any class of stock of the Company, whether now or
hereafter authorized.
Each holder of any shares of Class A Common Stock then outstanding shall be
entitled to a preemptive right to purchase or subscribe for any unissued
shares of Class A Common Stock to be issued by the Company for any reason,
including any increase of the authorized number of shares of Class A Common
Stock, or for any additional shares of any class of the capital stock of the
Company or any bonds, certificates of indebtedness, debentures or other
securities convertible into shares of Class A Common Stock, or carrying any
rights to purchase shares of Class A Common Stock, whether such shares or
bonds, certificates of indebtedness, debentures or other securities shall be
issued for cash, property or other lawful consideration.
Dissenters' Rights
Under Pennsylvania law, holders of shares of the Company's capital stock
shall have a right of appraisal with respect to specified corporate actions,
including (i) a plan of merger, consolidation, division or share exchange,
(ii) certain plans or amendments of the Restated Articles in which disparate
treatment is accorded to holders of shares of the same class or series, and
(iii) a sale or transfer of substantially all of the Company's assets.
Appraisal rights are not provided to holders of shares of any class that is
either listed on a national securities exchange or held of record by more than
2,000 holders, but this exception does not apply in the case of (i) a plan
under which such shares are not converted solely into shares of the acquiring,
surviving or new corporation and cash is paid in lieu of the fractional
shares, if any, or (ii) shares of Preferred Stock unless the resolution of the
Board of Directors that creates such series or class of Preferred Stock, the
plan or the terms of the transaction entitle all holders of such class to vote
thereon and require for adoption of the plan the affirmative vote of a
majority of the votes cast by all holders of shares of the series or class.
Restrictions on Transfer
Under the Company Bylaws, in the event the Company files a registration
statement registering shares of capital stock to be sold in an underwritten
public offering, such as the Offering contemplated by the Merger
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Agreement, a shareholder shall not sell, transfer or otherwise dispose of the
shares owned by such person, directly or indirectly, prior to the Offering in
any public sale or distribution, including a sale under Rule 144 promulgated
under the Securities Act during the period of seven days prior to, and 180
days after, the date such registration statement becomes effective, except as
to those shares to be sold to or distributed by the underwriters. This bylaw
provision shall not be amended without the unanimous written consent of the
shareholders of the Company. Notwithstanding anything contained in the Company
Bylaws to the contrary, the Board of Directors of the Company may waive any
restrictions set forth in this bylaw provision as it applies to any
shareholder at any time or from time to time.
PREFERRED STOCK
The Company is authorized to issue 100,000,000 shares of Preferred Stock, of
which no shares will be issued and outstanding upon consummation of the Merger
and the Offering. The Company has no plans to issue shares of Preferred Stock
but believes that the grant of full authority to the Board of Directors of the
Company to authorize the issuance of shares of Preferred Stock into one or
more series, as described below, will enhance the financial flexibility of the
Company. The Restated Articles grant full authority (to the extent permitted
by law) to the Board of Directors of the Company to divide the shares of
Preferred Stock into one or more series, to determine the designation and the
number of shares of any series (within the total number of shares of the class
authorized by the Restated Articles), and to determine the voting rights
(whether full, limited, multiple, fractional or no voting rights),
preferences, limitations and special rights, if any, of any series. Such
division and determination may be made by action of the Board of Directors
from time to time and shall constitute an amendment of the Restated Articles.
It is not possible to state the actual effect of the authorization and
issuance of any series of Preferred Stock upon the rights of the holders of
the Class A Common Stock and the Class B Common Stock until the Board of
Directors determines the specific terms, rights and preferences of a series of
Preferred Stock. However, such effects might include, among other things,
restricting dividends on the Class A Common Stock and the Class B Common
Stock, diluting the voting power of the Class A Common Stock and the Class B
Common Stock, or impairing liquidation rights of such shares without further
action by holders of the Class A Common Stock and the Class B Common Stock. In
addition, under certain circumstances, the issuance of Preferred Stock may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the
Company's securities or the removal of incumbent management.
ANTI-TAKEOVER CONSIDERATIONS
The Restated Articles contain certain provisions that could make more
difficult a change in control of the Company not having approval of the Board
of Directors. The entire voting power of the Company is vested in the holders
of the outstanding Class A Common Stock until the occurrence of the Agreement
Date relating to an agreement by the Company to issue shares of Class B Common
Stock in a business combination which is intended to be treated as a "pooling
of interests" under generally accepted accounting principles. After the Merger
and the Offering, the Voting Trust will control the Company through the
ownership of all of the outstanding shares of Class A Common Stock of the
Company. After the Agreement Date, holders of the Class A Common Stock, voting
separately as a class, will be entitled to elect four-tenths (calculated to
the next highest whole number) of the total number of directors of the
Company.
The Restated Articles authorizes the issuance of blank check Preferred
Stock. The Board of Directors may establish voting rights, liquidation
preferences, redemption rights, conversion rights and other rights relating to
such Preferred Stock, all or some of which may be senior to the Class A Common
Stock and the Class B Common Stock, without the approval of the holders of the
Class A Common Stock and the holders of the Class B Common Stock. In some
circumstances, the Preferred Stock could be issued and have the effect of
preventing a merger, tender offer or other takeover attempt which the Board of
Directors opposes.
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COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, the beneficial owners of the Trust, a
Delaware business trust, will become shareholders of the Company, a
Pennsylvania corporation and a "registered corporation" (as defined in the
Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL")).
Differences between the Delaware Business Trust Act (the "DBTA") and the PBCL,
as well as between the Trust's Restated Declaration of Trust and the Trust
Bylaws and the Restated Articles of the Company and the Company Bylaws will
result in changes in the rights of the Trust's beneficial owners when they
become shareholders of the Company.
The Trust's Restated Declaration of Trust was adopted in 1989 in connection
with the Trust's acquisition of the business of the Company from Aetna for
cash and 1,000 Series A Preferred Shares of the Trust. In January 1996,
Federated entered into an agreement with Aetna to convert all 1,000 Series A
Preferred Shares into Trust B Common Shares and to sell the converted shares
back to Federated at a mutually agreed upon price. As of February 20, 1998
(after giving effect to the stock dividend declared on February 20, 1998 to be
paid on April 15, 1998), there were 4,000 Trust Class A Common Shares and
55,612,000 Trust Class B Common Shares outstanding. No shares of any series of
Trust Preferred Shares are outstanding.
Pursuant to the Merger, each outstanding Class A Common Share and Class B
Common Share of Federated will be converted into the right to receive one
share of Class A Common Stock and one share of Class B Common Stock,
respectively, of the Company. Holders of Class A Common Stock and the Class B
Common Stock of the Company to be received in the Merger will have
substantially the same rights as holders of the Class A Common Shares and
Class B Common Shares of Federated, except as summarized below. In the event
the Company enters into a binding agreement providing for the issuance by the
Company of shares of Class B Common Stock in a transaction constituting a
business combination which, for financial reporting purposes, shall be
accounted for as a "pooling of interests" in accordance with generally
accepted accounting principles, the holders of the Class B Common Stock will
also have the right to elect a majority of the Board of Directors of the
Company.
Following is a description of certain differences, based on the DBTA and the
PBCL as in effect on the date hereof and the Declaration of Trust, the
Restated Articles, and the respective Bylaws of the Trust and the Company.
Descriptions of the Restated Articles and Bylaws of the Company are qualified
in their entirety by reference to the full texts thereof attached as exhibits
to the Merger Agreement and separately as Appendices B and C attached hereto.
ELECTION OF DIRECTORS
Under the Restated Declaration of Trust, the number of trustees (directors)
must be between three and fifteen, as determined by the trustees themselves.
Each trustee serves a term from the date of such trustee's election until the
next annual meeting of the shareholders. Trustees may be removed with or
without cause by the holders of Class A Common Shares or by two-thirds of the
board of trustees. A vacancy on the board created by the removal or
resignation of a trustee or by the expansion of the number of trustees may be
filled by the remaining trustees then in office.
The Restated Articles provide that the Board of Directors of the Company
shall consist of at least five members, all of whom prior to the Agreement
Date shall be elected by the holders of the Class A Common Stock. Following
the Agreement Date, the holders of the Class B Common Stock shall be entitled
to vote on all matters, including the election of directors, provided,
however, that the holders of the Class A Common Stock, voting separately as a
class with each holder of the outstanding shares of Class A Common Stock being
entitled to one vote per share, shall have the right to elect that number of
directors so that four-tenths (4/10) (calculated to the next highest whole
number) of the total number of directors fixed from time to time by, or in the
manner provided for in, the Bylaws of the Company, shall have been elected by
the holders of the Class A Common Stock separately.
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All directors, whether elected by the holders of the Class A Common Stock
voting separately as a class or elected by holders of both the Class A Common
Stock and the Class B Common Stock voting together, shall have equal standing,
serve terms of equal duration and have equal voting powers. Vacancies created
by the resignation or removal of a director elected by the holders of the
Class A Common Stock voting separately shall be filled by the holders of the
Class A Common Stock, voting separately, and vacancies created by the
resignation or removal of a director elected by the holders of the Class A
Common Stock and Class B Common Stock voting together as a class shall be
filled by the holders of the Class A Common Stock and Class B Common Stock,
voting together as a class. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by
holders of the Class A Common Stock or the Class B Common Stock, as the case
may be, shall be filled by the majority vote of the directors so elected by
holders of the Class A Common Stock or the Class B Common Stock, as the case
may be, then in office, even though less than a quorum.
Directors elected by the holders of the Class A Common Stock voting
separately as a class may be removed, with or without cause, only by the vote
or consent of a majority of the votes then entitled to be cast by the holders
of the Class A Common Stock, voting separately as a class. Directors elected
by the holders of the Class A Common Stock and Class B Common Stock voting
together without regard to class, may be removed, with or without cause, by
the vote or consent of a majority of the votes then entitled to be cast by the
holders of the Class A Common Stock and Class B Common Stock, voting together
without regard to class.
DIRECTORS' DUTIES
Under Delaware law, the standard of care applicable to trustees and officers
of a Delaware business trust such as the Trust is the standard of care set
forth in the governing instrument of such business trust, or, if no standard
is set forth, the general Delaware fiduciary standard of care. The Restated
Declaration of Trust does not specify the standard of care applicable to
trustees or officers of the Trust, and, therefore, the general Delaware
fiduciary standard of care applies to the trustees and officers of the Trust.
Under that standard, trustees must act with the care, skill, prudence and
diligence that a prudent person acting in like capacity would use under the
same circumstances.
Under the PBCL, directors of a Pennsylvania corporation are obligated to
perform their duties in good faith, in a manner they reasonably believe to be
in the best interests of the corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence
would use under similar circumstances. The PBCL states that directors of a
Pennsylvania corporation may, but are not required to, take into consideration
the effects of their actions upon various groups affected by such action,
including not only shareholders, but also employees, suppliers, customers,
creditors and communities. The PBCL also makes clear that a director has no
greater obligation to justify, or higher burden of proof with respect to, any
act relating to an actual or potential takeover of the corporation than he or
she has with respect to any other act as a director.
LIMITATION OF DIRECTORS' LIABILITY
By the terms of the Restated Declaration of Trust, trustees and officers of
the Trust are personally liable only for their willful misfeasance, bad faith,
gross negligence or reckless disregard of their duties to the Trust; provided,
however, that actions taken by the trustees in good faith reliance upon the
advice of counsel or other experts of recognized competence with respect to
the meaning and operation of the Restated Declaration of Trust shall not
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of the trustee.
The foregoing provision operates to eliminate under many circumstances the
ability of the Trust or its shareholders to recover monetary damages from a
trustee of the Trust found to have breached his or her fiduciary duty in such
capacity.
Absent a breach of fiduciary duty, lack of good faith or self-dealing,
actions taken as a director of a Pennsylvania corporation are presumed to be
in the best interests of the corporation. The PBCL states that shareholders of
a Pennsylvania corporation may adopt a bylaw which eliminates the personal
liability of directors
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for monetary damages for any action taken (or any failure to take any action)
unless (i) the directors have breached or failed to perform their duties and
(ii) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. However, a corporation may not eliminate personal
liability where the responsibility or liability of a director is pursuant to
any criminal statute or is for the payment of taxes pursuant to local, State
or Federal law.
The Company Bylaws contain a provision adopted by the shareholders limiting
personal liability of directors.
DIRECTORS' INDEMNIFICATION
Pursuant to Section 10.4 of the Restated Declaration of Trust and Article IX
of the Trust Bylaws, any trustee or officer of the Trust who is held
personally liable for any debts, liabilities or obligations of the Trust or in
taking or failing to take any other actions in connection with the Trust, the
taking or failure to take of which does not constitute willful misfeasance,
bad faith, gross negligence or reckless disregard, is indemnified and
reimbursed by the Trust.
The PBCL provides that, unless otherwise restricted in its bylaws, a
Pennsylvania corporation has the power to indemnify any person involved in any
third party or derivative action by reason of the fact that the person is or
was a representative of the corporation, if the person acted in good faith and
reasonably believed that his actions were in or not opposed to the best
interests of the corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe the conduct was unlawful. In general, no
indemnification is allowable in derivative actions where the person has been
adjudged liable to the corporation, unless and to the extent that the court
finds him entitled to indemnification against expenses despite such
adjudication. To the extent that a representative of a Pennsylvania
corporation has been successful on the merits or otherwise in defense of any
action or proceeding or in defense of any claim, issue, or matter therein, the
PBCL requires mandatory indemnification against expenses (including attorneys'
fees) actually and reasonably incurred in connection therewith. Unless
otherwise restricted by its bylaws, a Pennsylvania corporation may also
purchase insurance on behalf of representatives of the corporation against any
liability whether or not the corporation would have the power to indemnify
such person against that liability.
The Company Bylaws do not restrict indemnification and do not contain a
provision limiting the power of the Company to purchase insurance.
DIVIDENDS AND DISTRIBUTIONS
Declarations of dividends out of income and distributions out of principal
of the Trust may be made at any time and in any amount as may be determined by
the trustees. All dividend and distribution payments to a class or series of
stock are distributed pro rata to the holders of shares of such class or
series.
Under Pennsylvania law, unless otherwise restricted in the bylaws, the board
of directors may authorize and a business corporation may pay dividends or
make other distributions to stockholders. However, a distribution may not be
made if as a result (i) the corporation would be unable to pay its debts as
they become due in the usual course of business or (ii) the total assets of
the corporation would be less than the sum of its total liabilities plus
(unless otherwise provided in the articles) the amount that would be needed,
if the corporation were to be resolved at the time of distribution, to satisfy
the preferential rights of holders of preferred stock.
The Restated Articles provide that shares of Class A Common Stock and Class
B Common Stock rank on a parity with respect to dividends and distributions,
provided, however, that in the case of dividends or other distributions
payable in stock of the Company (other than Preferred Stock), including
distributions pursuant to stock split-ups or divisions, only shares of the
Class A Common Stock shall be distributed with respect the Class A Common
Stock, and only shares of the Class B Common Stock shall be distributed with
respect to the Class B Common Stock. At any time shares of both the Class A
Common Stock and the Class B Common Stock are
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outstanding, the Board of Directors may issue shares of the Class B Common
Stock in the form of a distribution or distributions pursuant to a stock
dividend on, or a split-up of, shares of the Class B Common Stock only to the
then holders of the outstanding shares of the Class B Common Stock and in
conjunction with and in the same ratio as a stock dividend on, or a split-up
of, the shares of the Class A Common Stock.
Except as otherwise required by applicable law or otherwise provided in the
Restated Articles, each share of Class A Common Stock and each share of Class
B Common Stock shall have identical powers, preferences and rights, including
rights in liquidation. Upon liquidation of the Company, holders of Class A
Common Stock and holders of Class B Common Stock are entitled to share ratably
in the assets thereof that may be available for distribution after
satisfaction of creditors. In addition, in connection with a Company Sale (as
hereinafter defined), the holders of the Class A Common Stock and the Class B
Common Stock shall receive the same amount of consideration per share,
notwithstanding any differences in voting rights. The term "Company Sale"
shall be deemed to include the following: (A) the acquisition of the Company
by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger,
consolidation or stock purchase), and (B) a sale of all or substantially all
of the assets of the Company. In any Company Sale, if the consideration
received by the Company or its stockholders, as the case may be, is other than
cash, its value, as determined in good faith by the Board of Directors will be
deemed its fair market value.
APPRAISAL RIGHTS
Under the Restated Declaration of Trust, holders of Class B Common Shares
may have a conditional right of appraisal in specified circumstances. The
Trust's position is that Section 8.7 was not intended to apply to the Merger.
Section 8.7 of the Restated Declaration of Trust provides that if there has
been a conversion of Trust Series A Preferred Shares into Trust Class B Common
Shares, any holder of Trust Class B Common Shares (other than any member of
the Trust's "management circle", (as defined in the Shareholders Rights
Agreement dated August 1, 1989), or any employee of the Trust or any of its
subsidiaries) who has not voted in favor of a merger or consolidation of the
Trust with or into another entity shall have the right to obtain an appraisal
of the fair value of such shares (exclusive of any element of value arising
from the accomplishment or expectation of such merger or consolidation)
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value; provided, that the right to obtain an
appraisal of fair value shall apply only if such holders holding at least 2/3
of the total Trust Class B Common Shares held by such holders have requested
such rights. Such a holder shall be entitled to receive out of the assets of
the Trust, in exchange for such Trust Class B Shares, the fair value of such
shares determined pursuant to such appraisal. Section 8.7 of the Restated
Declaration of Trust further provides that in determining such fair value and
in otherwise implementing Section 8.7, Section 262 of the DGCL shall apply. A
copy of Section 8.7 of the Restated Declaration of Trust and Section 262 of
the DGCL are attached to this Proxy Statement/Prospectus as Appendix D and is
incorporated by reference herein in its entirety.
Pennsylvania law provides that shareholders shall have a right of appraisal
with respect to specified corporate actions, including (i) a plan of merger,
consolidation, division or share exchange, (ii) certain plans or amendments of
the articles in which disparate treatment is accorded to holders of shares of
the same class or series, and (iii) a sale or transfer of substantially all of
the corporation's assets. Appraisal rights are not provided to holders of
shares of any class that is either listed on a national securities exchange or
held of record by more than 2,000 stockholders, but this exception does not
apply in the case of (i) a plan under which such shares are not converted
solely into shares of the acquiring, surviving or new corporation and cash in
lieu of the fractional shares, or (ii) shares of a preferred or special class
of stock unless the articles, the plan or the terms of the transaction entitle
all holders of such class to vote thereon and require for adoption of the plan
the affirmative vote of a majority of the votes cast by all holders of shares
of the class.
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VOTING RIGHTS
Trust Class A Common Shares
The entire voting power of the Trust is vested in the holders of Trust Class
A Common Shares, except as otherwise provided in the Restated Declaration of
Trust which provides for voting rights for holders of Trust Class B Common
Shares in circumstances specified below or by law. Each holder of Trust Class
A Common Shares is entitled to one vote for each Trust Class A Common Share
held by such holder, subject to the rights of the holders of Trust Class B
Common Shares with respect to certain corporate actions described below. The
holders of Trust Class A Common Shares are entitled to elect the entire board
of trustees. Trustees may be removed with or without cause by the holders of
Trust Class A Common Shares.
Trust Class B Common Shares
The holders of Trust Class B Common Stock have no voting power for any
purpose except as provided in the Restated Declaration of Trust or the Trust
Bylaws. The Restated Declaration of Trust provides that, without the consent
(given in writing or by vote at any regular or special meeting of
shareholders) of the holders of a majority of the aggregate of the Trust Class
B Common Shares that are then outstanding, the Trust will not (i) merge,
consolidate with or otherwise acquire any corporation or other business entity
except in a transaction (a) in which the Trust is the surviving entity and (b)
pursuant to which the Restated Declaration of Trust has not been amended,
altered, repealed or superseded; or (ii) sell, lease, exchange or otherwise
dispose of assets of the Trust or any subsidiary, other than to a wholly-owned
subsidiary of the Trust, in any transaction or series of transactions
exceeding in value $100,000,000 in the aggregate (taking into account all
liabilities assumed by the Trust or its subsidiaries in any such transaction
or transactions); (iii) (A) effect any amendment to the Restated Declaration
of Trust or the Trust Bylaws that adversely affects the rights, powers or
preferences of Trust Class B Common Shares or authorize any shares of
beneficial interest in the Trust other than Preferred Shares and Trust Common
Shares, provided that the Trust may issue Trust Series C Preferred Shares
without such consent (none are issued and outstanding), or (B) reclassify or
recapitalize any shares; or (iv) liquidate, dissolve or otherwise wind up the
affairs of the Trust or file, or consent by answer or otherwise to the filing
against the Trust of, a petition for relief of reorganization or arrangement
or any other petition in bankruptcy, insolvency or similar law of any
jurisdiction.
Trust Series A Preferred Shares
Under the Restated Declaration of Trust, the holders of any outstanding
shares of Trust Series A Preferred Shares have no voting power for any purpose
except as provided in the Restated Declaration of Trust. Trust Series A
Preferred Shares previously issued in 1989 are no longer outstanding. See
"Certain Transactions--Relationship with Aetna and Westinghouse Pension Plan."
So long as any Trust Series A Preferred Shares were outstanding, the Trust
could not, without the consent of the holders of a majority of the outstanding
Trust Series A Preferred Shares (i) reorganize the Trust into a corporation
unless the corporate holders of Trust Preferred Shares shall have received an
opinion reasonably satisfactory to each of them of independent counsel to the
effect that such reorganization would have no adverse federal or Pennsylvania
income tax consequences to such corporate holders, or (ii) amend, alter,
repeal or supersede the Restated Declaration of Trust or the Trust Bylaws in
any manner or take any other action so as to affect adversely the powers,
preferences or rights of any Trust Series A Preferred Shares, provided the
Trust could issue Trust Series C Preferred Shares without such consent. The
holders of Trust Series A Preferred Shares are also entitled to vote as a
class with the holders of Trust Class B Common Shares in certain circumstances
as discussed above with respect to the voting power of the Class B Common
Shares.
Trust Series B Preferred Shares
No Trust Series B Preferred Shares have been issued. If any Trust Series B
Preferred Shares are outstanding, the Trust cannot without the consent of the
holders of a majority of the outstanding Trust Series B Preferred
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Shares, (i) reorganize the Trust into a corporation unless the corporate
holders of Trust Preferred Shares shall have received an opinion of counsel to
the effect that such reorganization would have no adverse federal or
Pennsylvania income tax consequences to such corporate holders, and (ii)
amend, alter, repeal or supersede the Restated Declaration of Trust or the
Trust Bylaws in any manner to take any other action so as to affect adversely
the powers, preferences or rights of any Trust Series B Preferred Shares,
provided that the Trust may issue Trust Series C Preferred Shares without such
consent. Except as provided in the foregoing sentence, the holders of Trust
Series B Preferred Shares are not entitled to vote.
Trust Series C Common Shares
No Trust Series C Preferred Shares have been issued. The holders of
outstanding Trust Series C Preferred Shares have no voting rights, except that
the Company may not, without the consent of the holders of a majority of the
outstanding Trust Series C Preferred Shares, amend, alter, repeal or supersede
the Restated Declaration of Trust in any manner or take any other action so as
to affect adversely the powers, preferences or rights of any Trust Series C
Preferred Shares.
Class A Common Stock and Class B Common Stock of the Company
Prior to the Agreement Date, the entire voting power of the Company shall be
vested in the holders of the outstanding shares of Class A Common Stock. On
all matters upon which shareholders are entitled to vote or give consent, each
holder of a share a Class A Common Stock shall be entitled to cast thereon one
vote in person or by proxy for each share of Class A Common Stock held of
record by such holder. After consummation of the Merger, the Voting Trust will
have control of the Company through its ownership of all of the outstanding
shares of the Class A Common Stock of the Company.
From and after the Agreement Date, the holders of the outstanding shares of
Class A Common Stock and the holders of the outstanding shares of Class B
Common Stock, except as provided above under "Election of Directors", shall
vote together as a single class, and every holder of the outstanding shares of
the Class A Common Stock shall be entitled to cast 1,000 votes for each share
of Class A Common Stock held of record by such holder, and every holder of the
outstanding shares of the Class B Common Stock shall be entitled to cast one
vote for each share of Class B Common Stock held of record by such holder.
With respect to any proposed amendment of the Restated Articles that would
increase or decrease the number of authorized shares of either the Class A
Common Stock or the Class B Common Stock, or alter or change the powers,
preferences, relative voting power or special rights of the shares of the
Class A Common Stock or the Class B Common Stock so as to affect them
adversely, the approval of a majority of the votes entitled to be cast by the
holders of the class affected by the proposed amendment, voting separately as
a class, shall be obtained in addition to the approval of a majority of the
votes entitled to be cast by the holders of the Class A Common Stock and the
Class B Common Stock voting together as a single class as provided above.
If, at any time, there shall be only shares of either Class A Common Stock
or shares of Class B Common Stock outstanding, any shares of the Class B
Common Stock which are then outstanding shall, without any action by the Board
of Directors or the or holders of Class B Common Stock, the entire voting
power of the Company shall then be vested in the holders of the outstanding
shares of Class B Common Stock and each of such holders shall be entitled to
cast one vote for each share of Class B Common Stock held by such person. In
such event, the provisions of the Restated Articles that provide for differing
voting rights for the Class A Common Stock shall be of no further effect. All
shares of either the Class A Common Stock or the Class B Common Stock that are
then outstanding shall have equal and general voting power in the election of
directors and in all other matters upon which shareholders of the Company are
entitled to vote or give consent.
SHAREHOLDER APPROVAL OF MERGER OR CONSOLIDATION
The Restated Declaration of Trust provides that the entire voting power of
the Trust is vested in the holders of Trust Class A Common Shares and that
each holder of Trust Class A Common Shares is entitled to one vote
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for each Trust Class A Common Share held, provided that, without the consent
(given in writing or by vote at any regular or special meeting of
shareholders) of the holders of a majority of the aggregate of (a) the Trust
Class B Common Shares that are then outstanding, and (b) the Trust Class B
Common Shares that would be issued to holders of the Trust Series A Preferred
Shares were the outstanding Trust Series A Preferred Shares converted into
Trust Class B Common Shares, the Trust will not (i) merge, consolidate with or
otherwise acquire any corporation or other business entity except in a
transaction (a) in which the Trust is the surviving entity and (b) pursuant to
which the Restated Declaration of Trust has not been amended, altered,
repealed or superseded; or (ii) sell, lease, exchange or otherwise dispose of
assets of the Trust or any subsidiary, other than to a wholly-owned subsidiary
of the Trust, in any transaction or series of transactions exceeding in value
$100,000,000 in the aggregate (taking into account all liabilities assumed by
the Trust or its subsidiaries in any such transaction or transactions).
Under Pennsylvania law, unless required by the bylaws of the corporation, no
shareholder approval is required for a plan of merger or consolidation if: (i)
the surviving or new corporation is a domestic business corporation with
articles identical to those of the constituent corporation and shares
outstanding prior to the merger or consolidation will continue as or be
converted into identical shares of the surviving or new corporation under a
plan that causes the shareholders of the constituent corporation to hold in
the aggregate shares of the surviving or new corporation entitled to cast at
least a majority of the votes entitled to be cast for the election of
directors; (ii) prior to the adoption of the plan, another corporation that is
a party to the plan owns 90% or more of the outstanding shares of each class
of the corporation; or (iii) no shares of the corporation have been issued
prior to the adoption of the plan of merger or consolidation by the board of
directors.
In cases where stockholder approval is required, Pennsylvania law provides
that a merger or consolidation will be authorized by a majority of the votes
cast by holders of securities entitled to vote thereon. The presence, in
person or by proxy, of the holders of at least a majority of shares entitled
to vote is necessary to constitute a quorum at a meeting of shareholders held
for such purpose.
The Restated Articles provide that, the Company shall not, prior to the
Agreement Date, take any of the following actions without the consent of the
holders of a majority of the then outstanding shares of Class B Common Stock:
(a) merge, consolidate with or otherwise acquire any corporation or other
business entity; provided, however, that, in a transaction (i) in which the
Company is the surviving entity and (ii) pursuant to which the Restated
Articles have not been amended, altered, repealed or superseded, the Company
may, without such consent, merge, consolidate with or otherwise acquire any
corporation or other business entity;
(b) sell, lease, exchange or otherwise dispose of all or substantially all
of the assets of the Company or any subsidiary thereof to other than a wholly
owned subsidiary of the Company; provided, however, that, (i) in any
transaction or series of related transactions not exceeding in value
$100,000,000 in the aggregate (taking into account all liabilities assumed by
the Company or its subsidiaries in any such transaction or transactions)
involving all or substantially all of the assets of any subsidiary, or (ii) in
any transaction or series of transactions involving a securitization or other
receivable sales transaction, the Company may, without such consent, sell,
lease, exchange or otherwise dispose of all or substantially all of the assets
of such subsidiary;
(c) effect any amendment to the Restated Articles or Bylaws of the Company
that adversely affects the rights, powers or preferences of the shares of
Class B Common Stock; or
(d) liquidate, dissolve or otherwise wind up the affairs of the Company.
ANTI-TAKEOVER PROVISIONS
The DBTA provides that a business trust may merge or consolidate with or
into another business trust or other business entity. Unless otherwise
provided in the governing instrument of a business trust, a merger or c
onsolidation of a business trust must be approved by all of the trustees and
the beneficial owners of such business
76
<PAGE>
trust. The Trust Bylaws provide that the act of a majority of trustees present
at any meeting at which a quorum is present shall be the act of the trustees
unless a greater proportion is required by the Restated Declaration of Trust
or applicable law. The Restated Declaration of Trust provides that the Trust
will not, without the consent (given in writing or by vote at any regular or
special meeting of shareholders) of the holders of a majority of the aggregate
of the Trust Class B Common Shares that are then outstanding, (i) merge,
consolidate with or otherwise acquire any corporation or other business entity
except in a transaction (a) in which the Trust is the surviving entity and (b)
pursuant to which the Restated Declaration of Trust has not been amended,
altered, repealed or superseded; or (ii) sell, lease, exchange or otherwise
dispose of assets of the Trust or any subsidiary, other than to a wholly-owned
subsidiary of the Trust, in any transaction or series of transactions
exceeding in value $100,000,000 in the aggregate (taking into account all
liabilities assumed by the Trust or its subsidiaries in any such transaction
or transactions).
The Company is governed by certain "anti-takeover" provisions in the PBCL,
including the following: (i) provisions which prohibit certain business
combinations (as defined in the PBCL) involving a corporation that has voting
shares registered under the Exchange Act and an "interested person" (generally
defined to include a person who beneficially owns shares representing at least
twenty percent of the votes that all shareholders would be entitled to cast in
an election of directors of the corporation) unless certain conditions are
satisfied or an exemption is applicable; (ii) provisions concerning a
"control-share acquisition" in which the voting rights of certain shareholders
of the Company (specifically, a shareholder who acquires 20%, 33 1/3% or 50%
or more of the voting power of the Company) are conditioned upon the consent
of a majority vote at a meeting of the independent shareholders of the Company
after disclosure by such shareholder of certain information, and with respect
to which such shareholder is effectively deprived of voting rights if consent
is not obtained; (iii) provisions pursuant to which any profit realized by a
"controlling person or group," generally defined as a 20% beneficial owner,
from the disposition of any equity securities within twenty-four months prior
to, and eighteen months succeeding, the acquisition of such control is
recoverable by the Company; (iv) provisions pursuant to which severance
payments are to be made by the corporation to any eligible employee of a
covered corporation whose employment is terminated, other than for willful
misconduct, within ninety days before, or twenty-four months after, a control-
share acquisition; (v) provisions pursuant to which any holder of voting
shares of a registered corporation who objects to a "control transaction"
(generally defined as the acquisition by a person or group (the "controlling
person or group") that would entitle the holders thereof to cast at least 20%
of the votes that all shareholders would be entitled to cast in an election of
the directors of the corporation) is entitled to make a written demand on the
controlling person or group for payment of the fair value of the voting shares
of the corporation held by the shareholder; (vi) a set of interrelated
provisions that are designed to support the validity of actions taken by the
Board of Directors in response to takeover bids, including specifically the
Board's authority to "accept, reject or take no action" with respect to a
takeover bid, and permitting the unfavorable disparate treatment of a takeover
bidder; and (viii) provisions that allow the directors broad discretion in
considering the best interests of the corporation and the resources, intent
and conduct of any person seeking to acquire the corporation.
In addition, the Restated Articles contain certain provisions that could
make more difficult a change in control of the Company not having approval of
the Board of Directors. See "Description of Securities--Anti-Takeover
Considerations." The Restated Articles also authorize the issuance of blank
check Preferred Stock. The Board of Directors may establish voting rights,
liquidation preferences, redemption rights, conversion rights and other rights
relating to such Preferred Stock, all or some of which may be senior to the
Class A Common Stock and the Class B Common Stock, without the approval of the
holders of the Class A Common Stock and the holders of the Class B Common
Stock. In some circumstances, the Preferred Stock could be issued and have the
effect of preventing a merger, tender offer or other takeover attempt which
the Board of Directors opposes.
RIGHT TO CALL SPECIAL MEETING
The Trust Bylaws provide that a special meeting of the shareholders can be
called by the trustees or the chairman or by written request of the holder or
holders of at least one-tenth ( 1/10) of the outstanding shares of the Trust
entitled to vote.
77
<PAGE>
The PBCL provides that a special meeting of the shareholders of a registered
corporation may be called at any time (i) by the board of directors, (ii) by
such officers or other person as may be designated in the bylaws of that
corporation or (iii) by an interested stockholder for the purpose of approving
a business combination. The Company Bylaws designate the Chairman or the
President as officers entitled to call a special meeting and also provide that
a special meeting may be called by holders of not less than 20% of the
outstanding shares entitled to vote at such meeting.
ACTION BY SHAREHOLDER CONSENT
The Trust Bylaws provide that any action required or permitted to be taken
at any meeting of the shareholders may be taken without a meeting if a consent
to such action is signed by all the shareholders entitled to vote on the
action.
Pennsylvania law requires unanimous written consent of the shareholders to
authorize any action without a meeting, unless otherwise permitted in the
bylaws. An action may be authorized by less than unanimous written consent of
the shareholders of a registered corporation, if less than unanimous written
consent is permitted by its articles. The Restated Articles, relating to a
registered corporation under the PBCL, do not permit action by less than
unanimous written consent.
AMENDMENTS TO CHARTER
The Restated Declaration of Trust provides that a majority of the trustees
then in office may amend the Declaration of Trust by making an amendment
thereto; provided, however, that thereafter the shareholders then holding a
majority of the shares entitled to vote thereon shall approve such amendment.
If such amendment to the Restated Declaration of Trust will adversely affect
the rights, powers or preferences of any class or series of stock, the holders
of shares of such series or class must also approve such amendment.
Under the PBCL, amendments to the articles of incorporation of a registered
company may be proposed only by its board of directors. Except for certain
amendments which do not require shareholder approval and unless a greater vote
is required by its articles of incorporation, amendments of the articles of
incorporation of a Pennsylvania corporation are to be approved by the
affirmative vote of a majority of the votes entitled to be cast by all
shareholders entitled to vote thereon and, if any class or series of capital
stock is entitled to vote as a class, the affirmative vote of a majority of
the votes cast in each such separate vote. The Restated Articles require the
affirmative vote of a majority of the outstanding shares of Class B Common
Stock to effect any amendment to the Restated Articles that adversely affects
the rights, powers or preferences of the shares of Class B Common Stock.
AMENDMENTS TO BYLAWS
The Trust Bylaws may be amended by a majority vote of all of the trustees,
provided, however, that if such amendment will adversely affect the powers,
preferences or rights of any class or series of stock, the holders of shares
of such series or class must also approve such amendment.
Under the PBCL, the general rule is that the shareholders of a Pennsylvania
corporation who are entitled to vote have the power to adopt, amend or repeal
the bylaws thereof. The authority to adopt, amend or repeal bylaws of a
corporation may be expressly vested by the bylaws in the board of directors,
subject to the power of the shareholders to override any such action and
except that a board of directors may not have the authority to adopt or change
a bylaw on any subject that is expressly committed to the shareholders under
the PBCL, unless the articles of incorporation of that corporation expressly
give the board that authority.
The Restated Articles require the affirmative vote of a majority of the
outstanding shares of Class B Common Stock to effect any amendment to the
Company Bylaws that adversely affects the rights, powers or preferences of the
shares of the Class B Common Stock.
78
<PAGE>
PREEMPTIVE RIGHTS
Holders of shares of the Trust have no preemptive rights with respect to
issuances of additional shares of the Trust.
Pursuant to the Restated Articles, the holders of the Class B Common Stock
shall have no preemptive rights to subscribe for any shares of any class of
stock of the Company, whether now or hereafter authorized. Each holder of any
shares of Class A Common Stock then outstanding shall be entitled to a
preemptive right to purchase or subscribe for any unissued shares of Class A
Common Stock to be issued by the Company for any reason, including any
increase of the authorized number of shares of Class A Common Stock, or for
any additional shares of any class of the capital stock of the Company or any
bonds, certificates of indebtedness, debentures or other securities
convertible into shares of Class A Common Stock, or carrying any rights to
purchase shares of Class A Common Stock, whether such shares or bonds,
certificates of indebtedness, debentures or other securities shall be issued
for cash, property or other lawful consideration.
RESTRICTIONS ON TRANSFER
Under the Shareholders Rights Agreement, if Federated or holders of
securities of Federated shall register and sell such securities to the public
in a public offering which shall be an underwritten public offering pursuant
to an underwritten registration under the Securities Act, each shareholder
agrees not to effect any public sale or distribution of any equity securities
of Federated or any securities convertible into or exchangeable or exercisable
for such securities, including a sale under Rule 144 promulgated under the
Securities Act during the period of seven days prior to and 90 days after any
underwritten registration has become effective, except as part of such
underwritten registration.
Under the Company Bylaws, a similar provision is set forth except that the
period during which no sales may be made by shareholders owning such shares
prior to any such public offering extends to 180 days after the date the
registration statement becomes effective, except that the Board of Directors
of the Company may waive any restrictions set forth in this bylaw provision as
it applies to any shareholder. See "Description of Securities--Class A Common
Stock and Class B Common Stock--Restrictions on Transfer." The Company Bylaws
will be adopted at the time the Merger is consummated.
LEGAL MATTERS
Certain legal matters in connection with the shares of Class A Common Stock
and Class B Common Stock to be issued in connection with the Merger will be
passed upon for the Company by Kirkpatrick & Lockhart LLP, Pittsburgh,
Pennsylvania.
EXPERTS
The consolidated financial statements of Federated as of December 31, 1997
and 1996, and for each of the two years in the period ended December 31, 1997,
included in this Proxy Statement/Prospectus, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Trust for the year ended
December 31, 1995, have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick, LLP, independent auditors,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
79
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Report of KPMG Peat Marwick, LLP, Independent Auditors .................... F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996............... F-4
Consolidated Statements of Income for the Three Years Ended December 31,
1997, 1996 and 1995....................................................... F-5
Consolidated Statements of Changes in Shareholders' Equity for the Three
Years Ended December 31, 1997, 1996 and 1995.............................. F-6
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1997, 1996 and 1995................................................... F-7
Notes to Consolidated Financial Statements................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Federated Investors
We have audited the consolidated balance sheets of Federated Investors and
subsidiaries (Federated Investors) as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in shareholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of Federated Investors' management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
financial statements of Federated Investors for the year ended December 31,
1995 were audited by other auditors whose report dated January 25, 1996,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Federated
Investors and subsidiaries at December 31, 1997 and 1996 and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
February 20, 1998
F-2
<PAGE>
REPORT OF KPMG PEAT MARWICK, LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Federated Investors:
We have audited the consolidated statements of income, changes in
shareholders' equity, and cash flows of Federated Investors for the year ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Federated Investors for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick, LLP
Pittsburgh, Pennsylvania
January 25, 1996
F-3
<PAGE>
FEDERATED INVESTORS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................... $ 22,912 $ 6,561
Marketable securities................................... 8,945 13,761
Receivables--Federated Funds............................ 5,772 11,276
Receivables--Other, net of reserve of $3,266 and $1,584,
respectively........................................... 26,306 13,806
Prepaid expenses........................................ 2,853 1,704
Income taxes receivable................................. 7,519 6,558
Other current assets.................................... 1,805 3,196
--------- ---------
Total Current Assets................................... 76,112 56,862
--------- ---------
Long-Term Assets:
Customer relationships, net of accumulated amortization
of $26,907 and $15,550, respectively................... 30,398 29,265
Goodwill, net of accumulated amortization of $11,512 and
$9,273, respectively................................... 37,356 39,653
Other intangible assets, net............................ 126 187
Deferred sales commissions, net......................... 101,539 85,905
Property and equipment, net............................. 22,163 29,357
Other long-term assets.................................. 6,378 6,148
--------- ---------
Total Long-Term Assets................................. 197,960 190,515
--------- ---------
Total Assets........................................ $ 274,072 $ 247,377
========= =========
Current Liabilities:
Cash overdraft.......................................... $ 7,680 $ 8,849
Current portion of long-term debt--recourse............. 280 15,659
Accrued expenses........................................ 34,939 22,138
Accounts payable........................................ 18,634 15,645
Other current liabilities............................... 2,520 8,354
--------- ---------
Total Current Liabilities.............................. 64,053 70,645
--------- ---------
Long-Term Liabilities:
Long-term debt--recourse................................ 98,950 244,125
Long-term debt--nonrecourse............................. 122,304 0
Deferred tax liability, net............................. 26,546 15,642
Other long-term liabilities............................. 2,863 3,073
--------- ---------
Total Long-Term Liabilities............................ 250,663 262,840
--------- ---------
Total Liabilities................................... 314,716 333,485
--------- ---------
Minority Interest........................................ 466 814
--------- ---------
Shareholders' Equity:
Common Stock:
Class A, $1.00 stated value, 99,000 shares authorized,
4,000 and 2,000 shares issued and outstanding,
respectively.......................................... 4 2
Class B, $.01 stated value, 149,700,000 shares
authorized, 68,952,000 and 34,476,000 shares issued
and 55,618,000 and 27,988,000 shares outstanding,
respectively.......................................... 623 345
Additional paid-in capital.............................. 28,574 29,605
Retained earnings....................................... 55,419 9,989
Unrealized (loss) gain on marketable securities, net of
tax.................................................... (85) 25
Treasury stock, at cost, 26,667,000 and 12,976,000
shares Class B Common Stock, respectively.............. (123,373) (123,711)
Equity adjustment for foreign currency translation...... (6) (10)
Employee restricted stock plan.......................... (2,266) (3,167)
--------- ---------
Total Shareholders' Equity............................ (41,110) (86,922)
--------- ---------
Total Liabilities, Minority Interest, and
Shareholders' Equity................................ $ 274,072 $ 247,377
========= =========
</TABLE>
(The accompanying notes are an integral part of these consolidated financial
statements.)
F-4
<PAGE>
FEDERATED INVESTORS
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Investment advisory fees, net--Federated Funds.. $213,361 $174,585 $155,032
Investment advisory fees, net--Other............ 5,507 4,636 3,930
Administrative service fees, net--Federated 60,934 51,239 42,736
Funds..........................................
Administrative service fees, net--Other......... 24,495 21,684 24,957
Other service fees, net--Federated Funds........ 57,547 43,998 29,375
Other service fees, net--Other.................. 21,953 15,796 16,443
Securitization revenue.......................... 7,885 0 0
Commission income (loss)--Federated Funds....... 2,641 1,535 (157)
Interest and dividends.......................... 3,032 2,160 1,109
Marketable securities gains..................... 49 2,651 1,156
Other income.................................... 6,315 3,509 5,250
-------- -------- --------
Total Revenue.................................. 403,719 321,793 279,831
-------- -------- --------
Operating Expenses:
Compensation and related........................ 139,373 126,966 101,534
Amortization of deferred sales commissions...... 20,882 12,349 9,554
Office and occupancy............................ 28,608 29,859 23,272
Systems and communications...................... 23,373 22,288 22,829
Advertising and promotional..................... 34,984 30,984 21,471
Travel and related.............................. 14,834 15,929 12,827
Other........................................... 18,323 22,899 14,932
Amortization of intangible assets............... 13,715 8,886 10,445
-------- -------- --------
Total Operating Expenses....................... 294,092 270,160 216,864
-------- -------- --------
Operating income................................. 109,627 51,633 62,967
-------- -------- --------
Nonoperating Expenses:
Interest expense................................ 18,862 18,563 9,413
Other debt expense.............................. 1,198 1,724 413
-------- -------- --------
Total Nonoperating Expenses.................... 20,060 20,287 9,826
-------- -------- --------
Income before minority interest, income taxes and 89,567 31,346 53,141
extraordinary item..............................
Minority interest................................ 7,584 6,811 5,801
-------- -------- --------
Income before income taxes and extraordinary 81,983 24,535 47,340
item............................................
Income tax provision............................. 30,957 10,930 18,809
-------- -------- --------
Income before extraordinary item................. 51,026 13,605 28,531
Extraordinary item related to debt restructuring
costs, net of tax............................... 449 986 0
-------- -------- --------
Net income....................................... 50,577 12,619 28,531
Dividends on preferred stock..................... 0 3,025 6,000
-------- -------- --------
Net income applicable to common stock............ $ 50,577 $ 9,594 $ 22,531
======== ======== ========
Earnings per common share--basic:
Income before extraordinary item................ $ 0.93 $ 0.19 $ 0.38
Extraordinary item related to debt restructuring
costs, net of tax.............................. (0.01) (0.02) 0.00
-------- -------- --------
Net income per common share..................... $ 0.92 $ 0.17 $ 0.38
======== ======== ========
Earnings per common share--assuming dilution:
Income before extraordinary item................ $ 0.92 $ 0.19 $ 0.35
Extraordinary item related to debt restructuring
costs, net of tax.............................. (0.01) (0.02) 0.00
-------- -------- --------
Net income per common share--assuming dilution.. $ 0.91 $ 0.17 $ 0.35
======== ======== ========
Cash dividends per common share.................. $ 0.0875 $ 0.0625 $ 0.25
======== ======== ========
</TABLE>
Per share amounts have been restated to reflect one for one stock dividends in
1997 and 1996.
(The accompanying notes are an integral part of these consolidated financial
statements.)
F-5
<PAGE>
FEDERATED INVESTORS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
RETAINED ON
ADDITIONAL EARNINGS MARKETABLE FOREIGN
PREFERRED COMMON PAID-IN (ACCUMULATED SECURITIES, TREASURY CURRENCY
STOCK STOCK CAPITAL DEFICIT) NET OF TAX STOCK TRANSLATION
--------- ------ ---------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1995.......... $ 1 $152 $44,358 $(18,497) $ 0 $ 0 $ 1
Amortization of
Employee
Restricted Stock
Plan............. 0 0 0 0 0 0 0
Dividends Declared
on:
Common Stock..... 0 0 (15,160) 0 0 0 0
Preferred Stock,
$6,000
per share....... 0 0 0 (6,000) 0 0 0
Issuance of Stock
Under Employee
Restricted Stock
Plan, Net........ 0 1 88 0 0 173 0
Purchase of
Treasury Stock... 0 0 0 0 0 (231) 0
Foreign Currency
Translation...... 0 0 0 0 0 0 1
Unrealized Gain on
Marketable
Securities, Net
of Tax........... 0 0 0 0 624 0 0
Net Income........ 0 0 0 28,531 0 0 0
--- ---- ------- -------- ----- --------- ----
Balance at
December 31,
1995............. 1 153 29,286 4,034 624 (58) 2
Amortization of
Employee
Restricted Stock
Plan and
Other Compensation
Plans............ 0 0 371 0 0 0 0
Dividends Declared
on:
Common Stock..... 0 141 0 (3,639) 0 0 0
Preferred Stock,
$3,025
per share....... 0 0 0 (3,025) 0 0 0
Purchase of
Treasury Stock... 0 0 0 0 0 (123,653) 0
Conversion of
Preferred Stock
to Common Stock.. (1) 53 (52) 0 0 0 0
Foreign Currency
Translation...... 0 0 0 0 0 0 (12)
Unrealized Loss on
Marketable
Securities, Net
of Tax........... 0 0 0 0 (599) 0 0
Net Income........ 0 0 0 12,619 0 0 0
--- ---- ------- -------- ----- --------- ----
Balance at
December 31,
1996............. 0 347 29,605 9,989 25 (123,711) (10)
Amortization of
Employee
Restricted Stock
Plan and
Other Compensation
Plans............ 0 0 257 0 0 0 0
Dividends Declared
on Common Stock.. 0 280 0 (5,147) 0 0 0
Issuance of Stock
Under Employee
Restricted Stock
Plan, Net........ 0 0 (218) 0 0 440 0
Restricted Stock
Forfeitures...... 0 0 (1,070) 0 0 0 0
Purchase of
Treasury Stock... 0 0 0 0 0 (102) 0
Foreign Currency
Translation...... 0 0 0 0 0 0 4
Unrealized Loss on
Marketable
Securities, Net
of Tax........... 0 0 0 0 (110) 0 0
Net Income........ 0 0 0 50,577 0 0 0
--- ---- ------- -------- ----- --------- ----
Balance at
December 31,
1997............. $ 0 $627 $28,574 $ 55,419 $ (85) $(123,373) $ (6)
=== ==== ======= ======== ===== ========= ====
<CAPTION>
EMPLOYEE
RESTRICTED TOTAL
STOCK SHAREHOLDERS'
PLAN EQUITY
---------- -------------
<S> <C> <C>
Balance at January
1, 1995.......... $(5,282) $ 20,733
Amortization of
Employee
Restricted Stock
Plan............. 169 169
Dividends Declared
on:
Common Stock..... 0 (15,160)
Preferred Stock,
$6,000
per share....... 0 (6,000)
Issuance of Stock
Under Employee
Restricted Stock
Plan, Net........ (237) 25
Purchase of
Treasury Stock... 0 (231)
Foreign Currency
Translation...... 0 1
Unrealized Gain on
Marketable
Securities, Net
of Tax........... 0 624
Net Income........ 0 28,531
---------- -------------
Balance at
December 31,
1995............. (5,350) 28,692
Amortization of
Employee
Restricted Stock
Plan and
Other Compensation
Plans............ 2,183 2,554
Dividends Declared
on:
Common Stock..... 0 (3,498)
Preferred Stock,
$3,025
per share....... 0 (3,025)
Purchase of
Treasury Stock... 0 (123,653)
Conversion of
Preferred Stock
to Common Stock.. 0 0
Foreign Currency
Translation...... 0 (12)
Unrealized Loss on
Marketable
Securities, Net
of Tax........... 0 (599)
Net Income........ 0 12,619
---------- -------------
Balance at
December 31,
1996............. (3,167) (86,922)
Amortization of
Employee
Restricted Stock
Plan and
Other Compensation
Plans............ 28 285
Dividends Declared
on Common Stock.. 0 (4,867)
Issuance of Stock
Under Employee
Restricted Stock
Plan, Net........ (197) 25
Restricted Stock
Forfeitures...... 1,070 0
Purchase of
Treasury Stock... 0 (102)
Foreign Currency
Translation...... 0 4
Unrealized Loss on
Marketable
Securities, Net
of Tax........... 0 (110)
Net Income........ 0 50,577
---------- -------------
Balance at
December 31,
1997............. $(2,266) $ (41,110)
========== =============
</TABLE>
(The accompanying notes are an integral part of these consolidated financial
statements.)
F-6
<PAGE>
FEDERATED INVESTORS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net income..................................... $ 50,577 $ 12,619 $ 28,531
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item related to debt
restructuring costs........................... 690 1,516 0
Amortization of intangible assets.............. 13,715 8,886 10,445
Depreciation and other amortization............ 8,674 9,398 5,106
Amortization of deferred sales commissions..... 20,882 12,349 9,554
Minority interest.............................. 7,584 6,811 5,801
Loss on sale of property and equipment......... 271 0 42
Gain on sale of B shares....................... (1,739) 0 0
Write-off of property and equipment............ 0 403 0
Amortization of employee restricted stock and
other compensation plans...................... 285 2,554 169
Provision for deferred income taxes............ 11,117 17,088 5,153
Net realized gain on sale of marketable
securities.................................... (49) (2,651) (1,156)
Foreign currency translation................... 4 (12) 1
Deferred sales commissions..................... (111,817) (69,600) (40,050)
Contingent deferred sales charges received..... 11,343 8,191 8,634
Other changes in assets and liabilities:
Increase in receivables, net.................. (6,996) (4,561) (6,634)
Decrease (increase) in prepaid expenses and
other current assets......................... 116 684 (1,802)
Increase in income taxes receivable........... (961) (2,066) (4,566)
Decrease in deferred sales commissions........ 243 0 0
(Increase) decrease in other long-term assets. (1,870) (4,805) 3,526
Increase in accounts payable and accrued
expenses..................................... 15,790 17,653 2,150
(Decrease) increase in other current
liabilities.................................. (4,904) 11,485 1,011
(Decrease) increase in other long-term
liabilities.................................. (257) 1,537 (2,711)
Other......................................... 0 0 480
--------- -------- --------
Net Cash Provided by Operating Activities..... 12,698 27,479 23,684
--------- -------- --------
Investing Activities:
Proceeds from sale of property and equipment... 2,454 14 238
Additions to property and equipment............ (3,129) (12,362) (7,406)
Cash paid for acquisitions..................... (14,699) (12,128) 0
Purchases of marketable securities............. (24,531) (60,769) (27,218)
Proceeds from redemptions of marketable
securities.................................... 29,230 65,122 16,463
Other.......................................... 0 0 (35)
--------- -------- --------
Net Cash Used by Investing Activities.......... (10,675) (20,123) (17,958)
--------- -------- --------
Financing Activities:
Distributions to minority interest............. (7,932) (6,824) (6,107)
Dividends paid................................. (4,867) (6,523) (21,160)
Proceeds from issuance of common stock......... 25 0 25
Purchase of treasury stock..................... (102) (123,653) (231)
Proceeds from sale of B shares................. 65,453 0 0
Proceeds from new borrowings--Recourse......... 15,729 234,724 63,658
Proceeds from new borrowings--Nonrecourse...... 129,703 0 0
Payments on debt--Recourse..................... (176,282) (105,700) (42,698)
Payments on debt--Nonrecourse.................. (7,399) 0 0
--------- -------- --------
Net Cash Provided (Used) by Financing
Activities.................................... 14,328 (7,976) (6,513)
--------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents.................................... 16,351 (620) (787)
Cash and Cash Equivalents, Beginning of Period.. 6,561 7,181 7,968
--------- -------- --------
Cash and Cash Equivalents, End of Period........ $ 22,912 $ 6,561 $ 7,181
========= ======== ========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for:
Interest....................................... $ 19,668 $ 16,758 $ 9,961
Income taxes................................... 20,495 702 18,272
</TABLE>
(The accompanying notes are an integral part of these consolidated financial
statements.)
F-7
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations
Federated Investors and its subsidiaries ("Federated Investors") sponsor,
market and provide investment advisory, distribution and administrative
services primarily to mutual funds. Federated Investors also provides
investment advisory services and administrative services to corporations,
employee benefit plans and private investment advisory accounts. The
operations of Federated Investors are organized into three principal
functions: investment advisory, distribution and services.
A large portion of Federated Investors' revenue is derived from investment
advisory services provided to mutual funds and separately managed accounts
through various subsidiaries and affiliates pursuant to investment advisory
contracts. These subsidiaries are registered as investment advisers under the
Investment Advisers Act of 1940 and with certain states.
Shares of the portfolios or classes of shares under management or
administration by Federated Investors are distributed by indirect wholly-owned
subsidiaries which are registered broker/dealers under the Securities Exchange
Act of 1934 and under applicable state laws. Federated Investors' investment
products are primarily distributed within the bank trust, broker/dealer and
institutional markets.
Through an indirect wholly-owned subsidiary, Federated Investors provides
mutual fund services to support the operation and administration of all mutual
funds it sponsors.
(b) Basis of Presentation
The consolidated financial statements include the accounts of Federated
Investors and all of its subsidiaries including a special purpose entity
("SPE"). All significant intercompany accounts and transactions have been
eliminated.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements. Actual
results will differ from those estimates, and such differences may be material
to the consolidated financial statements.
(c) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and investments which consist of interest-
bearing deposits with banks, overnight federal funds sold, money market
accounts, and other investments with an original maturity of less than three
months.
(d) Marketable Securities
Investments consist of equity securities which are classified as "available
for sale" and are carried at fair value. The unrealized gains or losses on
these securities are carried as a separate component of shareholders' equity,
net of tax. Realized gains and losses on these securities are computed on a
specific identification basis and recognized in the statements of income.
(e) Property and Equipment
Property and equipment are recorded at cost, or fair value if acquired in
connection with a business combination, and are depreciated using the
straight-line method over their estimated useful lives ranging from
F-8
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) Property and Equipment, continued
three to ten years. Leasehold improvements are depreciated using the straight-
line method over their estimated useful lives or their respective lease terms,
whichever is shorter.
(f) Intangible Assets
Goodwill and other intangible assets are amortized on a straight-line basis
over the estimated period of benefit not to exceed twenty-five years.
Federated Investors continuously evaluates the remaining useful lives and
carrying values of the intangible assets to determine whether events and
circumstances indicate that a change in the useful life or impairment in value
may have occurred. Indicators of impairment monitored by Federated Investors
include a decline in the level of managed assets, changes to contractual
provisions underlying certain intangible assets and reductions in operating
cash flows. Should there be an indication of a change in the useful life or an
impairment in value, Federated Investors compares the carrying value of the
asset and its related useful life to the projected undiscounted cash flows
expected to be generated from the underlying asset over its remaining useful
life to determine whether an impairment has been triggered. If the carrying
value of the asset exceeds the undiscounted cash flows, impairment is measured
based on fair value using a discounted cash flow methodology. The discount
rate utilized by Federated Investors reflects its weighted average cost of
capital. Impairment from changes in contractual provisions is based on the
carrying value of the underlying asset, or component of the underlying asset
when the restrictions change.
Measuring impairment for the customer relationship intangible asset is
dependent upon the level of remaining managed assets for those relationships.
A decline in the remaining managed asset balance in excess of the estimated
attrition rate for those managed assets could have a considerable impact on
the underlying value of the customer relationship intangible.
(g) Deferred Sales Commissions and Securitization Revenue
Certain subsidiaries of Federated Investors pay commissions to
broker/dealers ("deferred sales commissions") to promote investments in
certain mutual funds. These deferred sales commissions are capitalized and
amortized on a straight-line basis over estimated periods of benefit not to
exceed contingent deferred sales charge ("CDSC") periods and are subject to
recoverability tests. Any CDSCs collected are used to reduce deferred sales
commissions.
In 1997, Federated Investors entered into a transaction with a third party
to sell the rights to the future revenue streams associated with the 12b-1,
shareholder service and CDSC fees of the Class B shares of various mutual
funds managed by Federated Investors. Pursuant to this transaction, the sales
of rights to future shareholder servicing cashflows are accounted for as
financings due to ongoing involvement by Federated Investors while 12b-1 and
CDSC cashflows are accounted for as sales, and gains and losses, if any, are
recognized. However, if such a sale involves an SPE which does not have
substantive equity from a source independent from Federated Investors, the SPE
would be consolidated with Federated Investors and the sale, including any
gain or loss, reversed and the transaction reflected in the consolidated
financial statements as a financing.
(h) Foreign Currency Translation
In consolidating a foreign subsidiary, the subsidiary's financial statements
are converted to U.S. currency resulting in an equity adjustment for foreign
currency translation on the Consolidated Balance Sheets.
F-9
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(i) Revenue Recognition
Revenue is recognized during the period in which the services are performed.
Federated Investors may waive certain fees for services (primarily investment
advisory fees) for competitive reasons, or to meet regulatory requirements.
(j) Reporting on Advertising Costs
Federated Investors reports the cost of all advertising as expenses as
incurred.
(k) Income Taxes
Federated Investors accounts for income taxes under the liability method
which requires the recognition of deferred tax assets and liabilities for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
(l) Earnings per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" ("SFAS 128"). SFAS 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share replaces the previous calculation of fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented to conform to SFAS 128 requirements.
(m) Stock-Based Compensation Plans
The Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective
for Federated Investors' fiscal year ended December 31, 1996. SFAS 123 defines
a fair value-based method of accounting for stock-based employee compensation
plans. Under the fair value-based method, compensation cost is measured at the
grant date based upon the value of the award and is recognized over the
service period. While the standard encourages entities to adopt this method of
accounting for employee stock compensation plans, it also allows an entity to
continue to measure compensation costs for its plans as prescribed in APB
Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25").
Federated Investors has elected to continue to apply APB 25 and has disclosed
the pro forma effect on earnings with SFAS 123 applied (see Note 8).
(n) Reclassification of Prior Periods' Statements
Certain items previously reported have been reclassified to conform with the
current year's presentation.
F-10
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(o) Recent Accounting Pronouncements
Statement of Financial Standards No. 130, "Reporting Comprehensive Income,"
("SFAS 130") is effective for fiscal years beginning after December 15, 1997.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income includes net income and all
other changes in shareholders' equity except those resulting from investments
and distributions to owners.
Statement of Financial Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") is effective for financial
statements for periods beginning after December 15, 1997. SFAS 131 requires
financial and descriptive information about an entity's operating segments to
be included in the annual financial statements.
Federated Investors believes that the impact of the adoptions of SFAS 130
and SFAS 131 will not have a material impact on its financial statements.
(2) MARKETABLE SECURITIES
A summary of the cost and estimated market value of marketable securities is
as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED ESTIMATED
------------------ MARKET
COST GAINS (LOSSES) VALUE
------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available for sale:
Investments in fluctuating value mutual
funds
December 31, 1997..................... $ 9,075 $ 61 $ (191) $ 8,945
======= ======= ======== =======
December 31, 1996..................... $13,722 $ 115 $ (76) $13,761
======= ======= ======== =======
</TABLE>
Gross realized gains and (losses) on the sale of marketable securities were
approximately $275,000 and ($226,000); $3,126,000 and ($475,000); and
$1,169,000 and ($13,000), respectively, for the years ended December 31, 1997,
1996, and 1995.
Federated Investors enters into futures contracts to hedge against changes
in market values related to investing in mutual funds it sponsors. These
investments enable the funds to build a diversified portfolio and are redeemed
as outside investors purchase the funds. The futures contracts are carried at
fair value in Marketable Securities on the Consolidated Balance Sheets. At
December 31, 1997, the futures contracts had maturities of less than one year.
F-11
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements...................................... $ 18,187 $ 18,432
Computer equipment.......................................... 32,988 31,229
Office furniture and equipment.............................. 10,508 10,706
Transportation equipment.................................... 1,851 5,699
-------- --------
63,534 66,066
Accumulated depreciation.................................. (41,371) (36,709)
-------- --------
Property and equipment, net................................. $ 22,163 $ 29,357
======== ========
</TABLE>
Depreciation expense was approximately $7,599,000, $7,961,000, and
$5,106,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
(4) INTANGIBLE ASSETS
Intangible assets consist of customer relationships, goodwill and other
intangible assets. The other intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Employment contracts.......................................... $ 2,634 $ 2,634
Computer software............................................. 10 10
Organization expenses......................................... 1,067 1,067
------- -------
3,711 3,711
Accumulated amortization.................................... (3,585) (3,524)
------- -------
Other intangible assets, net.................................. $ 126 $ 187
======= =======
</TABLE>
In 1997, Federated Investors assumed the investment management and
distribution responsibilities for seven retail mutual funds. The acquisition
was accounted for as a purchase for which Federated Investors recorded a
customer relationship intangible and paid $13,282,000 in cash.
In 1996, Federated Investors acquired the right to advise, distribute,
administer and provide management services for fund assets for a total of
$11,280,000 in cash plus a percentage of certain assets over a two year
period. Additionally in 1996, Federated Investors acquired the right to
negotiate new administration or sub-administration and/or distribution
agreements for cash of $800,000. Both acquisitions resulted in Federated
Investors recording customer relationship intangibles.
F-12
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(5) LONG-TERM DEBT--RECOURSE
Federated Investors' long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Senior Secured Credit Agreement............................... $ 0 $160,300
Senior Secured Note Purchase Agreement........................ 98,000 98,000
Capitalized Leases............................................ 1,230 1,484
------- --------
Total Debt.................................................. 99,230 259,784
Less: Current Portion......................................... 280 15,659
------- --------
Total Long-Term Debt.......................................... $98,950 $244,125
======= ========
</TABLE>
In 1996, Federated Investors obtained a bank Senior Secured Credit Agreement
("Senior") maturing in 2001 consisting of a Revolving Credit Facility and a
Term Loan Facility. Also in 1996, Federated Investors entered into a
$98,000,000 Senior Secured Note Purchase Agreement ("Note") maturing in 2006.
Pursuant to these agreements, Federated Investors must meet certain financial
and nonfinancial covenants. At December 31, 1997 and 1996, respectively,
Federated Investors was in compliance with all such covenants.
In 1996, Federated Investors entered into an interest rate cap agreement
("Cap") to reduce the impact of increases in interest rates on the Senior. The
premium paid was amortized to interest expense until the Cap was sold in 1997
concurrent with the extinguishment of the Term Loan Facility.
The obligations of Federated Investors under the Senior and the Note are
secured by pledges of all the outstanding common stock or shares of beneficial
interest of all of the subsidiaries owned by Federated Investors.
(a) Senior Secured Credit Agreement
The Term Loan Facility was fully repaid as of December 31, 1997. The
Revolving Credit Facility is used for general business purposes. At December
31, 1997, the outstanding balance was $0, with availability of $148,961,000.
The $160,300,000 outstanding balance at December 31, 1996 had a weighted-
average borrowing rate of 6.90%.
(b) Senior Secured Note Purchase Agreement
The Note is due in seven equal annual installments beginning in the year
2000 and maturing in 2006. The Note carries a fixed interest rate of 7.96%.
(c) Maturities
The aggregate contractual maturities of the recourse debt for the years
following December 31, 1997 are:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998.......................................................... $ 280
1999.......................................................... 238
2000.......................................................... 14,258
2001.......................................................... 14,280
2002.......................................................... 14,174
2003 and thereafter........................................... 56,000
-------
Total Recourse Debt......................................... $99,230
=======
</TABLE>
F-13
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(6) SECURITIZATION OF B-SHARE ASSETS AND NONRECOURSE DEBT
Federated Investors has entered into an agreement with a third party to sell
the rights to the future revenue streams associated with the 12b-1,
shareholder service and CDSC fees of the Class B shares of various mutual
funds it manages. This agreement includes both an initial sale of existent
rights to future revenue streams as well as establishing a program to sell on
a continuous basis the future rights associated with future revenue streams
relating to the ongoing sale of B shares.
(a) Initial Transaction
In the fourth quarter of 1997, Federated Investors exchanged its rights to
certain future cash flows associated with net deferred sales commission assets
with a remaining book value of $88,738,000 for $110,214,000 in cash. Two SPEs
were established for the purpose of the initial transaction. A bankruptcy
remote SPE was formed by Federated Investors to purchase the rights to the
future cash flows from a subsidiary and in turn it sold these future cash
flows to a third party's SPE. The third party's SPE funded this purchase by
issuing Class A and Class B notes. Due to a majority residual interest in the
third party SPE, Federated Investors is considered the beneficial owner of
this SPE and accordingly, it has been consolidated into the financial
statements of Federated Investors with the appropriate intercompany
transactions thereby eliminated.
The cash flows of the B-share assets will be used by the third party SPE to
first pay trustee fees and other program related expenses. After these fees
are paid, interest and principal are paid in the following succession: Class A
interest, Class B interest, Class A principal, and Class B principal (only
upon full payment of Class A principal). Any residual cash flow after full
payment of all principal on the notes will be paid 90% to Federated Investors
and 10% to the holders of the Class B notes. This debt is nonrecourse debt to
Federated Investors in the event the future cash flows associated with the
rights sold do not cover the full obligation of the notes.
The Class A notes had an outstanding balance at December 31, 1997 of
$97,873,000 at a fixed interest rate of 7.44%. The Class B notes had an
outstanding balance at December 31, 1997 of $9,700,000 at a fixed interest
rate of 9.80%.
Also in the fourth quarter of 1997, Federated Investors exchanged additional
net deferred sales commission assets with a remaining book value of
$54,008,000 for $55,228,000 in cash. The transaction has been accounted for as
a sale for the portion of the proceeds related to the future cash flows of the
12b-1 and CDSC fees. The portion related to the future shareholder servicing
fees was accounted for as debt with an imputed interest rate of 7.6%. As of
December 31, 1997, the remaining balance was $14,731,000. The nonrecourse debt
does not contain a contractual maturity but is repaid dependent upon the cash
flows of the transaction.
(b) Ongoing Transactions
For a period of three years, the third party has agreed to purchase on a
semi-monthly basis the rights associated with certain future revenue streams
of B shares sold during that period.
(7) EMPLOYEE BENEFIT PLANS
The employees of Federated Investors participate in a 401(k)/Profit Sharing
Plan.
F-14
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(7) EMPLOYEE BENEFIT PLANS, CONTINUED
(a) 401(k)
Federated Investors offers a 401(k) plan covering substantially all
employees. Under the 401(k) plan, employees can make contributions at a rate
of one to fifteen percent of their compensation (as defined in the 401(k)
plan), subject to Internal Revenue Code limitations. Federated Investors makes
a matching contribution in an amount equal to 100% of a participant's first 2%
of contributions and 50% of the next 4% of contributions. Forfeitures of
unvested matching contributions are used to offset future matching
contributions.
In order to vest in Federated Investors' matching contributions, a
participant in the 401(k) plan must be employed at least three years and work
at least 1,000 hours per year. Upon completion of three years of service, 20%
of a participant's balance vests and 20% vests for each of the following four
years, if the participant works 1,000 hours per year. Employees are
immediately vested in their 401(k) salary reduction contributions.
Matching contributions to the 401(k) plan amounted to $2,537,000, $2,596,000
and $1,322,000, for the years ended December 31, 1997, 1996 and 1995,
respectively.
(b) Profit Sharing
An employee of Federated Investors becomes eligible to participate in the
Profit Sharing plan upon the first day of employment. The Profit Sharing plan
is a defined contribution plan to which Federated Investors contributes
amounts as authorized by its Board of Trustees. An employee will receive a
portion of Federated Investors' contribution upon completion of 500 hours of
service and if employed on the last day of the plan year. No contributions
have been made to the Profit Sharing plan in 1997, 1996 and 1995.
(8) OTHER COMPENSATION PLANS
(a) Deferred Compensation Plans
(1) In 1997, a deferred compensation arrangement was established for a group
of key employees for the purpose of providing incentive to certain individuals
who contribute to the success of Federated Investors. Each annual award
provided under this program is deferred for a period of four years with the
vesting period beginning in 1997. Termination of employment for any reason
other than death, disability or retirement prior to the plan's vesting date of
the third quarter 2001 causes the participant's benefit to be forfeited. The
liability at December 31, 1997 is $73,000 and is included in Other Long-Term
Liabilities on the Consolidated Balance Sheet.
(2) A deferred compensation arrangement ("Deferred Comp") was established
for a group of employees for the purpose of providing incentive to individuals
who contribute to the success of Federated Investors by their superior
performance. A portion of the Deferred Comp award through December 31, 1991
was deferred for a period of five years. Termination of employment prior to
the five-year vesting period causes the participant's benefit to be forfeited.
The Deferred Comp terminated in 1996 and all liabilities under the plan were
paid with interest to participants by December 31, 1996. Amounts forfeited
during these periods were not significant. Amounts included in compensation
and related expense on the Consolidated Statements of Income were $0, $44,000
and $4,299,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
(b) Employee Restricted Stock Plan
Under the Employee Restricted Stock Plan, Federated Investors has sold to
certain key employees, subject to restrictions, shares of Class B Common Stock
(nonvoting). During the restricted period, the recipient receives
F-15
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) OTHER COMPENSATION PLANS, CONTINUED
dividends on the shares. The compensation cost to Federated Investors (the
difference between the estimated fair value of the stock and the amount paid
by the key employees at issuance) is charged to expense over the period of
employee performance during which the restrictions lapse, not to exceed ten
years. In 1997, 1996, and 1995, 50,000, 0, and 160,000 shares of Class B
Common Stock (nonvoting) were sold under the Employee Restricted Stock Plan,
respectively. Forfeitures of 408,000, 88,000, and 60,000 shares occurred in
1997, 1996 and 1995, respectively. For the years ended December 31, 1997, 1996
and 1995, compensation expense related to the Employee Restricted Stock Plan
was $28,000, $2,183,000, and $169,000, respectively.
(c) Stock Appreciation Rights
In 1994, Federated Investors established an Employee Stock Appreciation
Rights Plan ("SARS Plan") to reward employees who have contributed to the
success of Federated Investors and to provide incentive to increase their
efforts on behalf of Federated Investors. In 1995 and 1994, 410,000 and
1,796,000 rights were issued under the SARS Plan, respectively. The SARS Plan
rights are valued over a period of up to ten years. The value at the time of
issuance and subsequent valuations to measure compensation expense is based on
an independent appraisal of the Class B Common Stock. Vesting occurs over a
period of five to ten years and is subject to the fulfillment of certain
defined criteria. The awards can be paid in cash or in shares of Class B
Common Stock at the end of the vesting period. Forfeitures of 16,000 and
160,000 rights of the 1994 SARS Plan occurred in 1996 and 1995, respectively.
At January 31, 1996, the SARS Plan rights previously issued were converted to
stock options with the exception of 32,000 rights which remained with the SARS
Plan.
(d) Stock Options
In the first quarter of 1996, 1,998,000 SARS Plan rights were converted to
stock options ("Replacement Options"). In 1997, 1,122,000 stock options ("1997
Options") were granted to a group of key employees. All options are part of a
Stock Incentive Plan offered by Federated Investors to reward employees who
have contributed to the success of Federated Investors and to provide
incentive to increase their efforts on behalf of Federated Investors. The
difference between the independent appraisal of the Class B Common Stock and
the exercise price of the options at the time of issuance is charged to
compensation expense over the vesting period. The fair value of the 1997
Options and the Replacement Options on the date of grant was $5.04 and $3.43
per option. For existing plans vesting occurs over a nine year period, a ten-
year period, or on a predetermined date and is subject to the fulfillment of
certain defined criteria. Each vested Replacement Option may be exercised for
the purchase of one share of Class B Common Stock at the exercise price.
For the year ended December 31, 1997 and 1996, compensation expense related
to the stock options was $231,000 and $365,000, respectively. At December 31,
1997, the weighted-average remaining contractual life of outstanding options
was 8 years, 1 month.
F-16
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(8) OTHER COMPENSATION PLANS, CONTINUED
The following table summarizes the changes in the stock options outstanding
during 1997:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at beginning of year...................... 1,806,000 $2.87
Granted............................................. 1,122,000 8.29
Exercised........................................... 0 --
Forfeited/Expired................................... (265,000) 2.87
---------
Outstanding at end of year............................ 2,663,000 5.15
=========
Exercisable at end of year............................ 0 --
=========
</TABLE>
(e) Pro Forma Net Income
Federated Investors accounts for stock options and employee restricted stock
in accordance with APB 25. The following pro forma information regarding net
income assumes the adoption of SFAS 123 for stock options and employee
restricted stock granted subsequent to December 31, 1994. (Disclosure is not
required for options granted prior to 1995.) The estimated fair value of the
options is amortized to expense over the option and vesting period. The fair
value was estimated at the date of grant using the Minimum Value option
pricing model with the following weighted-average assumptions for 1997: nine
and ten year risk-free interest rates of 5.69% and 5.75%, respectively; a
dividend yield of 1.6% and an expected life of nine to ten years based upon
the specific plans valued. The estimated fair value of the restricted stock is
amortized to expense over the vesting period. The fair value was estimated at
the market price on the grant date. The pro forma results are estimates of
statements of income as if compensation expense had been recognized for all
stock-based compensation plans and are not indicative of the impact on future
periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net income (In Thousands).................... $50,501 $12,630 $28,483
======= ======= =======
Pro forma Basic Earnings per common share.............. $ 0.92 $ 0.17 $ 0.38
======= ======= =======
Pro forma Diluted Earnings per common share............ $ 0.91 $ 0.17 $ 0.35
======= ======= =======
</TABLE>
(9) MINORITY INTEREST IN SUBSIDIARY
A subsidiary of Federated Investors has a majority interest (50.5%) and acts
as the general partner in Passport Research, Ltd., a limited partnership.
Edward D. Jones & Co. is the limited partner with a 49.5% interest. The
Partnership acts as investment adviser to two regulated investment companies.
(10) COMMON AND PREFERRED STOCK
On February 20, 1998, the Board of Directors declared a one for one stock
dividend payable on April 15, 1998 to stockholders of record on March 17,
1998. Federated Investors has recorded this stock dividend effective December
31, 1997.
F-17
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(10) COMMON AND PREFERRED STOCK, CONTINUED
In 1996, Federated Investors entered into an agreement to convert 1,000
shares of Series A Preferred Stock ("Series A Preferred") into 21,211,032
Class B Common Stock and to buy the converted shares back for $4.77 per share,
or $101,233,000. In 1996, Federated Investors purchased 4,720,000 shares of
Class B Common Stock from existing shareholders at $4.75 per share for a total
of $22,420,000. The repurchased Class A and Class B shares were recorded as
treasury stock at cost.
Federated Investors has authorized 125,000 shares of no par Series B
Cumulative Nonconvertible Preferred Stock ("Series B Preferred"). The Series B
Preferred is entitled to dividends of $1,000 per share and is subject to a
mandatory redemption date of August 1, 1999. In the event of Federated
Investors' liquidation, Series B Preferred shareholders are entitled to $1,000
per share plus unpaid dividends. No Series B Preferred shares have been issued
to date. Federated Investors has also authorized 75,000 shares of no par
Series C Preferred Stock ("Series C Preferred"). The Series C Preferred is not
entitled to receive dividends as long as the Series A and Series B Preferred
are outstanding. No Series C Preferred shares have been issued to date.
The Class A Common Stock ("Class A Common") and Class B Common Stock ("Class
B Common"), (collectively "Common Shares") are entitled to receive dividends
only after all dividends on the Series A, B and C Preferred have been paid.
The holders of the Class A Common have the entire voting rights of Federated
Investors; however, without the consent of the majority of the holders of the
Class B Common, Class A Common shareholders cannot alter its structure,
dispose of all or substantially all of its assets, amend the Declaration of
Trust or Bylaws of Federated Investors to adversely affect the Class B Common,
or liquidate or dissolve Federated Investors.
Dividend payments on Common Shares may not exceed $5,000,000 in any fiscal
year nor exceed the sum of $5,000,000 plus 50% of the net income of Federated
Investors during the period from January 1, 1996 to and including the date of
payment. A cash dividend of $.0875, $.0625, and $.25 per share, or $4,867,000,
$3,498,000, and $15,160,000 was paid in 1997, 1996 and 1995, respectively, to
holders of Common Shares.
(11) LEASES
Federated Investors and its subsidiaries have various operating lease
agreements primarily involving facilities, office and computer equipment, and
vehicles. These leases are noncancellable and expire on various dates through
the year 2007.
The following is a schedule by year of future minimum rental payments
required under the operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998.......................................................... $16,267
1999.......................................................... 10,183
2000.......................................................... 9,172
2001.......................................................... 8,914
2002.......................................................... 9,179
2003 and thereafter........................................... 45,636
-------
Total Minimum Lease Payments................................ $99,351
=======
</TABLE>
Rent expense was approximately $14,293,000, $14,674,000, and $12,841,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
F-18
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(12) INCOME TAXES
Federated Investors files a consolidated federal income tax return with its
subsidiaries. Financial statement tax expense is determined under the
liability method.
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.......................................... $19,597 $(6,672) $13,548
State............................................ 243 514 108
-------- -------- --------
19,840 (6,158) 13,656
Deferred:
Federal.......................................... 11,117 17,088 5,153
Extraordinary Item............................... (241) (530) 0
-------- -------- --------
Total.............................................. $30,716 $10,400 $18,809
======== ======== ========
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, the foreign subsidiary
had net operating income (losses) of $1,449,000, $(257,000), and $(447,000),
respectively, for which no income tax expense (benefit) has been provided.
The reconciliation between the federal statutory income tax rate and
Federated Investors' effective income tax rate consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Expected statutory rate........................... 35.0% 35.0% 35.0%
Increase:
State income taxes.............................. 0.2 1.4 0.1
Amortization of goodwill........................ 1.0 3.2 1.7
Meals and entertainment limitation.............. 1.2 4.6 1.9
Other........................................... 0.4 0.3 1.0
-------- -------- --------
Total........................................... 37.8% 44.5% 39.7%
======== ======== ========
</TABLE>
F-19
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(12) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Intangible assets............................................ $14,946 $14,641
Organization costs........................................... 1,399 1,399
Deferred compensation plans.................................. 0 29
Employee restricted stock plan............................... 170 38
Reserve for rent escalation.................................. 0 126
Reserve for bad debts........................................ 1,068 0
Other........................................................ 246 1,021
------- -------
Total gross deferred tax asset............................. 17,829 17,254
Deferred tax liabilities:
Deferred sales commissions................................... 12,730 30,052
Deferred gain................................................ 29,023 0
Property and equipment depreciation.......................... 101 875
Other........................................................ 2,521 1,969
------- -------
Total gross deferred tax liability........................... 44,375 32,896
------- -------
Net deferred tax liability..................................... $26,546 $15,642
======= =======
</TABLE>
F-20
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(13) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Income from continuing operations.................... $50,577 $12,619 $28,531
Preferred stock dividends............................ 0 3,025 6,000
------- ------- -------
Numerator for basic earnings per share for continuing
operations--
income available to common stockholders............. 50,577 9,594 22,531
Effect of dilutive securities:
Preferred stock dividends............................ 0 0 6,000
------- ------- -------
Numerator for diluted earnings per share for
continuing operations-- income available to common
stockholders after assumed conversions.............. $50,577 $ 9,594 $28,531
======= ======= =======
Denominator:
Denominator for basic earnings per share--
weighted-average shares............................. 54,928 55,439 59,330
Effect of dilutive securities:
Restricted Stock..................................... 290 78 0
Employee stock options/SARs.......................... 558 316 88
Convertible preferred stock.......................... 0 0 21,211
------- ------- -------
Dilutive potential common shares..................... 848 394 21,299
Denominator for diluted earnings per share--
adjusted weighted-average shares and assumed
conversions......................................... 55,776 55,833 80,629
======= ======= =======
Basic earnings per share............................... $ 0.92 $ 0.17 $ 0.38
======= ======= =======
Diluted earnings per share............................. $ 0.91 $ 0.17 $ 0.35
======= ======= =======
</TABLE>
- --------
The convertible preferred stock is antidilutive at December 31, 1996, as such,
it was excluded from the computation of diluted earnings per share.
(14) DISCLOSURES OF FAIR VALUE
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of estimated fair values
of certain on- and off-balance sheet financial instruments. The fair value
estimates, as well as the related methods and assumptions used to value each
of Federated Investors' significant financial instruments, are set forth
below.
(a) Cash, Cash Equivalents, and Marketable Securities
The carrying amount of cash and cash equivalents approximates fair value due
to the short maturities of these instruments. The fair value of marketable
securities is based on quoted market prices.
F-21
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(14) DISCLOSURES OF FAIR VALUE, CONTINUED
(b) Receivables, Accounts Payable, and Accrued Expenses
The carrying amounts of these financial instruments approximate fair value
due to the short maturities of these instruments.
(c) Long-Term Debt
As described in Note 5, the majority of Federated Investors' debt is
comprised of the Note. Because of the difficulty in obtaining quoted market
values for comparable debt with similar terms and limitations, Federated
Investors considered the maturity date, underlying collateral and borrowing
rates available to Federated Investors for loans with similar terms and
maturities. Based upon these factors, Federated Investors estimates that the
recorded amount approximates fair value.
(d) Futures Contracts
Federated Investors entered into futures contracts during 1997 and 1996 to
hedge against changes in market values related to the shares purchased of
mutual funds. Federated Investors' carrying value of $45,000 approximates the
estimated fair value at December 31, 1997.
(15) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1996 1995
---- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase to employee restricted stock plan, net............... $ 0 $ 0 $ 237
Sale of deferred sales commissions............................ 0 0 21,737
Payoff of the revolving credit facility....................... 0 0 21,737
</TABLE>
(16) COMMITMENTS AND CONTINGENCIES
Federated Investors is contingently liable to an insurance company for
unanticipated expenses or losses in an amount not to exceed 180% of Federated
Investors' annual premium. At December 31, 1997, this amount is secured by an
irrevocable stand-by letter of credit for $1,039,000.
Federated Investors has claims asserted against it that result from
litigation in the ordinary course of business. Management believes that the
ultimate resolution of such matters will not materially affect the financial
position or statements of income of Federated Investors.
(17) RELATED PARTY TRANSACTIONS
Federated Investors provides investment advisory, administrative,
distribution and shareholder services to the Federated group of funds
(Federated Funds). All of these services provided for the Federated Funds are
under contracts that definitively set forth the fees to be charged for these
services and are approved by the funds' independent Directors/Trustees.
Federated Investors may waive certain fees charged for these services
(primarily investment advisory fees) in order to make the funds more
competitive or to meet regulatory requirements.
In 1996, prior to the stock dividend, Federated Investors repurchased from
related parties 956,000 shares of Class B Common Stock for $19.00 per share.
During 1995, Federated Investors repurchased from an executive officer 20,000
shares of Class B Common Stock. Federated Investors paid $11.58 per share, the
estimated fair value at that date. The Class B Common Stock repurchases were
recorded as treasury stock.
F-22
<PAGE>
FEDERATED INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
(18) YEAR 2000 DISCLOSURE (UNAUDITED)
Federated Investors utilizes software and related technologies throughout
its businesses including both proprietary systems as well as those provided by
outside vendors. Significant functions such as portfolio accounting/-
recordkeeping and shareholder services rely on systems provided by outside
vendors. It is anticipated that these systems will be affected by the date
change in the year 2000. The year 2000 issue exists because many computer sys-
tems and applications currently use two-digit date fields to designate a year.
As the century date change occurs, certain date-sensitive systems may recog-
nize the year 2000 as 1900, or not at all. This inability to recognize or
properly treat the year 2000 may cause systems to process critical financial
and operational information incorrectly. Federated Investors, like many other
companies, is expected to incur expenditures over the next two years to ad-
dress this issue.
Federated Investors formed a team of employees in 1997 to determine the full
scope and related costs to ensure both proprietary and third party vendor
systems will be year 2000 compliant, meeting both internal needs and those of
our customers. Federated Investors' assessment of internal systems is
substantially complete and plans are in place for all proprietary applications
within Federated Investors to be renovated or replaced. Completion of
renovation or replacement and the subsequent testing and implementation are
scheduled for 1998, with 1999 being reserved for industry-wide, cooperative
testing. The assessment process is in progress for the related infrastructure
and third party desktop software products. Based on management's
identification of resource requirements for both plan implementation and
overall project management, it is anticipated that the Year 2000 costs, which
are being expensed as incurred, will be, at a minimum, $10 million for
internal systems and do not reflect the impact of outside vendors to become
Year 2000 compliant. Accordingly, a final cost estimate cannot be determined
at this time.
F-23
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 20, 1998
BETWEEN
FEDERATED INVESTORS,
A DELAWARE BUSINESS TRUST
AND
FEDERATED INVESTORS, INC.,
A PENNSYLVANIA CORPORATION.
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of February 20, 1998 (this
"Agreement"), among FEDERATED INVESTORS, a Delaware business trust (the
"Trust"), and FEDERATED INVESTORS, INC., a Pennsylvania corporation (the
"Company").
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Trust and the Company desire to enter into a merger transaction
pursuant to which the Trust will be merged with and into the Company, with the
Company continuing as the surviving corporation (the "Merger"), whereby each
issued and outstanding Class A Common Share, $1.00 stated value per share, of
the Trust ("Trust Class A Common Shares") will be converted into one share of
Class A Common Stock, no par value per share, of the Company ("Class A Common
Stock"), and each issued and outstanding Class B Common Share, $0.01 stated
value per share, of the Trust ("Trust Class B Common Shares")(other than
shares held in the treasury of the Trust immediately prior to the Effective
Time (as defined herein)) will be converted into one share of Class B Common
Stock, no par value per share, of the Company ("Class B Common Stock", and,
together with the Class A Common Stock, the "Company Common Stock"); and
WHEREAS, the Merger is intended to be a tax-free transaction pursuant to
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
such that no gain or loss will be recognized by the Trust and no gain or loss
will be recognized by holders of Trust Class A Common Shares or Trust Class B
Common Shares on the exchange of such shares for Class A Common Stock or Class
B Common Stock pursuant to this Agreement; and
WHEREAS, the Trust and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger, including the consummation of an
initial public offering by the Company on terms satisfactory to the Company
and the Trust (the "Offering");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Pennsylvania Business Corporation Law of 1988, as
amended (the "PBCL"), the Delaware Business Trust Act, as amended (the "DBTA")
and the Restated Declaration of Trust of the Trust dated July 28, 1989, as
amended (the "Declaration"), the Trust shall be merged with and into the
Company at the Effective Time (as defined in Section 1.03). Following the
Effective Time, the separate existence of the Trust shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations
of the Trust in accordance with applicable law.
SECTION 1.02. CLOSING
The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date") at the offices of the
Trust, Federated Investors Tower, Pittsburgh, Pennsylvania 15222, unless
another time, date or place is agreed to by the parties hereto.
SECTION 1.03. EFFECTIVE TIME
Subject to the provisions of this Agreement, as soon as practicable on or
after the Closing Date, the parties shall file a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions
of the DBTA and the Declaration and articles of merger (the "Articles of
Merger") executed in accordance with
A-1
<PAGE>
the relevant provisions of the PBCL, and shall make all other filings or
recordings required under the DBTA and the PBCL. The Merger shall become
effective at such time as the Trust and the Company shall agree and as is
specified in the Certificate of Merger and the Articles of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
SECTION 1.04. EFFECTS OF THE MERGER
The Merger shall have the effects specified in Section 1929 of the PBCL and
Section 3815(g) of the DBTA.
SECTION 1.05. ARTICLES OF INCORPORATION AND BY-LAWS
(a) At the Effective Time and without further action on the part of the
Company, the Restated Articles of Incorporation of the Company attached hereto
as Exhibit A shall be the articles of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) At the Effective Time and without further action on the part of the
Company, the Restated By-laws of the Company attached hereto as Exhibit B
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS
The directors of the Company immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
SECTION 1.07. OFFICERS
The officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE PARTIES
SECTION 2.01. EFFECT ON CAPITAL STOCK
As of the Effective Time, by virtue of the Merger and without any action on
the part of the Trust or the holder of any Trust Class A Common Shares or
Trust Class B Common Shares:
(a) Cancellation of Treasury Shares. Each Trust Class A Common Share and
Trust Class B Common Share that is owned by the Trust or the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Trust Class A Common Shares. Each issued and outstanding
Trust Class A Common Share (other than shares to be canceled in accordance
with Section 2.01(a)) shall be converted into one share of Class A Common
Stock (the "Class A Merger Consideration").
(c) Conversion of Trust Class B Common Shares. Except as otherwise provided
by Section 2.01(d), each issued and outstanding Trust Class B Common Share
(other than shares to be canceled in accordance with Section 2.01(a)) shall be
converted into one share of Class B Common Stock. The consideration issuable
pursuant to this paragraph is referred to herein as the "Class B Merger
Consideration", and together with the Class A Merger Consideration, as the
"Merger Consideration".
A-2
<PAGE>
(d) Dissenting Shareholders. To the extent that Section 8.7 of the
Declaration is declared by a court of competent jurisdiction to be applicable
to the Merger, any issued and outstanding Trust Class B Common Shares held by
a person, other than any member of the Management Circle (as defined in the
Shareholder Rights Agreement dated August 1, 1989, between the Company, The
Standard Fire Insurance Company and the other shareholders bound thereby, as
amended (the "Shareholder Rights Agreement")) or any employee of the Trust or
any subsidiary of the Trust ("Employee Shareholders"), who shall not have
voted to adopt this Agreement or consented thereto in writing and who shall
have properly demanded appraisal (a "Dissenting Shareholder") for such shares
in accordance with Section 8.7 of the Declaration ("Dissenting Shares") (which
Section provides that appraisal rights shall only apply if holders other than
members of the Management Circle and Employee Shareholders holding at least
2/3 of the total outstanding Trust Class B Common Shares held by such holders
have requested such rights) shall not be converted as described in Section
2.01(b) and (c), unless such holder fails to perfect or withdraws or otherwise
loses his right to appraisal. If, after the Effective Time, such Dissenting
Shareholder fails to perfect or withdraws or loses his right to appraisal,
such Dissenting Shareholder's Trust Class B Common Shares shall no longer be
considered Dissenting Shares for the purposes of this Agreement and shall
thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the Class B Merger Consideration. In
determining the fair value of the Dissenting Shares and in otherwise
implementing Section 8.7 of the Declaration, Section 262 of the Delaware
General Corporation Law ("DGCL") shall apply.
(e) Cancellation of Trust Class A Common Shares and Trust Class B Common
Shares. As of the Effective Time, all Trust Class A Common Shares and Trust
Class B Common Shares shall no longer be outstanding and shall automatically
be canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such Trust Class A
Common Shares or Trust Class B Common Shares (a "Certificate") shall cease to
have any rights with respect thereto, except the right to receive the
applicable Merger Consideration, or, in the case of Dissenting Shareholders,
if any, the rights, if any, accorded under Section 8.7 of the Declaration.
(f) Cancellation of Company Capital Stock held by Trust. As of the Effective
Time, all shares of the capital stock of the Company that are owned by the
Trust shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
SECTION 2.02. EXCHANGE OF CERTIFICATES
(a) Deposit with the Exchange Agent. As of the Effective Time, the Company
shall deposit with or other independent agent mutually acceptable
to the Company and the Trust (the "Exchange Agent") for the benefit of the
holders of Trust Class A Common Shares and Trust Class B Common Shares, for
exchange through the Exchange Agent, the certificates evidencing the Merger
Consideration (the "Exchange Fund") payable pursuant to Section 2.01 in
exchange for outstanding Trust Class A Common Shares and Trust Class B Common
Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates, (i) a letter of transmittal and (ii) instructions
for use in effecting the surrender of such Certificates in exchange for the
applicable Merger Consideration. Upon surrender of such a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Company, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive a
certificate or certificates evidencing the Merger Consideration which such
holder has the right to receive pursuant to this Article II, and the
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each certificate formerly evidencing shares of Trust Common Shares which have
been so converted will be deemed for all corporate purposes of the Company to
evidence ownership of the number of shares of Class A Common Stock or Class B
Common Stock of the Company, as the case may be, for which the Trust Class A
or Class B Common Shares formerly represented thereby were exchanged;
provided, however, that until such certificate is so surrendered, no dividend
payable to holders of record of Class A Common Stock or Class
A-3
<PAGE>
B Common Stock of the Company as of any date subsequent to the Effective Time
shall be paid to the holder of such certificate in respect of the shares of
Class A Common Stock or Class B Common Stock of the Company evidenced thereby
and such holder shall not be entitled to vote such shares of Class A Common
Stock or Class B Common Stock of the Company. Upon surrender of a certificate
formerly evidencing Trust Common Shares which have been so converted, there
shall be paid to the record holder of the certificates of Class A Common Stock
or Class B Common Stock issued in exchange therefor (i) at the time of such
surrender, the amount of dividends and any other distributions theretofore
paid with respect to such shares of Class A Common Stock or Class B Common
Stock of the Company, as of any date subsequent to the Effective Time to the
extent the same has not yet been paid to a public official pursuant to
abandoned property, escheat or similar laws and (ii) at the appropriate
payment date, the amount of dividends and any other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of Class A Common
Stock or Class B Common Stock of the Company. No interest shall be payable
with respect to the payment of such dividends.
(c) No Further Ownership Rights in Trust Class A Common Shares and Trust
Class B Common Shares. The Merger Consideration issued upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed
to have been paid in full satisfaction of all rights pertaining to the Trust
Class A Common Shares and Trust Class B Common Shares theretofore represented
by such Certificates, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Trust Class A
Common Shares and Trust Class B Common Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(d) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration deliverable in respect thereof, pursuant to this
Agreement.
ARTICLE III
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Trust as follows:
(a) Organization, Standing and Corporate Power. The Company is a corporation
duly formed and validly subsisting under the laws of the Commonwealth of
Pennsylvania and has the requisite corporate power and authority to carry on
its business as now being conducted. The business of the Company is carried
out through subsidiaries that are duly qualified or licensed to do business
and are in good standing (with respect to jurisdictions which recognize such
concept) in each jurisdiction in which the nature of their business or the
ownership or leasing of their properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on the Company or any
subsidiary.
(b) Capital Structure. Immediately prior to the Effective Time (or prior to
the adoption of the Restated Articles of Incorporation), there were 5,095,512
shares of common stock, par value $.05 per share, of the Company issued and
outstanding, all of which were owned by the Trust. As of the Effective Time,
the authorized capital stock of the Company shall consist of 20,000 shares of
Class A Common Stock, no par value, 900,000,000 shares of Class B Common
Stock, no par value and 100,000,000 shares of preferred stock, no par value
per share ("Preferred Stock"). As of the Effective Time (after giving effect
to the 1998 Stock Dividend
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but without giving effect to the Offering described in Section 4.03), the
consummation which is a condition to the Merger as set forth in Section
5.01(d), there will be 4,000 shares of Class A Common Stock issued and
outstanding, 55,618,000 shares of Class B Common Stock issued and outstanding
and 9,000,000 shares of Class B Common Stock reserved for issuance under the
Federated Investors Stock Incentive Plan (the "Stock Incentive Plan"). Except
as set forth above, immediately prior to the Effective Time, no shares of
capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. All outstanding shares of capital stock of the
Company are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable.
(c) Authority. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company. The execution and delivery of this Agreement by the Trust
shall constitute the approval of this Agreement by the Trust in its capacity
as the sole shareholder of the Company. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
(d) Noncontravention. Subject to (i) compliance with the terms of the Senior
Secured Credit Agreement, dated January 31, 1996, as amended, among the Trust,
PNC Bank, National Association, and the other banks named therein (the "Senior
Credit Agreement"), (ii) compliance with the terms of the Note Purchase
Agreement, dated as of June 15, 1996, among the Trust and the Purchasers
identified therein (the "Note Purchase Agreement"), and (iii) compliance with
the terms of the Pledge Agreement, dated as of June 15, 1996, among the Trust,
the Company, the Pledgors (as defined therein), the Collateral Agent (as
defined therein) and the Noteholders (as defined therein) (the "Pledge
Agreement"), the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any lien upon any of the properties or assets of the
Company under, (i) the Articles of Incorporation or By-laws of the Company, as
amended to date, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or its properties or assets or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or liens that individually or in the aggregate would not (x) have a
material adverse effect on the Company, (y) impair the ability of the Company
to perform its obligations under this Agreement in any material respect or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (1) the effectiveness of the
Registration Statement on Form S-4 with respect to the Merger (the "S-4
Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), including a Proxy Statement (hereinafter defined) meeting the
requirements of the Securities Exchange Act of 1934, as amended; (2) the
effectiveness of the Registration Statement on Form S-1 with respect to the
Offering filed with the Commission pursuant to the Act; (3) the filing of the
Certificate of Merger with the Delaware Secretary of State and the Articles of
Merger with the Pennsylvania Secretary of State and; (4) such consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure to make or obtain which would not reasonably be expected to have a
material adverse effect on the Company or impair the ability of the Company to
perform its obligations under this Agreement in any material respect.
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SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
The Trust represents and warrants to the Company as follows:
(a) Organization, Standing and Power. The Trust is a business trust duly
organized, validly existing and in good standing under the laws of Delaware
and has the requisite power and authority to carry on its business as now
being conducted. The Trust is duly qualified or licensed to do business and is
in good standing in the Commonwealth of Pennsylvania, and is not required to
be so qualified or licensed in any other jurisdiction.
(b) Capital Structure. The authorized capital stock of the Trust consists of
150,000,000 shares of beneficial interest, consisting of four classes as
follows: (i) 125,000 shares of Series B Cumulative Preferred Shares, no par
value per share, none of which are issued and outstanding, (ii) 75,000 shares
of Series C Preferred Shares, no par value per share, none of which are issued
and outstanding as of February 20, 1998 (4,000 shares after giving effect to
the 1998 Stock Dividend hereinafter defined), (iii) 99,000 Class A Common
Shares, no par value per share, 2,000 of which are issued and outstanding, and
(iv) 149,700,000 Class B Common Shares, no par value per share, 27,809,000 of
which are issued and outstanding as of February 20, 1998 (55,618,000 shares
after giving effect to the 1998 Stock Dividend). Except for the shares of
restricted stock, stock appreciation rights and stock options issued and/or
granted under the Trust's Restricted Stock Plan, Stock Appreciation Rights
Plan and Stock Incentive Plan (the "Prior Stock Plan") which, as of February
20, 1998, aggregated 1,411,000 restricted shares of Class B Common Shares
(2,822,000 shares after giving effect to the 1998 Stock Dividend) and
1,332,400 shares of Class B Common Shares (2,664,800 shares after giving
effect to the 1998 Stock Dividend), and except as set forth in the first
sentence of this paragraph, there are no outstanding stock appreciation rights
or rights to receive shares of the Trust on a deferred basis and no shares of
capital stock or beneficial interests of the Trust are issued, reserved for
issuance or outstanding, except for the one for one stock dividend declared on
February 20, 1998 to be paid on April 1, 1998 to shareholders of record on
March 17, 1998 (the "1998 Stock Dividend"). All outstanding shares of
beneficial interest of the Trust are duly authorized, validly issued, fully
paid and nonassessable, and subject to the Shareholder Rights Agreement.
(c) Authority. The Trust has all requisite power and authority under the
DBTA and the Declaration to enter into this Agreement and, subject to the
Trust Shareholder Approval (as defined herein), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
by the Trust and the consummation by the Trust of the transactions
contemplated by this Agreement have been duly authorized by all necessary
action required under the DBTA and the Declaration on the part of the Trust,
subject to the Trust Shareholder Approval. This Agreement has been duly
executed and delivered by the Trust and constitutes a valid and binding
obligation of the Trust, enforceable against the Trust in accordance with its
terms. The consummation of the Merger contemplated by this Agreement requires
the affirmative vote of the holders of a majority of the outstanding Trust
Class A Common Shares and Trust Class B Common Shares, each voting separately
as a class ("Trust Shareholder Approval").
(d) Ownership of the Company. The Trust owns all of the outstanding capital
stock of the Company, free and clear of all liens and encumbrances except for
encumbrances created under the Pledge Agreement, and has duly approved this
Agreement in its capacity as the sole shareholder of the Company.
(e) Noncontravention. Subject to (i) the Trust Shareholder Approval, (ii)
compliance with the terms of Sections 8.1 and 8.2 of the Senior Credit
Agreement and (iii) compliance with Section 6 of the Pledge Agreement, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement by the Trust will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of the Trust under,
(i) the Restated Declaration of Trust of the Trust, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Trust
or its properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any
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judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Trust or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or liens that individually or in the aggregate would not (x) have a
material adverse effect on the Trust, (y) impair the ability of the Trust to
perform its obligations under this Agreement in any material respect or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to the Trust in connection with the execution and
delivery of this Agreement by the Trust or the consummation by the Trust of
the transactions contemplated by this Agreement, except for (1) the filing
with the Commission of a definitive proxy statement relating to the Special
Meeting (as defined herein) (such proxy statement, as amended or supplemented
from time to time, the "Proxy Statement"), (2) the filing of the Certificate
of Merger with the Delaware Secretary of State and the Articles of Merger with
the Pennsylvania Secretary of State; and (3) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure to make or
obtain which would not reasonably be expected to have a material adverse
effect on the Trust or impair the ability of the Trust to perform its
obligations under this Agreement in any material respect.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. PREPARATION OF THE PROXY STATEMENT AND S-4 REGISTRATION
STATEMENT; SPECIAL MEETING.
(a) As soon as practicable following the date of this Agreement, the Company
and the Trust shall prepare and file with the Commission the Proxy Statement
and the S-4 Registration Statement. The Trust and the Company shall use all
reasonable efforts to cause the S-4 Registration Statement to be declared
effective by the Commission as soon as practicable following the filing
thereof with the Commission. The Trust will use all reasonable efforts to
cause the Proxy Statement to be mailed to holders of the Trust's beneficial
interests as promptly as practicable after the effectiveness of the S-4
Registration Statement.
(b) The Trust will, as soon as practicable following the effectiveness of
the S-4 Registration Statement, duly call, give notice of, convene and hold a
meeting of the holders of its beneficial interests (the "Special Meeting") for
the purpose of obtaining the approval of the holders of a majority of the
Trust Class A Common Shares and Trust Class B Common Shares, each voting
separately as a class, of this Agreement and the transactions contemplated
hereby (the "Trust Shareholder Approval"). The Trust will, through its Board
of Trustees, recommend to the holders of its beneficial interests the adoption
of this Agreement and the approval of the transactions contemplated hereby.
SECTION 4.02. STOCK OPTION AND BENEFIT PLANS.
At the Effective Time, the Company shall assume the rights and obligations
of the Trust under the Trust's Prior Stock Plan. The Company shall treat as
having been issued under its Stock Incentive Plan all shares of restricted
stock, stock appreciation rights and stock options issued under the Prior
Stock Plan. At the Effective Time, each share of restricted stock, stock
appreciation right and stock option issued or granted under the Prior Stock
Plan shall be converted automatically into a share of restricted stock, stock
appreciation right or stock option, as the case may be, of or with respect to
Class B Common Stock. The Board of Directors of the Company and the Board of
Trustees of the Trust shall take all actions necessary to carry into effect
the intent of this Section 4.02. The Company shall, as soon as practicable
following the Effective Time, register on Form S-8 or such other form as may
be prescribed by the Commission the securities to be issued by the Company in
connection with the assumption of the Trust's obligations under the Prior
Stock Plan.
SECTION 4.03. PREPARATION OF S-1 REGISTRATION STATEMENT.
As soon as practicable following the date of this Agreement, the Company,
with the cooperation of the Trust, shall prepare and file with the Commission
a Registration Statement on Form S-1 with respect to the
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Offering setting forth the terms of such Offering as the Company, in its sole
discretion, may determine, including timing and pricing of the Offering, the
number of the shares to be offered by the Company and any selling
shareholders, the selection of underwriters and all other matters relating to
the Offering. The Offering will be subject to prevailing market conditions and
other factors as may be taken into account by the Board of Directors of the
Company. Neither the Trust nor the Company shall be obligated to cause the S-1
Registration Statement to be declared effective by the Commission, if in
either party's judgment the Offering should not proceed.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Trust Shareholder Approval. The Trust Shareholder Approval shall have
been obtained.
(b) No Appraisal Rights. In connection with the Merger, there shall not be
written demands or objections made and not withdrawn or otherwise lost by
Dissenting Shareholders who in the aggregate hold at least 2/3 of the total
outstanding Trust Class B Common Shares held by all holders who are entitled
to seek appraisal rights under Section 8.7 of the Declaration.
(c) No Injunctions or Restraints. No judgment, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect.
(d) Effective Registration Statement. The S-4 Registration Statement filed
by the Company with respect to the Merger shall have been declared effective,
and no stop order or proceeding seeking a stop order is in effect or has been
instituted.
(e) Consummation of Offering. The S-1 Registration Statement filed by the
Company with respect to the Offering shall have been declared effective, and
no stop order or proceeding seeking stop order is in effect or has been
instituted, and the Offering shall have been made on terms and conditions
(including size and price) satisfactory to the Company and the Trust and shall
be consummated on the Closing Date concurrently with the Merger.
SECTION 5.02. CONDITIONS TO OBLIGATION OF THE TRUST
The obligation of the Trust to effect the Merger is further subject to
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such date).
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Consents and Notices. The Company shall have received any material third
party or governmental consent and shall have provided any material notice or
other document required to be provided by it in connection with the
transactions contemplated by this Agreement, including, without limitation,
the consent of
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PNC Bank, National Association pursuant to the Senior Credit Agreement and the
Note Purchase Agreement, and the provision of the notice required by the
Pledge Agreement.
(d) Effective Registration Statement. The S-4 Registration Statement filed
by the Company with respect to the Merger shall have been declared effective,
and no stop order or proceeding seeking a stop order is in effect or has been
instituted.
SECTION 5.03. CONDITIONS TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Trust set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations expressly relate to an
earlier date (in which case as of such date).
(b) Performance of Obligations of the Trust. The Trust 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.
(c) Consents. The Trust shall have received any material third party or
governmental consent and shall have provided any material notice or other
document required to be provided by it in connection with the transactions
contemplated by this Agreement, including, without limitation, obtaining the
consent and providing the notice and proxies required by the Senior Credit
Agreement and providing the notices required by the Pledge Agreement.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Trust Shareholder Approval:
(a) by mutual consent of the Trust and the Company;
(b) by either the Trust or the Company:
(i) if a court of competent jurisdiction or other governmental entity
shall have issued a nonappealable final order, decree or ruling or taken
any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger;
(ii) if at the Special Meeting (including any adjournment or postponement
thereof), the requisite vote of the holders of the Trust Class A Common
Shares and Trust Class B Common Shares in favor of this Agreement and the
Merger shall not have been obtained; or
(iii) if the registration statement relating to the Offering shall not
have become effective under the Securities Act of 1933, as amended, or the
Offering shall have been abandoned or not otherwise consummated.
SECTION 6.02. EFFECT OF TERMINATION
In the event of termination of this Agreement by either the Company or the
Trust as provided in Section 6.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of the
Trust, the Company or their respective officers, directors, trustees,
shareholders or affiliates.
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SECTION 6.03. AMENDMENT
This Agreement may be amended at any time by action taken or authorized by
the Board of Trustees of the Trust and the Board of Directors of the Company;
provided, however, that after the Trust Shareholder Approval is obtained, no
amendment shall be made which by law requires further approval by the holders
of Trust Class A Common Shares or Trust Class B Common Shares without such
further approval.
SECTION 6.04. EXTENSION; WAIVER
The Company and the Trust, by action taken or authorized by the Board of
Directors or the Board of Trustees, respectively, may extend the time for
performance of the obligations or other acts of the other party to this
Agreement, may waive inaccuracies in the representations or warranties
contained in this Agreement, and may waive compliance with any agreements or
conditions contained in this Agreement. The failure of either party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 7.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 7.02. COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
SECTION 7.03. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement constitutes the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and is not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 7.04. GOVERNING LAW
Except as otherwise specifically referred to herein, this Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof; except that the Merger
contemplated hereby shall be governed by the laws of the State of Delaware and
the Commonwealth of Pennsylvania.
SECTION 7.05. ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by either party without the prior written consent of the other
party. Any assignment in violation of the preceding sentence shall be void.
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.
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SECTION 7.06. FEES AND EXPENSES
All fees, costs and expenses incurred by the Trust and the Company in
connection with this Agreement and the transactions contemplated hereby shall
be paid (i) by the Trust if the Merger does not occur and (ii) by the Company
if the Merger occurs.
IN WITNESS WHEREOF, the Trust and the Company have caused this Agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date first written above.
FEDERATED INVESTORS
By:
-------------------------------
Name:
Title:
FEDERATED INVESTORS, INC.
By:
-------------------------------
Name:
Title:
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APPENDIX B
RESTATED ARTICLES OF INCORPORATION OF FEDERATED INVESTORS, INC.
-------------------------
FIRST: Name. The name of the Corporation is FEDERATED INVESTORS, INC.
SECOND: Registered Office. The location and post office address of the
registered office of the Corporation in the Commonwealth of Pennsylvania is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222, in the County of Allegheny.
THIRD: Incorporation. The Corporation was incorporated on October 18, 1957
under the Business Corporation Law of 1933 of the Commonwealth of Pennsylvania
for the purpose or purposes to advise, counsel, and make recommendations on
investment, economic, business and allied matters to individuals,
partnerships, corporations and other entities; to buy, sell and otherwise deal
in stocks, bonds, mutual funds, investment plans and investment securities of
all kinds; and generally to engage in the business of investment adviser and
investment broker-dealer for itself and as agent for others, as well as to
have unlimited power to engage in and to do any lawful act concerning any and
all lawful business for which corporations may be incorporated under such
Business Corporation Law.
FOURTH: Term. The term for which the Corporation is to exist is perpetual.
FIFTH: Capital Stock.
A. Classes and Number of Shares. The aggregate number of shares which the
Corporation shall have authority to issue is One Billion, Twenty Thousand
(1,000,020,000) shares, consisting of (1) Twenty Thousand (20,000) shares of
Class A Common Stock, of no par value, (2) Nine Hundred Million (900,000,000)
shares of Class B Common Stock, of no par value, and (3) One Hundred Million
(100,000,000) shares of Preferred Stock, of no par value. The Board of
Directors of the Corporation shall have the full authority permitted by law to
divide the shares of Preferred Stock into one or more series, to determine the
designation and the number of shares of any series (within the total number of
shares of the class authorized by these Restated Articles of Incorporation),
and to determine the voting rights (whether full, limited, multiple,
fractional or no voting rights), preferences, limitations and special rights,
if any, or any series. Any such division and any such determination may be
made by action of the Board of Directors from time to time and shall
constitute an amendment of this Article FIFTH.
B. Issuance of the Common Stock and the Preferred Stock. Subject to the
preemptive rights of the holders of the Class A Common Stock as hereinafter
provided, the Board of Directors of the Corporation may from time to time
authorize by resolution the issuance of any and all shares of Class A Common
Stock, Class B Common Stock and Preferred Stock herein authorized for such
purposes, in such amounts, to such persons (including any corporation or other
business entity), for such consideration, and in the case of the Preferred
Stock, in one more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the shareholders, except as
otherwise required by applicable law.
C. Powers and Rights of the Common Stock.
1. Voting Rights and Powers. Prior to the agreement date hereinafter
defined in this Article FIFTH (hereinafter sometimes called the "Agreement
Date"), except as otherwise provided in this Article FIFTH or by applicable
law, the holders of the outstanding shares of Class B Common Stock shall
have no voting rights; the entire voting power of the Corporation shall be
vested in the holders of the outstanding shares of
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Class A Common Stock and, with respect to all matters upon which
shareholders are entitled to vote or to which shareholders are entitled to
give consent, each of such holders shall be entitled to cast thereon one
vote in person or by proxy for each share of Class A Common Stock standing
in his or her name. From and after the Agreement Date, with respect to all
matters upon which shareholders are entitled to vote or to which
shareholders are entitled to give consent, the holders of the outstanding
shares of Class A Common Stock and the holders of outstanding shares of
Class B Common Stock, except as otherwise provided herein, shall vote
together without regard to class, and every holder of the outstanding
shares of the Class A Common Stock shall be entitled to cast thereon one
thousand (1,000) votes in person or by proxy for each share of the Class A
Common Stock standing in his or her name and every holder of the
outstanding shares of the Class B Common Stock shall be entitled to cast
thereon one vote in person or by proxy for each share of Class B Common
Stock standing in his or her name; except, however, that holders of the
Class A Common Stock, voting separately as a class with each holder of the
outstanding shares of Class A Common Stock being entitled to one vote in
person or by proxy for each share of the Class A Common Stock standing in
his or her name, shall have the right to elect that number of directors so
that four-tenths ( 4/10) (calculated to the next highest whole number) of
the total number of directors of the Corporation fixed from time to time
by, or in the manner provided for in, the Bylaws of the Corporation, shall
have been elected by the holders of the Class A Common Stock separately.
With respect to any proposed amendment to these Restated Articles of
Incorporation which would increase or decrease the number of authorized
shares of either Class A Common Stock or Class B Common Stock, or alter or
change the powers, preferences, relative voting power or special rights of
the shares of Class A Common Stock or Class B Common Stock so as to affect
them adversely, the approval of a majority of the votes entitled to be cast
by the holders of the class affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the approval of a
majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock voting together without regard to
class as hereinbefore provided.
2. Exceptions. Notwithstanding anything contained herein to the contrary,
prior to the Agreement Date, without the consent (given in writing or by
vote at any regular or special meeting of the shareholders of the
Corporation) of the holders of a majority of the then outstanding shares of
Class B Common Stock, the Corporation shall not:
(a) merge, consolidate with or otherwise acquire any corporation or
other business entity; provided, however, that, in a transaction (i) in
which the Corporation is the surviving entity and (ii) pursuant to
which these Restated Articles of Incorporation have not been amended,
altered, repealed or superseded, the Corporation may, without such
consent, merge, consolidate with or otherwise acquire any corporation
or other business entity;
(b) sell, lease, exchange or otherwise dispose of all or
substantially all of the assets of the Corporation or any subsidiary
thereof to other than a wholly-owned subsidiary of the Corporation;
provided, however, that, (i) in any transaction or series of related
transactions not exceeding in value One Hundred Million Dollars
($100,000,000.00) in the aggregate (taking into account all liabilities
assumed by the Corporation or its subsidiaries in any such transaction
or transactions) involving all or substantially all of the assets of
any subsidiary, or (ii) in any transaction or series of related
transactions involving a securitization or other receivables sale
transaction, the Corporation may, without such consent, sell, lease,
exchange or otherwise dispose of all or substantially all of the assets
of such subsidiary;
(c) effect any amendment to these Restated Articles of Incorporation
or the Bylaws of the Corporation that adversely affects the rights,
powers or preferences of the shares of Class B Common Stock; or
(d) liquidate, dissolve or otherwise wind up the affairs of the
Corporation.
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3. Board of Directors.
a. Number. The Board of Directors of the Corporation shall consist of
at least five members, all of whom prior to the Agreement Date shall be
elected by the holders of the Class A Common Stock voting separately as
a class as hereinbefore provided and at least two of whom from and
after the Agreement Date shall be elected by the holders of the Class A
Common Stock voting separately as a class as hereinbefore provided.
b. Standing and Term. All directors, whether elected by the holders
of the Class A Common Stock voting separately as a class or elected by
the holders of both the Class A Common Stock and the Class B Common
Stock voting together, shall have equal standing, serve terms of equal
duration and have equal voting powers.
c. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled
by a majority vote of the remaining directors then in office, even
though less than a quorum; provided however, that any vacancies and
newly created directorships involving directors who have been or shall
be elected by the holders of the Class A Common Stock voting separately
as a class as hereinbefore provided shall be filled by a majority vote
of the remaining directors then in office elected by the holders of the
Class A Common Stock voting separately as a class and that any
vacancies and newly created directorships involving directors who have
been or shall be elected by the holders of the Class A Common Stock and
the Class B Common Stock voting together as hereinbefore provided shall
be filled by a majority of the remaining directors then in office
elected by the holders of the Class A Common Stock and the Class B
Common Stock voting together.
d. Removal. Directors elected by the holders of the Class A Common
Stock voting separately as a class, and directors filling vacancies and
newly created directorships involving directors who have been or shall
be elected by the holders of the Class A Common Stock voting separately
as a class as hereinbefore provided, may be removed, with or without
cause, only by the vote or consent of a majority of the votes then
entitled to be cast by the holders of the Class A Common Stock, voting
separately as a class. Directors elected by the holders of the Class A
Common Stock and the Class B Common Stock voting together without
regard to class, and directors filling vacancies and newly created
directorships, other than those involving directors who have been or
shall be elected by the holders of the Class A Common Stock voting
separately as a class as hereinbefore provided, may be removed, with or
without cause, only by the vote or consent of a majority of the votes
then entitled to be cast by the holders of the Class A Common Stock and
the Class B Common Stock, voting together without regard to class.
4. Dividends and Distributions. Each share of Class A Common Stock and
each share of Class B Common Stock shall be equal in respect of rights to
dividends and distributions, when and as declared, whether in cash or in
the form of stock or other property of the Corporation; except, however,
that, in the case of dividends or other distributions payable in stock of
the Corporation, other than Preferred Stock, including distributions
pursuant to stock split-ups or divisions, only shares of Class A Common
Stock shall be distributed with respect to the Class A Common Stock and
only shares of Class B Common Stock shall be distributed with respect to
the Class B Common Stock.
5. Preemptive Rights. Each holder of any shares of Class A Common Stock
then outstanding shall be entitled to a preemptive right to purchase or
subscribe for any unissued shares of Class A Common Stock to be issued by
the Corporation for any reason, including any increase of the authorized
number of shares of Class A Common Stock, or for any additional shares of
any class of the capital stock of the Corporation or any bonds,
certificates of indebtedness, debentures or other securities convertible
into shares of Class A Common Stock, or carrying any rights to purchase
shares of Class A Common Stock, whether such shares or bonds, certificates
of indebtedness, debentures or other securities shall be issued for cash,
property or
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other lawful consideration. The holders of the Class B Common Stock shall
have no preemptive rights to subscribe for any shares of any class of stock
of the Corporation, whether now or hereafter authorized.
6. Other Rights. Except as otherwise required by applicable law or as
otherwise provided in these Restated Articles of Incorporation, each share
of Class A Common Stock and each share of Class B Common Stock shall have
identical powers, preferences and rights, including rights in liquidation.
Upon liquidation of the Corporation, holders of Class A Common Stock and
holders of Class B Common Stock are entitled to share ratably in the assets
thereof that may be available for distribution after satisfaction of
creditors. In addition, in connection with a Company Sale (as hereinafter
defined), the holders of the Class A Common Stock and the Class B Common
Stock shall receive the same amount of consideration per share,
notwithstanding any differences in voting rights. The term "Company Sale"
shall be deemed to include the following: (A) the acquisition of the
Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization,
merger, consolidation or stock purchase) and (B) a sale of all or
substantially all of the assets of the Corporation. In any Company Sale, if
the consideration received by the Corporation or its stockholders, as the
case may be, is other than cash, its value, as determined in good faith by
the Board of Directors, will be deemed its fair market value.
7. Duration of Class Rights and Powers. At any time when there shall be
no shares of Class A Common Stock outstanding but there shall be shares of
Class B Common Stock outstanding, except as otherwise provided in this
Article FIFTH or by applicable law, without any action by the Board of
Directors or the holders of the shares of Class B Common Stock outstanding,
the entire voting power of the Corporation shall then be vested in the
holders of the outstanding shares of Class B Common Stock and, with respect
to all matters upon which shareholders are entitled to vote or to which
shareholders are entitled to give consent, each of such holders shall be
entitled to cast thereon one vote in person or by proxy for each share of
Class B Common Stock standing in his or her name; and the provisions of
these Restated Articles of Incorporation which provide for different voting
rights for the Class A Common Stock shall not be of any effect.
D. Powers and Rights of the Preferred Stock. The voting rights, preferences,
limitations and special rights, if any, pertaining to the Preferred Stock, or
any series thereof, shall be such as may be fixed by the Board of Directors of
the Corporation in its sole discretion, authority so to do being hereby
expressly vested in the Board of Directors.
E. Agreement Date. For the purposes of this Article FIFTH, the term
"Agreement Date" as used herein shall mean the first date on which the Company
shall execute and deliver, and enter into, a legally binding and enforceable
agreement providing for the issue by the Company of shares of Class B Common
Stock in a transaction constituting a business combination which, for
financial reporting purposes, shall be accounted for as a pooling of interests
in accordance with generally accepted accounting principles.
F. Shares Represented by Certificates and Uncertificated Shares. The shares
of the Corporation of any class or series shall be represented by certificates
or shall be uncertificated shares.
SIXTH: No Cumulative Voting. The shareholders of the Corporation shall not
have the right to cumulate their votes for election of directors of the
Corporation.
SEVENTH: Amendment. Subject to the provisions of Article FIFTH hereof, these
Restated Articles of Incorporation may be amended in the manner prescribed at
the time by applicable law; and all rights conferred upon shareholders in
these Restated Articles of Incorporation are granted subject to this
reservation.
EIGHTH: Restatement. These Restated Articles of Incorporation supersede the
original Articles of Incorporation of the Corporation and all amendments
thereto.
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APPENDIX C
FEDERATED INVESTORS, INC.
------------
RESTATED BYLAWS
------------
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RESTATED BYLAWS
OF FEDERATED INVESTORS, INC.
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I OFFICES AND FISCAL YEAR
Section 1.01 Registered office........................................... C-4
Section 1.02 Other Offices............................................... C-4
Section 1.03 Fiscal Year................................................. C-4
ARTICLE II NOTICES--WAIVERS--MEETINGS GENERALLY
Section 2.01 Manner of Giving Notice..................................... C-4
Section 2.02 Notice of Meetings of Board of Directors.................... C-5
Section 2.03 Notice of Meeting of Shareholders........................... C-5
Section 2.04 Waiver of Notice............................................ C-5
Section 2.05 Modification of Proposal Contained in Notice................ C-5
Section 2.06 Exception to Requirement of Notice.......................... C-5
Section 2.07 Use of Conference Telephone and Similar Equipment........... C-6
ARTICLE III SHAREHOLDERS
Section 3.01 Place of Meeting............................................ C-6
Section 3.02 Annual Meeting.............................................. C-6
Section 3.03 Special Meetings............................................ C-6
Section 3.04 Quorum and Adjournment...................................... C-6
Section 3.05 Action by Shareholders...................................... C-7
Section 3.06 Organization of Meetings.................................... C-7
Section 3.07 Voting Rights of Shareholders............................... C-7
Section 3.08 Voting and Other Action by Proxy............................ C-7
Section 3.09 Voting by Fiduciaries and Pledgees.......................... C-8
Section 3.10 Voting by Joint Holders of Shares........................... C-8
Section 3.11 Voting by Corporations and Other Business Organizations..... C-9
Section 3.12 Determination of Shareholders of Record..................... C-9
Section 3.13 Voting Lists................................................ C-10
Section 3.14 Judges of Election.......................................... C-10
Section 3.15 Consent of Shareholders in Lieu of Meeting.................. C-10
Section 3.16 Minors as Security Holders.................................. C-11
ARTICLE IV BOARD OF DIRECTORS
Section 4.01 Powers; Personal Liability.................................. C-11
Section 4.02 Qualifications and Selection of Directors................... C-11
Section 4.03 Number and Term of Office................................... C-12
Section 4.04 Vacancies................................................... C-12
Section 4.05 Removal of Directors........................................ C-13
Section 4.06 Place of Meeting............................................ C-13
Section 4.07 Organization of Meetings.................................... C-13
Section 4.08 Regular Meetings............................................ C-13
Section 4.09 Special Meetings............................................ C-13
Section 4.10 Quorum of and Action by Directors........................... C-13
Section 4.11 Executive and Other Committees.............................. C-13
Section 4.12 Compensation................................................ C-14
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
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ARTICLE V OFFICERS
Section 5.01 Officers Generally.......................................... C-14
Section 5.02 Election and Term of Office................................. C-14
Section 5.03 Subordinate Officers, Committees and Agents................. C-14
Section 5.04 Removal of Officers and Agents.............................. C-15
Section 5.05 Vacancies................................................... C-15
Section 5.06 Authority................................................... C-15
Section 5.07 Chairman of the Board....................................... C-15
Section 5.08 Vice Chairman............................................... C-15
Section 5.09 President................................................... C-15
Section 5.10 Vice President.............................................. C-15
Section 5.11 Secretary................................................... C-15
Section 5.12 Treasurer................................................... C-15
Section 5.13 Salaries.................................................... C-16
ARTICLE VI SHARE CERTIFICATES, TRANSFER, ETC.
Section 6.01 Share Certificates.......................................... C-16
Section 6.02 Issuance.................................................... C-16
Section 6.03 Transfer.................................................... C-16
Section 6.04 Record Holder of Shares..................................... C-16
Section 6.05 Lost, Destroyed or Mutilated Certificates................... C-16
Section 6.06 Restriction on Transfer of Shares........................... C-16
ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS
AND OTHER AUTHORIZED REPRESENTATIVES
Section 7.01 Scope of Indemnification.................................... C-17
Section 7.02 Proceedings Initiated by Indemnified Representatives........ C-18
Section 7.03 Advancing Expenses.......................................... C-18
Section 7.04 Securing of Indemnification Obligations..................... C-18
Section 7.05 Payment of Indemnification.................................. C-18
Section 7.06 Arbitration................................................. C-19
Section 7.07 Contribution................................................ C-19
Section 7.08 Mandatory Indemnification of Directors, Officers, Etc....... C-19
Section 7.09 Contract Rights; Amendment or Repeal........................ C-19
Section 7.10 Scope of Article............................................ C-19
Section 7.11 Reliance on Provisions...................................... C-20
Section 7.12 Interpretation.............................................. C-20
ARTICLE VIII MISCELLANEOUS
Section 8.01 Corporate Seal.............................................. C-20
Section 8.02 Checks...................................................... C-20
Section 8.03 Contracts................................................... C-20
Section 8.04 Interested Directors or Officers; Quorum.................... C-20
Section 8.05 Deposits.................................................... C-21
Section 8.06 Corporate Records........................................... C-21
Section 8.07 Financial Reports........................................... C-21
Section 8.08 Amendment of Bylaws......................................... C-21
</TABLE>
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RESTATED BYLAWS
OF
FEDERATED INVESTORS, INC.
----------------
ARTICLE I
OFFICES AND FISCAL YEAR
Section 1.01. Registered Office. The registered office of the Corporation in
the Commonwealth of Pennsylvania shall be at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779 in the County of
Allegheny, until otherwise established by an amendment of the articles of the
Corporation or by the board of directors and a record of the change is filed
with the Pennsylvania Department of State in the manner provided by law.
Section 1.02. Other Offices. The Corporation may also have offices at such
other places within or without the Commonwealth of Pennsylvania as the board
of directors may from time to time appoint or the business of the Corporation
may require.
Section 1.03. Fiscal Year. The fiscal year of the Corporation shall end on
the last day of December in each year.
ARTICLE II
NOTICE--WAIVERS--MEETINGS GENERALLY
SECTION 2.01. MANNER OF GIVING NOTICE.
(a) General Rule. Whenever written notice is required to be given to any
person under the provisions of the Business Corporation Law of 1988 or by the
articles of the Corporation or these bylaws, it may be given to the person
either personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or
TWX (with answerback received) or courier service, charges prepaid, or by
facsimile transmission, to the address (or to the telex, TWX or facsimile
number) of the person appearing on the books of the Corporation or, in the
case of directors, supplied by the director to the Corporation for the purpose
of notice. If the notice is sent by mail, telegraph or courier service, it
shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telex or TWX, when
dispatched or, in the case of facsimile transmission, when received. A notice
of meeting shall specify the place, day and hour of the meeting and any other
information required by any other provision of the Business Corporation Law of
1988, the articles of the Corporation, or these bylaws.
(b) Adjourned Shareholder Meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken, unless
the board of directors fixes a new record date for the adjourned meeting or
the Business Corporation Law of 1988 requires notice of the business to be
transacted and that notice has not previously been given.
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Section 2.02. Notice of Meetings of Board of Directors. Notice of a regular
meeting of the board of directors need not be given. Notice of every special
meeting of the board of directors shall be given to each director by telephone
or in writing at least 72 hours (in the case of notice by telephone, telex,
TWX or facsimile transmission, telegraph, courier service or express mail) or
five days (in the case of notice by first class mail) before the time at which
the meeting is to be held. Every such notice shall state the time and place of
the meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board need be specified in the notice of the
meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule. Written notice of every meeting of the shareholders shall
be given by, or at the direction of, the secretary to each shareholder of
record entitled to vote at the meeting at least:
(1) ten days prior to the day named for a meeting called to consider a
fundamental change under 15 Pa.C.S. Chapter 19; or
(2) five days prior to the day named for the meeting in any other case.
If the secretary neglects or refuses to give notice of a meeting, the person
or persons calling the meeting may do so.
(b) Contents. In the case of a special meeting of shareholders, the notice
shall specify the general nature of the business to be transacted.
(c) Notice of Action by Shareholders on By-laws. In the case of a meeting of
shareholders that has as one of its purposes, action on the bylaws, written
notice shall be given to each shareholder entitled to vote at the meeting that
the purpose, or one of the purposes, of the meeting is to consider the
adoption, amendment or repeal of the bylaws. There shall be included in, or
enclosed with, the notice a copy of the proposed amendment or a summary of the
changes to be effected thereby.
Section 2.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is required to be given
under the provisions of the Business Corporation Law of 1988, the articles of
the Corporation or these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of the notice.
Neither the business to be transacted at, nor the purpose of, a meeting need
be specified in the waiver of notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. Modification of Proposal Contained in Notice. Whenever the
language of a proposed resolution is included in a written notice of a meeting
required to be given under the provisions of the Business Corporation Law of
1988 or the articles of the Corporation or these bylaws, the meeting
considering the resolution may without further notice adopt it with such
clarifying or other amendments as do not enlarge its original purpose.
Section 2.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is required to be
given to any person under the provisions of the Business Corporation Law of
1988 or by the articles of the Corporation or these bylaws or by the terms of
any agreement or other instrument or as a condition precedent to taking any
corporate action and communication with that person is then unlawful, the
giving of the notice or communication to that person shall not be required.
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(b) Shareholders Without Forwarding Addresses. Notice or other
communications shall not be sent to any shareholder with whom the Corporation
has been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder
has otherwise failed to provide the Corporation with a current address.
Whenever the shareholder provides the Corporation with a current address, the
Corporation shall commence sending notices and other communications to the
shareholder in the same manner as to other shareholders.
Section 2.07 Use of Conference Telephone and Similar Equipment. One or more
persons may participate in a meeting of the board of directors or the
shareholders of the Corporation by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at the meeting.
ARTICLE III
SHAREHOLDERS
Section 3.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the registered office of the Corporation unless
another place is designated by the board of directors in the notice of a
meeting.
Section 3.02. Annual Meeting. The board of directors may fix the date and
time of the annual meeting of the shareholders; but, if no such date and time
is fixed by the board, the meeting for any calendar year shall be held on the
first Tuesday in May in such year, if not a legal holiday under the laws of
the Commonwealth of Pennsylvania, and, if a legal holiday, then on the next
succeeding business day, not a Saturday, at ten o'clock a.m., local time. At
the meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder then entitled to vote may
call the meeting at any time thereafter.
Section 3.03. Special Meetings.
(a) Call of Special Meetings. Special meetings of the shareholders may be
called at any time (1) by the board of directors or (2) unless otherwise
provided in the articles of the Corporation, by shareholders entitled to cast
at least 20% of the votes that all shareholders are entitled to cast at the
particular meeting.
(b) Fixing of Time for Meeting. At any time, upon written request of any
person who has duly called a special meeting, it shall be the duty of the
secretary to fix the time of meeting which shall be held not more than 60 days
after the receipt of the request. If the secretary neglects or refuses to fix
the time of the meeting, the person or persons calling the meeting may do so.
Section 3.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the Corporation duly called
shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
votes that all shareholders are entitled to cast on a particular matter to be
acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the Corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
board of directors of the Corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly organized
meeting can continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
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(c) Adjournment for Lack of Quorum. If a meeting cannot be organized because
a quorum has not attended, those present may, except as provided in the
Business Corporation Law of 1988, adjourn the meeting to such time and place
as they may determine.
(d) Adjournments Generally. Any meeting at which directors are to be elected
shall be adjourned only from day to day, or for such longer periods not
exceeding 15 days each as the shareholders present and entitled to vote shall
direct, until the directors have been elected. Any other regular or special
meeting may be adjourned for such period as the shareholders present and
entitled to vote shall direct.
(e) Electing Directors at Adjourned Meeting. Those shareholders entitled to
vote who attend a meeting called for the election of directors that has been
previously adjourned for lack of a quorum, although less than a quorum as
fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(f) Other Action in Absence of Quorum. Those shareholders entitled to vote
who attend a meeting of shareholders that has been previously adjourned for
one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall
nevertheless constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if the notice states that those
shareholders who attend the adjourned meeting shall nevertheless constitute a
quorum for the purpose of acting upon the matter.
Section 3.05. Action by Shareholders. Except as otherwise provided in the
Business Corporation Law of 1988 or the articles of the Corporation or these
bylaws, whenever any corporate action is to be taken by vote of the
shareholders of the corporation, it shall be authorized upon receiving the
affirmative vote of a majority of the votes cast by all shareholders entitled
to vote thereon and, if any shareholders are entitled to vote thereon as a
class, upon receiving the affirmative vote of a majority of the votes cast by
the shareholders entitled to vote as a class.
Section 3.06. Organization of Meetings. At every meeting of the
shareholders, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the president, the vice
presidents in their order of rank and seniority, or a person chosen by
majority vote of the shareholders present and entitled to vote, shall act as
chairman of the meeting. The secretary or, in the absence of the secretary, an
assistant secretary, or, in the absence of the secretary and assistant
secretaries, a person appointed by the chairman of the meeting, shall act as
secretary.
Section 3.07. Voting Rights of Shareholders. Unless otherwise provided in
the articles of the Corporation, every shareholder of the Corporation shall be
entitled to one vote for every share standing in the name of the shareholder
on the books of the Corporation.
Section 3.08. Voting and Other Action by Proxy.
(a) General Rule.
(1) Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders, or the expression of consent or dissent to corporate action
in writing, by a proxy of a shareholder, shall constitute the presence of,
or vote or action by, or written consent or dissent of the shareholder.
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(3) Where two or more proxies of a shareholder entitled to vote are
present, the Corporation shall, unless otherwise expressly provided in the
proxy, accept as the vote of all shares represented thereby the vote cast
by a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted or upon the manner of voting
the shares, the voting of the shares shall be divided equally among those
persons.
(b) Minimum Requirements. Every proxy shall be executed in writing by the
shareholder or by the duly authorized attorney-in-fact of the shareholder and
filed with the secretary of the Corporation. A telegram, telex, cablegram,
datagram or similar transmission from a shareholder or attorney-in-fact, or a
photographic, facsimile or similar reproduction of a writing executed by a
shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of this subsection;
and
(2) shall be so treated if it sets forth a confidential and unique
identification number or other mark furnished by the corporation to the
shareholder for the purposes of a particular meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest, shall be revocable
at will, notwithstanding any other agreement or any provision in the proxy to
the contrary, but the revocation of a proxy shall not be effective until
written notice thereof has been given to the secretary of the Corporation. An
unrevoked proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A proxy shall
not be revoked by the death or incapacity of the maker unless, before the vote
is counted or the authority is exercised, written notice of the death or
incapacity is given to the secretary of the corporation.
(d) Expenses. Unless otherwise restricted in the articles of the
Corporation, the Corporation shall pay the reasonable expenses of solicitation
of votes, proxies or consent of shareholders entitled to vote by or on behalf
of the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees. Shares of the Corporation
standing in the name of a trustee or other fiduciary and shares held by an
assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a
pledgee or nominee.
Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the Corporation are held jointly or as
tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or by proxy,
all of the shares standing in the names of such persons shall be deemed to
be represented for the purpose of determining a quorum and the Corporation
shall accept as the vote of all the shares the vote cast by a joint owner
or a majority of them; and
(2) if the persons are equally divided upon whether the shares held by
them shall be voted or upon the manner of voting the shares, the voting of
the shares shall be divided equally among the persons without prejudice to
the rights of the joint owners or the beneficial owners thereof among
themselves.
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(b) Exception. If there has been filed with the secretary of the corporation
a copy, certified by an attorney at law to be correct, of the relevant
portions of the agreement under which the shares are held or the instrument by
which the trust or estate was created or the order of court appointing them or
of an order of court directing the voting of the shares, the persons specified
as having such voting power in the document latest in date of operative effect
so filed, and only those persons, shall be entitled to vote the shares but
only in accordance therewith.
Section 3.11. Voting by Corporations and Other Business Organizations.
(a) Voting by Corporate Shareholders. Any corporation or other business
organization that is a shareholder of this corporation may vote by any of its
officers or agents, or by proxy appointed by any officer or agent, unless some
other person, (i) in the case of such corporation, by resolution of the board
of directors or a provision of its articles or bylaws, or (ii) in the case of
such business organization, by resolution of its governing body or a provision
of its charter or bylaws or their equivalent, a copy of which resolution or
provision certified to be correct by one of its officers, has been filed with
the secretary of this Corporation, is appointed its general or special proxy
in which case that person shall be entitled to vote the shares.
(b) Controlled Shares. Shares of this Corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board of
directors of this Corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The board of directors may fix a time prior to the
date of any meeting of shareholders as a record date for the determination of
the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall not be more than 60
days prior to the date of the meeting of shareholders. Only shareholders of
record on the date fixed shall be so entitled notwithstanding any transfer of
shares on the books of the Corporation after any record date fixed as provided
in this subsection. The board of directors may similarly fix a record date for
the determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the board fixes a new record date for the adjourned
meeting.
(b) Determination When a Record Date is Not Fixed. If a record date is not
fixed:
(1) The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on
the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day immediately preceding the day
on which the meeting is held.
(2) The record date for determining shareholders entitled to:
(i) express consent or dissent to corporate action in writing without a
meeting, when prior action by the board of directors is not necessary;
(ii) call a special meeting of the shareholders; or
(iii) propose an amendment of the articles of the Corporation;
shall be the close of business on the day on which the first written
consent or dissent, request for a special meeting or petition proposing an
amendment of the articles is filed with the secretary of the Corporation.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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Section 3.13. Voting Lists.
(a) General Rule. The officer or agent having charge of the transfer books
for shares of the Corporation shall make a complete list of the shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical
order, with the address of and the number of shares held by each. The list
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
(b) Effect of List. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at a meeting prior to a
demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to
who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
Section 3.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders of the
Corporation, the board of directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder entitled to vote shall, appoint
judges of election at the meeting. The number of judges shall be one or three.
A person who is a candidate for office to be filled at the meeting shall not
act as a judge.
(b) Vacancies. In case any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
board of directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges
of election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the meeting, or of any
shareholder, the judges of election shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate
of any fact found by them. Any report or certificate made by them shall be
prima facie evidence of the facts stated therein.
Section 3.15. Consent of Shareholders in Lieu of Meeting.
(a) Unanimous Written Consent. Any action required or permitted to be taken
at a meeting of the shareholders or of a class of shareholders may be taken
without a meeting if, prior or subsequent to the action, a consent or consents
thereto by all of the shareholders who would be entitled to vote at a meeting
for such purpose shall be filed with the secretary of the Corporation.
(b) Partial Written Consent. Any action required or permitted to be taken at
a meeting of the shareholders or of a class of shareholders may be taken
without a meeting upon the written consent of shareholders who would have been
entitled to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all shareholders entitled to vote
thereon were present and voting. The consents shall be filed with the
secretary of the Corporation. The action shall not become effective until
after at least ten days' written notice of the action has been given to each
shareholder entitled to vote thereon who has not consented thereto.
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Section 3.16. Minors as Security Holders. The Corporation may treat a minor
who holds shares or obligations of the Corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the Corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.01. Powers; Personal Liability.
(a) General Rule. Unless otherwise provided by statute, all powers vested by
law in the Corporation shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the
direction of, the board of directors.
(b) Personal Liability of Directors.
(1) A director shall not be personally liable, as such, for monetary
damages for any action taken unless:
(i) the director has breached or failed to perform the duties of his
or her office under 15 Pa.C.S. Such. 17B; and
(ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(2) Paragraph (1) shall not apply to:
(i) the responsibility or liability of a director pursuant to any
criminal statute, or
(ii) the liability of a director for the payment of taxes pursuant to
Federal, State or local law.
Any repeal, amendment or modification of the bylaw set forth in this Section
4.01 (b) shall not adversely affect any right or protection existing at the
time of such repeal, amendment or modification to which a director or former
director may be entitled hereunder. The rights conferred by this bylaw shall
continue as to any person who has ceased to be a director of the Corporation
and shall inure to the benefit of the heirs, executors and administrators of
such person.
(c) Notation of Dissent. A director who is present at a meeting of the board
of directors, or of a committee of the board, at which action on any corporate
matter is taken on which the director is generally competent to act, shall be
presumed to have assented to the action taken unless his or her dissent is
entered in the minutes of the meeting or unless the director files a written
dissent to the action with the secretary of the meeting before the adjournment
thereof or transmits the dissent in writing to the secretary of the
Corporation immediately after the adjournment of the meeting. The right to
dissent shall not apply to a director who voted in favor of the action.
Nothing in this section shall bar a director from asserting that minutes of
the meeting incorrectly omitted his or her dissent if, promptly upon receipt
of a copy of such minutes, the director notifies the secretary, in writing, of
the asserted omission or inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the Corporation shall be a natural
person of full age who need not be a resident of Pennsylvania or a shareholder
of the Corporation.
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(b) Nomination of Directors. Nominations for the election of directors by
the shareholders entitled to vote therefor may be made by the board of
directors or by any shareholder entitled to vote for the election thereof;
provided, however, that in the case of any nomination by such shareholder,
advance written notice of such nomination shall be received by the secretary
of the Corporation by certified mail no later than (i) 90 days prior to the
anniversary of the previous year's annual meeting of shareholders, or (ii)
with respect to an election of directors to be held at a special meeting of
shareholders or at an annual meeting, the tenth day following the date on
which notice of such meeting is first given to the shareholder. Each such
notice of such nomination shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice, (ii)
the principal occupation of employment of each such nominee, and (iii) the
number and class of shares of stock of the Corporation which are beneficially
owned by each such nominee. In addition, the shareholder making such
nomination shall promptly provide any other information reasonably requested
by the secretary of the Corporation.
(c) Election of Directors. Except as otherwise provided in these bylaws,
directors of the Corporation shall be elected by the shareholders entitled to
vote. In elections for directors, voting need not be by ballot unless required
by vote of the shareholders before the voting for election of directors
begins. The candidates receiving the highest number of votes from each class
or group of classes, if any, entitled to elect directors separately up to the
number of directors to be elected by the class or group of classes shall be
elected. If at any meeting of shareholders, directors of more than one class
are to be elected, each class of directors shall be elected in a separate
election.
(d) Cumulative Voting. The shareholders of the Corporation shall not have
the right to cumulate their votes for election of directors of the
Corporation.
Section 4.03. Number and Term of Office.
(a) Number. The board of directors shall consist of such number of
directors, not less than five nor more than fifteen, as may be determined from
time to time by resolution of the board of directors.
(b) Term of Office. Each director shall hold office until the expiration of
the term of one year for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
(c) Resignation. Any director may resign at any time upon written notice to
the Corporation. The resignation shall be effective upon receipt thereof by
the Corporation or at such subsequent time as shall be specified in the notice
of resignation.
Section 4.04. Vacancies.
(a) General Rule. Unless otherwise provided in the articles of
incorporation, vacancies in the board of directors, including vacancies
resulting from an increase in the number of directors, may be filled by a
majority vote of the remaining members of the board though less than a quorum,
or by a sole remaining director, and each person so selected shall be a
director to serve for the balance of the unexpired term, and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal.
(b) Action by Resigned Directors. Unless otherwise provided in the articles
of incorporation, when one or more directors resign from the board effective
at a future date, the directors then in office, including those who have so
resigned, shall have power by the applicable vote to fill the vacancies, the
vote thereon to take effect when the resignations become effective.
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Section 4.05. Removal of Directors.
(a) Removal by the Shareholders. The entire board of directors, or any class
of the board, or any individual director may be removed from office without
assigning any cause by the vote of shareholders, or of the holders of a class
or series of shares, entitled to elect directors, or the class of directors.
In case the board or a class of the board or any one or more directors are so
removed, new directors may be elected at the same meeting.
(b) Removal by the Board. The board of directors may declare vacant the
office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 50 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a
meeting of the board of directors.
Section 4.06. Place of Meetings. Meetings of the board of directors may be
held at such place within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or as may be designated in
the notice of the meeting.
Section 4.07. Organization of Meetings. At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the president, the vice
presidents in their order of rank and seniority, or a person chosen by
majority vote of the directors present, shall act as chairman of the meeting.
The secretary or, in the absence of the secretary, an assistant secretary, or,
in the absence of the secretary and assistant secretaries, a person appointed
by the chairman of the meeting, shall act as secretary.
Section 4.08. Regular Meetings. Regular meetings of the board of directors
shall be held at such time and place as shall be designated from time to time
by resolution of the board of directors.
Section 4.09. Special Meetings. Special meetings of the board of directors
shall be held whenever called by the chairman or by two or more of the
directors.
Section 4.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of the Corporation
shall be necessary to constitute a quorum for the transaction of business, and
the acts of a majority of the directors present and voting at a meeting at
which a quorum is present shall be the acts of the board of directors.
(b) Action by Written Consent. Any action required or permitted to be taken
at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the secretary of the Corporation.
Section 4.11. Executive and Other Committees.
(a) Establishment and Powers. The board of directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees to consist of one or more directors of the Corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring approval of
shareholders under the Business Corporation Law of 1988.
(2) The creation or filling of vacancies in the board of directors.
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(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board that by its
terms is amendable or repealable only by the board of directors.
(5) Action on matters committed by a resolution of the board of directors
to another committee of the board.
(b) Alternate Committee Members. The board of directors may designate one or
more directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
(c) Term. Each committee of the board of directors shall serve at the
pleasure of the board.
(d) Committee Procedures. The term "board of directors" or "board," when
used in any provision of these bylaws relating to the organization or
procedures of or the manner of taking action by the board of directors, shall
be construed to include and refer to any executive or other committee of the
board.
Section 4.12. Compensation. The board of directors shall have the authority
to fix the compensation of directors for their services as directors and a
director may be a salaried officer of the corporation.
ARTICLE V
OFFICERS
Section 5.01. Officers Generally.
(a) Number. Qualifications and Designation. The officers of the Corporation
shall be a chairman of the board of directors, a vice chairman, a president, a
secretary, a treasurer, and such other officers as may be elected in
accordance with the provisions of Section 5.03. Except for the chairman of the
board who shall be a member of the board of directors, officers may but need
not be directors or shareholders of the Corporation. The chairman, vice
chairman, president and secretary shall be natural persons of full age. The
treasurer may be a corporation, but if a natural person shall be of full age.
Any number of offices may be held by the same person.
(b) Resignations. Any officer may resign at any time upon written notice to
the Corporation. The resignation shall be effective upon receipt thereof by
the Corporation or at such subsequent time as may be specified in the notice
of resignation.
(c) Bonding. The Corporation may secure the fidelity of any or all of its
officers by bond or otherwise.
Section 5.02. Election and Term of Office. The officers of the Corporation,
except those elected by delegated authority pursuant to Section 5.03, shall be
elected annually by the board of directors, and each such officer shall hold
office for a term of one year and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
Section 5.03. Subordinate Officers, Committees and Agents. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more vice presidents, one or more assistant
secretaries, and one or more assistant treasurers, each of whom shall hold
office for such period, have such authority, and perform such duties as are
provided in these bylaws or as the board of directors may from time to time
determine. The board
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of directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents, or
committees thereof and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer or agent of the
Corporation may be removed by the board of directors with or without cause.
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 5.06. Authority. All officers of the Corporation, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided by or pursuant
to resolutions or orders of the board of directors or, in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.
Section 5.07. The Chairman of the Board. The chairman of the board of
directors shall be the chief executive officer of the Corporation and shall
have general supervision over the business and operations of the Corporation,
subject, however, to the control of the board of directors. The chairman of
the board, or, in the absence of the chairman, the president, shall preside at
all meetings of the shareholders and of the board of directors.
Section 5.08. The Vice Chairman. The vice chairman shall perform such duties
as may from time to time be assigned to him by the board of directors, the
chairman of the board or the president.
Section 5.09. The President. The president shall be the chief operating
officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject, however, to the control
of the chairman of the board of directors. The president shall sign, execute
and acknowledge, in the name of the corporation, deeds, mortgages, bonds,
contracts or other instruments authorized by the board of directors, except in
cases where the signing and execution thereof shall be expressly delegated by
the board of directors, or by these bylaws, to some other officer or agent of
the Corporation; and, in general, shall perform all duties incident to the
office of president and such other duties as from time to time may be assigned
by the board of directors or the chairman of the board.
Section 5.10. The Vice Presidents. The vice presidents shall perform the
duties of the president in the absence of the president and such other duties
as may from time to time be assigned to them by the board of directors or the
president.
Section 5.11. The Secretary. The secretary or an assistant secretary shall
attend all meetings of the shareholders and of the board of directors and
shall record all the votes of the shareholders and of the directors and the
minutes of the meetings of the shareholders and of the board of directors and
of committees of the board in a book or books to be kept for that purpose;
shall see that notices are given and records and reports properly kept and
filed by the Corporation as required by law; shall be the custodian of the
seal of the Corporation and see that it is affixed to documents executed on
behalf of the Corporation under its seal; and, in general, shall perform all
duties incident to the office of the secretary, and such other duties as may
from time to time be assigned by the board of directors or the president.
Section 5.12. The Treasurer. The treasurer or an assistant treasurer shall
have or provide for the custody of the funds or other property of the
Corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
Corporation; shall deposit all funds in his or her custody as treasurer in
such banks or other places of deposit as the board of directors may from time
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to time designate; shall, whenever so required by the board of directors,
render an account showing all transactions as treasurer and the financial
condition of the corporation; and, in general, shall discharge such other
duties as may from time to time be assigned by the board of directors or the
president.
Section 5.13. Salaries. The salaries of the officers elected by the board of
directors shall be fixed from time to time by the board of directors or by
such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to
elect such officers or to retain or appoint such employees or other agents has
been delegated pursuant to Section 5.03. No officer shall be prevented from
receiving such salary or other compensation by reason of the fact that the
officer is also a director of the Corporation.
ARTICLE VI
SHARE CERTIFICATES. TRANSFER, ETC.
Section 6.01. Share Certificates. Certificates for shares of the Corporation
shall be in such form as approved by the board of directors, and shall state
that the Corporation is incorporated under the laws of the Commonwealth of
Pennsylvania, the name of the person to whom issued, and the number and class
of shares and the designation of the series (if any) that the certificate
represents. The share register or transfer books and blank share certificates
shall be kept by the secretary or by any transfer agent or registrar
designated by the board of directors for that purpose.
Section 6.02. Issuance. The share certificates of the Corporation shall be
numbered and registered in the share register or transfer books of the
Corporation as they are issued. They shall be signed by the president or a
vice president and by the secretary or an assistant secretary or the treasurer
or an assistant treasurer; but where a certificate is signed by a transfer
agent or a registrar, the signature of any corporate officer upon the
certificate may be a facsimile, engraved or printed. In case any officer who
has signed, or whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer because of death, resignation
or otherwise, before the certificate is issued, it may be issued with the same
effect as if the officer had not ceased to be such at the date of its issue.
The provisions of this Section 6.02 shall be subject to any inconsistent or
contrary agreement at the time between the Corporation and any transfer agent
or registrar.
Section 6.03. Transfer. Transfers of shares shall be made on the share
register or transfer books of the Corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made
inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
Div. 8, or other provisions of law.
Section 6.04. Record Holder of Shares. The Corporation shall be entitled to
treat the person in whose name any share or shares of the Corporation stand on
the books of the Corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of any
shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may, in its discretion, cause a new certificate or certificates to
be issued to the holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of
the certificate, upon satisfactory proof of the loss or destruction and, if
the board of directors shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as the board may direct.
Section 6.06. Restriction on Transfer of Shares.
(a) Initial Underwritten Registration. In the event that the Corporation at
any time prepares and files a registration statement registering shares of
capital stock of the Corporation to be sold to, or otherwise distributed
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by, underwriters under the Securities Act of 1933, as the initial public
offering by the Corporation of such shares, a shareholder shall not sell,
transfer or otherwise dispose of the shares of capital stock of the
Corporation held, directly or indirectly, prior to such initial public
offering, in any public sale or distribution, including a sale pursuant to
Rule 144 (or any successor provision) under the Securities Act of 1933, during
the period of seven days prior to, and 180 days after, the day when the
registration statement has become effective, except as part of the sale to, or
distribution by, the underwriters.
(b) Waiver by Board of Directors. Notwithstanding anything contained in
these bylaws to the contrary, the Board of Directors of the Corporation may
waive any restrictions set forth in this Section 6.06 as it applies to any
shareholder or shareholders at any time or from time to time.
(c) Certificate Legend. All certificates for shares of the Corporation shall
have the following legend printed or stamped thereon:
"The shares represented by this certificate may not be sold, assigned,
transferred, pledged or otherwise disposed of, except in accordance with
the terms and conditions of the bylaws of the corporation."
(d) Status of Bylaws. Notwithstanding any other provision of these bylaws or
of the Business Corporation Law of 1988, the bylaw in this Section 6.06 shall
constitute a contract among the shareholders of the Corporation, and shall not
be amended without their unanimous consent.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER
AUTHORIZED REPRESENTATIVES
Section 7.01. Scope of Indemnification.
(a) General Rule. The Corporation shall indemnify an indemnified
representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party
or otherwise by reason of the fact that such person is or was serving in an
indemnified capacity, including, without limitation, liabilities resulting
from any actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, negligence, gross negligence or act giving rise to
strict or products liability, except:
(1) where the indemnification is expressly prohibited by applicable law;
(2) where the conduct of the indemnified representative has been finally
determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or recklessness within the
meaning of 15 Pa.C.S. (S) 1746(b) or any superseding provision of law
sufficient in the circumstances to bar indemnification against
liabilities arising from the conduct; or
(ii) to be based upon or attributable to the receipt by the
indemnified representative from the Corporation of a personal benefit
to which the indemnified representative is not legally entitled; or
(3) to the extent the indemnification has been finally determined in a
final adjudication pursuant to Section 7.06 to be otherwise unlawful.
(b) Partial Payment. If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the Corporation shall indemnify the
indemnified representative to the maximum extent for such portion of the
liabilities.
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(c) Presumption. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative
is not entitled to indemnification.
(d) Definitions. For the purposes of this Article VII:
(1) "indemnified capacity" means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the Corporation, or, at the request
of the Corporation, as a director, officer, employee, agent, fiduciary or
trustee of another corporation, limited liability company, partnership,
joint venture, trust, employee benefit plan or other entity or enterprise;
(2) "indemnified representative" means any and all directors and officers
of the Corporation and any other person designated as an indemnified
representative by the board of directors of the Corporation (which may, but
need not, include any person serving at the request of the corporation, as
a director, officer, employee, agent, fiduciary or trustee of another
corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or other entity of enterprise);
(3) "liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or cost or expense, of any nature (including,
without limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or completed action, suit,
appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of its security
holders or otherwise.
Section 7.02. Proceedings Initiated by Indemnified
Representatives. Notwithstanding any other provision of this Article VII, the
Corporation shall not indemnify under this Article an indemnified
representative for any liability incurred in a proceeding initiated (which
shall not be deemed to include counterclaims or affirmative defenses) or
participated in as an intervenor or amicus curiae by the person seeking
indemnification unless the initiation of or participation in the proceedings
is authorized, either before or after its commencement, by the affirmative
vote of a majority of the directors in office. This section shall not apply to
reimbursement of expenses incurred in successfully prosecuting or defending an
arbitration under Section 7.06 or otherwise successfully prosecuting or
defending the rights of an indemnified representative granted by or pursuant
to this Article.
Section 7.03. Advancing Expenses. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 7.01 or the initiation of or participation in a
proceeding which is authorized pursuant to Section 7.02 upon receipt of an
undertaking by or on behalf of the indemnified representative to repay the
amount if it is ultimately determined pursuant to Section 7.06 that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article. The financial ability of an indemnified representative to repay an
advance shall not be a prerequisite to the making of the advance.
Section 7.04. Securing of Indemnification Obligations. To further effect,
satisfy or secure the indemnification obligations provided herein or
otherwise, the Corporation may maintain insurance, obtain a letter of credit,
act as selfinsurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the Corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.
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Section 7.05. Payment of Indemnification. An indemnified representative
shall be entitled to indemnification within 30 days after a written request
for indemnification has been delivered to the secretary of the Corporation.
Section 7.06. Arbitration.
(a) General Rule. Any dispute related to the right to indemnification,
contribution or advancement of expenses as provided under this Article, except
with respect to indemnification for liabilities arising under the Securities
Act of 1933 that the Corporation has undertaken to submit to a court for
adjudication, shall be decided only by arbitration in the metropolitan area in
which the principal executive offices of the Corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of
the American Arbitration Association, or any successor to the functions
thereof, before a panel of three arbitrators, one of whom shall be selected by
the Corporation, the second of whom shall be selected by the indemnified
representative and third of whom shall be selected by the other two
arbitrators. In the absence of the American Arbitration Association or such
successor, or if for any reason arbitration under the arbitration rules of the
American Arbitration Association or such successor cannot be initiated, or if
one of the parties fails or refuses to select an arbitrator or if the
arbitrators selected by the corporation and the indemnified representative
cannot agree on the selection of the third arbitrator within 30 days after
such time as the Corporation and the indemnified representative have each been
notified of the selection of the other's arbitrator, the necessary arbitrator
or arbitrators shall be selected by the presiding judge of the court of
general jurisdiction in such metropolitan area.
(b) Burden of Proof. The party or parties challenging the right of an
indemnified representative to the benefits of this Article VII shall have the
burden of proof.
(c) Expenses. The Corporation shall reimburse an indemnified representative
for the expenses (including attorneys' fees and disbursements) incurred in
successfully prosecuting or defending such arbitration.
(d) Effect. Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction, except that the
Corporation shall be entitled to interpose as a defense in any such judicial
enforcement proceeding any prior final judicial determination adverse to the
indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article VII. This arbitration
provision shall be specifically enforceable.
Section 7.07. Contribution. If the indemnification provided for in this
Article VII or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the Corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to effect the intent of this Article or
otherwise.
Section 7.08. Mandatory Indemnification of Indemnified Representatives. To
the extent that a representative of the Corporation has been successful on the
merits or otherwise in defense of any action or proceeding referred to in 15
Pa.C.S. (S)(S) 1741 or 1742 or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection therewith.
Section 7.09. Contract Rights; Amendment or Repeal. All rights under this
Article VII shall be deemed a contract between the Corporation and the
indemnified representative pursuant to which the Corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment
or modification hereof shall be prospective only and shall not affect any
rights or obligations then existing.
Section 7.10. Scope of Article. The rights granted by this Article VII shall
not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise both as to action in an
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indemnified capacity and as to action in any other capacity. The
indemnification, contribution and advancement of expenses provided by, or
granted pursuant to, this Article shall continue as to a person who has ceased
to be an indemnified representative in respect of matters arising prior to
such time, and shall inure to the benefit of the heirs and personal
representatives of such a person.
Section 7.11. Reliance on Provisions. Each person who shall act as an
indemnified representative of the Corporation shall be deemed to be doing so
in reliance upon the rights provided by this Article VII.
Section 7.12. Interpretation. The provisions of this Article VII are
intended to constitute bylaws authorized by 15 Pa.C.S. (S) 1746.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Corporate Seal. The Corporation shall have a corporate seal in
the form of a circle containing the name of the Corporation, the year of
incorporation and such other details as may be approved by the board of
directors.
Section 8.02. Checks. All checks, notes, bills of exchange or other orders
in writing shall be signed by such person or persons as the board of directors
or any person authorized by resolution of the board of directors may from time
to time designate.
Section 8.03. Contracts.
(a) General Rule. Except as otherwise provided in the Business Corporation
Law of 1988 in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to
enter into any contract or to execute or deliver any instrument on behalf of
the corporation, and such authority may be general or confined to specific
instances.
(b) Statutory Form of Execution of Instruments. Any note, mortgage, evidence
of indebtedness, contract or other document, or any assignment or endorsement
thereof, executed or entered into between the corporation and any other
person, when signed by one or more officers or agents having actual or
apparent authority to sign it, or by the president or vice president and
secretary or assistant secretary or treasurer or assistant treasurer of the
Corporation, shall be held to have been properly executed for and in behalf of
the Corporation, without prejudice to the rights of the Corporation against
any person who shall have executed the instrument in excess of his or her
actual authority.
Section 8.04. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the corporation and one
or more of its directors or officers or between the Corporation and another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise in which one or more of its directors or officers are
directors or officers or have a financial or other interest, shall not be void
or voidable solely for that reason, or solely because the director or officer
is present at or participates in the meeting of the board of directors that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for that purpose, if:
(1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors and the board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though
the disinterested directors are less than a quorum;
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(2) the material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the board of directors or
the shareholders.
(b) Quorum. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board that authorizes a contract or
transaction specified in subsection (a).
Section 8.05. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies
or other depositaries as the board of directors may approve or designate, and
all such funds shall be withdrawn only upon checks signed by such one or more
officers or employees as the board of directors shall from time to time
determine.
Section 8.06. Corporate Records.
(a) Required Records. The Corporation shall keep complete and accurate books
and records of account, minutes of the proceedings of the incorporators,
shareholders and directors and a share register giving the names and addresses
of all shareholders and the number and class of shares held by each. The share
register shall be kept at either the registered office of the Corporation in
the Commonwealth of Pennsylvania or at its principal place of business
wherever situated or at the office of its registrar or transfer agent. Any
books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written verified
demand stating the purpose thereof, have a right to examine, in person or by
agent or attorney, during the usual hours for business for any proper purpose,
the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to the interest of the person as a shareholder. In every instance
where an attorney or other agent is the person who seeks the right of
inspection, the demand shall be accompanied by a verified power of attorney or
other writing that authorizes the attorney or other agent to so act on behalf
of the shareholder. The demand shall be directed to the corporation at its
registered office in the Commonwealth of Pennsylvania or at its principal
place of business wherever situated.
Section 8.07. Financial Reports. Unless otherwise agreed between the
Corporation and a shareholder, the Corporation shall furnish to its
shareholders annual financial statements, including at least a balance sheet
as of the end of each fiscal year and a statement of income and expenses for
the fiscal year. The financial statement shall be prepared on the basis of
generally accepted accounting principles, if the Corporation prepares
financial statements for the fiscal year on that basis for any purpose, and
may be consolidated statements of the Corporation and one or more of its
subsidiaries. The financial statements shall be mailed by the Corporation to
each of its shareholders entitled thereto within 120 days after the close of
each fiscal year and, after the mailing and upon written request, shall be
mailed by the Corporation to any shareholder or beneficial owner entitled
thereto to whom a copy of the most recent annual financial statements has not
previously been mailed. Statements that are audited or reviewed by a public
accountant shall be accompanied by the report of the accountant; in other
cases, each copy shall be accompanied by a statement of the person in charge
of the financial records of the corporation:
(1) Stating his or her reasonable belief as to whether or not the
financial statements were prepared in accordance with generally accepted
accounting principles and, if not, describing the basis of presentation.
(2) Describing any material respects in which the financial statements
were not prepared on a basis consistent with those prepared for the
previous year.
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This Section 8.07 shall not apply to the Corporation if it shall be required
by the Securities Exchange Act of 1934 or any other law to file financial
statements at least once a year in a public office.
Section 8.08. Amendment of Bylaws. These bylaws may be amended or repealed,
or new bylaws may be adopted, either (i) subject to the provisions of the
articles of the Corporation, by vote of the shareholders entitled to vote at
any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders, and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by vote of a majority
of the board of directors of the Corporation in office at any regular or
special meeting of directors. Any change in these bylaws shall take effect
when adopted unless otherwise provided in the resolution effecting the change.
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APPENDIX D
SECTION 8.7 OF RESTATED DECLARATION OF TRUST OF
FEDERATED INVESTORS DATED AS OF JULY 28, 1989
SECTION 8.7 APPRAISAL RIGHTS. If there has been a conversion of any Series A
Preferred Share into Class B Common Shares, any holder of Class B Common
Shares (other than any member of the Management Circle (as such term is
defined in the Shareholder Agreement) or any employee of the Trust or any
Subsidiary of the Trust) who has not voted in favor of a merger or
consolidation of the Trust into or with another entity shall have the right to
obtain an appraisal of the fair value of such Shares (exclusive of any element
of value arising from the accomplishment or expectation of such merger or
consolidation) together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value, provided that such right shall
apply only if such holders holding at least 2/3 of the total Class B Common
Shares held by such holders have requested such rights. Such a holder shall be
entitled to receive out of the assets of the Trust, in exchange for such
Shares, the fair value of such Shares determined pursuant to such appraisal.
In determining such fair value and in otherwise implementing this section,
section 262 of the Delaware General Corporation Law shall apply.
Notwithstanding any other provision hereof, no Shareholder shall have
appraisal rights with respect to a reorganization of the Trust into a
corporation permitted pursuant to section 4.2.5 or 4.3.5. [neither section is
applicable]
Excerpts from the Shareholder Rights Agreement between The Standard Fire
Insurance Company, Federated Investors and the other Shareholders dated August
l, 1989, as amended.
Certain Definitions:
Management Circle: "At any date, (a) the Management Group, (b) any relative
(by blood, adoption or marriage) within the third degree of any of the
Management Group, (c) any corporation 90% or more of the stock of which is,
any partnership 90% or more of the interests in which are, or any trust
(including a decedent's estate) 90% or more of the beneficial interests in
which are, held by any of the Persons referred to in clauses (a) and (b), and
(d) any qualified employee benefit plan of the Company."
Management Group: "At any date, (a) the original Managers, and (b) the
Replacement Managers."
Original Managers: The individuals listed in the definitions in the
Shareholder Rights Agreement and in Section A of Schedule l to the Asset
Purchase Agreement who consisted of the members of the Board of Trustees of
Federated Investors at its inception in 1989.
Replacement Manager: "Any executive employee of the Company performing
services for the Company substantially similar to those performed by any one
or more Original Managers . . . ., at any time when such executive employee
is employed by the Company to perform such services."
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SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
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date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal of their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determine their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. In determining the
fair rate of interest, the Court may consider all relevant factors, including
the rate of interest which the surviving or resulting corporation would have
had to pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted his certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
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the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his rights as provided in subsection (d) of this
section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of his demand for an
appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law (the
"PBCL") provide that a business corporation shall have the power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such proceeding, if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal proceeding,
has no reasonable cause to believe his conduct was unlawful. In the case of an
action by or in the right of the corporation, such indemnification is limited
to expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person has been adjudged to be liable to the
corporation unless, and only to the extent that, a court determines upon
application that, despite the adjudication of liability but in view of all the
circumstances, such person is fairly and reasonably entitled to indemnity for
the expenses that the court deems proper.
PBCL Section 1744 provides that, unless ordered by a court, any
indemnification referred to above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the director, officer, employee or agent
of the corporation has met the applicable standard of conduct. Such
determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, PBCL Section 1743 provides that to the extent
that a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above as contained in sections 1741 and 1742, or in defense of any claim
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
PBCL Section 1745 provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business corporation
in defending any such proceeding may be paid by the corporation in advance of
the final disposition of the action or proceeding upon receipt of an
undertaking to repay the amount advanced if it is ultimately determined that
the director, officer, employee or agent of the corporation is not entitled to
be indemnified by the corporation.
PBCL Section 1746 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the foregoing provisions is not
exclusive of any other rights to which a person seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise both as to action in such person's official capacity
and as to action in another capacity while holding office, and that
indemnification may be granted under any bylaw, agreement, vote of
shareholders or directors or otherwise for any action taken whether or not the
corporation would have the power to indemnify the person under any other
provision of law and whether or not the indemnified liability arises or arose
from any threatened,
II-1
<PAGE>
pending or completed action by or in the right of the corporation, provided,
however, that no indemnification may be made in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness.
The By-Laws of the Registrant provide that the Directors, officers, agents
and employees of the Registrant shall be indemnified as of right to the
fullest extent now or hereafter not prohibited by law in connection with any
actual or threatened action, suit or proceeding, civil, criminal,
administrative, investigative or other (whether brought by or in the right of
the Registrant or otherwise) arising out of their service to the Registrant or
to another enterprise at the request of the Registrant.
PBCL Section 1747 permits a Pennsylvania business corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another threatened, pending or completed action or other enterprise, against
any liability asserted against such person and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify the person against such liability under the
provisions described above.
The By-Laws of the Registrant provide that the Registrant may purchase and
maintain insurance to protect itself and any Director, officer, agent or
employee entitled to indemnification under the By-Laws against any liability
asserted against such person and incurred by such person in respect of the
service of such person to the Registrant whether or not the Registrant would
have the power to indemnify such person against such liability by law or under
the provisions of the By-Laws.
The Registrant maintains directors' and officers' liability insurance
covering its Directors and officers with respect to liabilities, including
liabilities under the Securities Act of 1933, as amended, which they may incur
in connection with their serving as such. Under this insurance, the Registrant
may receive reimbursement for amounts as to which the Directors and officers
are indemnified by the Registrant under the foregoing By-Law indemnification
provision. Such insurance also provides certain additional coverage for the
Directors and officers against certain liabilities even though such
liabilities may not be covered by the foregoing By-Law indemnification
provision.
As permitted by PBCL Section 1713, the By-Laws of the Registrant provide
that no Director shall be personally liable for monetary damages for any
action taken, unless such Director's breach of duty or failure to perform
constituted self-dealing, willful misconduct or recklessness. The PBCL states
that this exculpation from liability does not apply to the responsibility or
liability of a Director pursuant to any criminal statute or the liability of a
Director for the payment of taxes pursuant to Federal, state or local law. It
may also not apply to liabilities imposed upon directors by the Federal
securities laws. PBCL Section 1715(d) creates a presumption, subject to
exceptions, that a Director acted in the best interests of the corporation.
PBCL Section 1712, in defining the standard of care a Director owes to the
corporation, provides that a Director stands in a fiduciary relation to the
corporation and must perform his duties as a Director or as a member of any
committee of the Board in good faith, in a manner he reasonably believes to be
in the best interest of the corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence
would use under similar circumstances.
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.01 Agreement and Plan of Merger dated as of February 20, 1998 between
Federated Investors and the Company
3.01 Restated Articles of Incorporation of the Company
3.02 Restated By-Laws of the Company
4.01 Form of Class A Common Stock certificate*
4.02 Form of Class B Common Stock certificate*
4.04 Stock Purchase Agreement dated August 1, 1989 between the Company and
Westinghouse Credit Corporation
4.05 Intercompany Subordination Agreement dated June 15, 1996 by and among
the Company and its subsidiaries
4.06 Shareholder Rights Agreement dated August 1, 1989 between the Company
and The Standard Fire Insurance Company, as amended through January
31, 1996
4.07 Senior Secured Credit Agreement, dated as of January 31, 1996, by and
among Federated and the Banks set forth therein and PNC, National
Association
4.08 Federated Note Purchase Agreement, dated as of June 15, 1996
4.09 Federated Program Master Agreement, dated as of October 24, 1997,
among Federated, Federated Funding 1997-1, Inc., Federated Management
Company, Federated Securities Corp., Wilmington Trust Company, PLT
Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust
Company*
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the legality of the
securities being registered*
9.01 Voting Shares Irrevocable Trust dated May 31, 1989
10.01 Stock Incentive Plan
10.02 Executive Annual Incentive Plan
10.03 Federated Investors Tower Lease dated January 1, 1993*
10.04 Federated Investors Tower Lease dated February 1, 1994*
10.05 Centre City Tower Lease dated July 23, 1992, as amended
21.01 Subsidiaries of the Registrant
23.01 Consent of Kirkpatrick & Lockhart LLP (to be included in opinion to be
filed as Exhibit 5.01)*
23.02 Consent of Ernst & Young LLP
23.03 Consent of KPMG Peat Marwick, LLP
24.01 Power of Attorney (included on signature page)
27.01 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.
(b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X,
or the information that would otherwise be included in such schedules is
contained in the Registrant's consolidated financial statements or
accompanying notes.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(7) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all required
information concerning a transaction, and the company being acquired involved
therein, and that was not the subject of and included in the registration
statement when it became effective.
Insofar as indemnification for liabilities raising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter ha been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on March 20, 1998.
FEDERATED INVESTORS, INC.
By: /s/ John F. Donahue
----------------------------------
John F. Donahue
Chairman and Chief Executive
Officer
Know All Persons By These Presents, that each person whose signature appears
below constitutes and appoints John W. McGonigle and Thomas R. Donahue and
each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement (including any and all amendments, including post-
effective amendments, effected pursuant to Rule 462), and to file the same,
with all exhibits thereto, and other documentation in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premise, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
<TABLE>
<S> <C>
/s/ John F. Donahue Chairman, Chief Executive March 20, 1998
- ------------------------- Officer and Director
John F. Donahue (Principal Executive
Officer)
/s/ J. Christopher Donahue President, Chief Operating March 20, 1998
- ------------------------- Officer and Director
J. Christopher Donahue
/s/ John W. McGonigle Director March 20, 1998
- -------------------------
John W. McGonigle
/s/ Thomas R. Donahue Chief Financial Officer March 20, 1998
- ------------------------- (Principal
Thomas R. Donahue Financial and Accounting
Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 20, 1998
BETWEEN
FEDERATED INVESTORS,
A DELAWARE BUSINESS TRUST
AND
FEDERATED INVESTORS, INC.,
A PENNSYLVANIA CORPORATION.
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of February 20, 1998 (this
"Agreement"), among FEDERATED INVESTORS, a Delaware business trust (the
"Trust"), and FEDERATED INVESTORS, INC., a Pennsylvania corporation (the
"Company").
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Trust and the Company desire to enter into a merger transaction
pursuant to which the Trust will be merged with and into the Company, with the
Company continuing as the surviving corporation (the "Merger"), whereby each
issued and outstanding Class A Common Share, $1.00 stated value per share, of
the Trust ("Trust Class A Common Shares") will be converted into one share of
Class A Common Stock, no par value per share, of the Company ("Class A Common
Stock"), and each issued and outstanding Class B Common Share, $0.01 stated
value per share, of the Trust ("Trust Class B Common Shares")(other than
shares held in the treasury of the Trust immediately prior to the Effective
Time (as defined herein)) will be converted into one share of Class B Common
Stock, no par value per share, of the Company ("Class B Common Stock", and,
together with the Class A Common Stock, the "Company Common Stock"); and
WHEREAS, the Merger is intended to be a tax-free transaction pursuant to
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
such that no gain or loss will be recognized by the Trust and no gain or loss
will be recognized by holders of Trust Class A Common Shares or Trust Class B
Common Shares on the exchange of such shares for Class A Common Stock or Class
B Common Stock pursuant to this Agreement; and
WHEREAS, the Trust and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger, including the consummation of an
initial public offering by the Company on terms satisfactory to the Company
and the Trust (the "Offering");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Pennsylvania Business Corporation Law of 1988, as
amended (the "PBCL"), the Delaware Business Trust Act, as amended (the "DBTA")
and the Restated Declaration of Trust of the Trust dated July 28, 1989, as
amended (the "Declaration"), the Trust shall be merged with and into the
Company at the Effective Time (as defined in Section 1.03). Following the
Effective Time, the separate existence of the Trust shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations
of the Trust in accordance with applicable law.
SECTION 1.02. CLOSING
The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date") at the offices of the
Trust, Federated Investors Tower, Pittsburgh, Pennsylvania 15222, unless
another time, date or place is agreed to by the parties hereto.
SECTION 1.03. EFFECTIVE TIME
Subject to the provisions of this Agreement, as soon as practicable on or
after the Closing Date, the parties shall file a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions
of the DBTA and the Declaration and articles of merger (the "Articles of
Merger") executed in accordance with
1
<PAGE>
the relevant provisions of the PBCL, and shall make all other filings or
recordings required under the DBTA and the PBCL. The Merger shall become
effective at such time as the Trust and the Company shall agree and as is
specified in the Certificate of Merger and the Articles of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
SECTION 1.04. EFFECTS OF THE MERGER
The Merger shall have the effects specified in Section 1929 of the PBCL and
Section 3815(g) of the DBTA.
SECTION 1.05. ARTICLES OF INCORPORATION AND BY-LAWS
(a) At the Effective Time and without further action on the part of the
Company, the Restated Articles of Incorporation of the Company attached hereto
as Exhibit A shall be the articles of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) At the Effective Time and without further action on the part of the
Company, the Restated By-laws of the Company attached hereto as Exhibit B
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS
The directors of the Company immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
SECTION 1.07. OFFICERS
The officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE PARTIES
SECTION 2.01. EFFECT ON CAPITAL STOCK
As of the Effective Time, by virtue of the Merger and without any action on
the part of the Trust or the holder of any Trust Class A Common Shares or
Trust Class B Common Shares:
(a) Cancellation of Treasury Shares. Each Trust Class A Common Share and
Trust Class B Common Share that is owned by the Trust or the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Trust Class A Common Shares. Each issued and outstanding
Trust Class A Common Share (other than shares to be canceled in accordance
with Section 2.01(a)) shall be converted into one share of Class A Common
Stock (the "Class A Merger Consideration").
(c) Conversion of Trust Class B Common Shares. Except as otherwise provided
by Section 2.01(d), each issued and outstanding Trust Class B Common Share
(other than shares to be canceled in accordance with Section 2.01(a)) shall be
converted into one share of Class B Common Stock. The consideration issuable
pursuant to this paragraph is referred to herein as the "Class B Merger
Consideration", and together with the Class A Merger Consideration, as the
"Merger Consideration".
2
<PAGE>
(d) Dissenting Shareholders. To the extent that Section 8.7 of the
Declaration is declared by a court of competent jurisdiction to be applicable
to the Merger, any issued and outstanding Trust Class B Common Shares held by
a person, other than any member of the Management Circle (as defined in the
Shareholder Rights Agreement dated August 1, 1989, between the Company, The
Standard Fire Insurance Company and the other shareholders bound thereby, as
amended (the "Shareholder Rights Agreement")) or any employee of the Trust or
any subsidiary of the Trust ("Employee Shareholders"), who shall not have
voted to adopt this Agreement or consented thereto in writing and who shall
have properly demanded appraisal (a "Dissenting Shareholder") for such shares
in accordance with Section 8.7 of the Declaration ("Dissenting Shares") (which
Section provides that appraisal rights shall only apply if holders other than
members of the Management Circle and Employee Shareholders holding at least
2/3 of the total outstanding Trust Class B Common Shares held by such holders
have requested such rights) shall not be converted as described in Section
2.01(b) and (c), unless such holder fails to perfect or withdraws or otherwise
loses his right to appraisal. If, after the Effective Time, such Dissenting
Shareholder fails to perfect or withdraws or loses his right to appraisal,
such Dissenting Shareholder's Trust Class B Common Shares shall no longer be
considered Dissenting Shares for the purposes of this Agreement and shall
thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the Class B Merger Consideration. In
determining the fair value of the Dissenting Shares and in otherwise
implementing Section 8.7 of the Declaration, Section 262 of the Delaware
General Corporation Law ("DGCL") shall apply.
(e) Cancellation of Trust Class A Common Shares and Trust Class B Common
Shares. As of the Effective Time, all Trust Class A Common Shares and Trust
Class B Common Shares shall no longer be outstanding and shall automatically
be canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such Trust Class A
Common Shares or Trust Class B Common Shares (a "Certificate") shall cease to
have any rights with respect thereto, except the right to receive the
applicable Merger Consideration, or, in the case of Dissenting Shareholders,
if any, the rights, if any, accorded under Section 8.7 of the Declaration.
(f) Cancellation of Company Capital Stock held by Trust. As of the Effective
Time, all shares of the capital stock of the Company that are owned by the
Trust shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
SECTION 2.02. EXCHANGE OF CERTIFICATES
(a) Deposit with the Exchange Agent. As of the Effective Time, the Company
shall deposit with or other independent agent mutually acceptable
to the Company and the Trust (the "Exchange Agent") for the benefit of the
holders of Trust Class A Common Shares and Trust Class B Common Shares, for
exchange through the Exchange Agent, the certificates evidencing the Merger
Consideration (the "Exchange Fund") payable pursuant to Section 2.01 in
exchange for outstanding Trust Class A Common Shares and Trust Class B Common
Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates, (i) a letter of transmittal and (ii) instructions
for use in effecting the surrender of such Certificates in exchange for the
applicable Merger Consideration. Upon surrender of such a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Company, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive a
certificate or certificates evidencing the Merger Consideration which such
holder has the right to receive pursuant to this Article II, and the
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each certificate formerly evidencing shares of Trust Common Shares which have
been so converted will be deemed for all corporate purposes of the Company to
evidence ownership of the number of shares of Class A Common Stock or Class B
Common Stock of the Company, as the case may be, for which the Trust Class A
or Class B Common Shares formerly represented thereby were exchanged;
provided, however, that until such certificate is so surrendered, no dividend
payable to holders of record of Class A Common Stock or Class
3
<PAGE>
B Common Stock of the Company as of any date subsequent to the Effective Time
shall be paid to the holder of such certificate in respect of the shares of
Class A Common Stock or Class B Common Stock of the Company evidenced thereby
and such holder shall not be entitled to vote such shares of Class A Common
Stock or Class B Common Stock of the Company. Upon surrender of a certificate
formerly evidencing Trust Common Shares which have been so converted, there
shall be paid to the record holder of the certificates of Class A Common Stock
or Class B Common Stock issued in exchange therefor (i) at the time of such
surrender, the amount of dividends and any other distributions theretofore
paid with respect to such shares of Class A Common Stock or Class B Common
Stock of the Company, as of any date subsequent to the Effective Time to the
extent the same has not yet been paid to a public official pursuant to
abandoned property, escheat or similar laws and (ii) at the appropriate
payment date, the amount of dividends and any other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of Class A Common
Stock or Class B Common Stock of the Company. No interest shall be payable
with respect to the payment of such dividends.
(c) No Further Ownership Rights in Trust Class A Common Shares and Trust
Class B Common Shares. The Merger Consideration issued upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed
to have been paid in full satisfaction of all rights pertaining to the Trust
Class A Common Shares and Trust Class B Common Shares theretofore represented
by such Certificates, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Trust Class A
Common Shares and Trust Class B Common Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(d) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration deliverable in respect thereof, pursuant to this
Agreement.
ARTICLE III
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Trust as follows:
(a) Organization, Standing and Corporate Power. The Company is a corporation
duly formed and validly subsisting under the laws of the Commonwealth of
Pennsylvania and has the requisite corporate power and authority to carry on
its business as now being conducted. The business of the Company is carried
out through subsidiaries that are duly qualified or licensed to do business
and are in good standing (with respect to jurisdictions which recognize such
concept) in each jurisdiction in which the nature of their business or the
ownership or leasing of their properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on the Company or any
subsidiary.
(b) Capital Structure. Immediately prior to the Effective Time (or prior to
the adoption of the Restated Articles of Incorporation), there were 5,095,512
shares of common stock, par value $.05 per share, of the Company issued and
outstanding, all of which were owned by the Trust. As of the Effective Time,
the authorized capital stock of the Company shall consist of 20,000 shares of
Class A Common Stock, no par value, 900,000,000 shares of Class B Common
Stock, no par value and 100,000,000 shares of preferred stock, no par value
per share ("Preferred Stock"). As of the Effective Time (after giving effect
to the 1998 Stock Dividend
4
<PAGE>
but without giving effect to the Offering described in Section 4.03), the
consummation which is a condition to the Merger as set forth in Section
5.01(d), there will be 4,000 shares of Class A Common Stock issued and
outstanding, 55,618,000 shares of Class B Common Stock issued and outstanding
and 9,000,000 shares of Class B Common Stock reserved for issuance under the
Federated Investors Stock Incentive Plan (the "Stock Incentive Plan"). Except
as set forth above, immediately prior to the Effective Time, no shares of
capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. All outstanding shares of capital stock of the
Company are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable.
(c) Authority. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company. The execution and delivery of this Agreement by the Trust
shall constitute the approval of this Agreement by the Trust in its capacity
as the sole shareholder of the Company. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
(d) Noncontravention. Subject to (i) compliance with the terms of the Senior
Secured Credit Agreement, dated January 31, 1996, as amended, among the Trust,
PNC Bank, National Association, and the other banks named therein (the "Senior
Credit Agreement"), (ii) compliance with the terms of the Note Purchase
Agreement, dated as of June 15, 1996, among the Trust and the Purchasers
identified therein (the "Note Purchase Agreement"), and (iii) compliance with
the terms of the Pledge Agreement, dated as of June 15, 1996, among the Trust,
the Company, the Pledgors (as defined therein), the Collateral Agent (as
defined therein) and the Noteholders (as defined therein) (the "Pledge
Agreement"), the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any lien upon any of the properties or assets of the
Company under, (i) the Articles of Incorporation or By-laws of the Company, as
amended to date, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or its properties or assets or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or liens that individually or in the aggregate would not (x) have a
material adverse effect on the Company, (y) impair the ability of the Company
to perform its obligations under this Agreement in any material respect or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (1) the effectiveness of the
Registration Statement on Form S-4 with respect to the Merger (the "S-4
Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), including a Proxy Statement (hereinafter defined) meeting the
requirements of the Securities Exchange Act of 1934, as amended; (2) the
effectiveness of the Registration Statement on Form S-1 with respect to the
Offering filed with the Commission pursuant to the Act; (3) the filing of the
Certificate of Merger with the Delaware Secretary of State and the Articles of
Merger with the Pennsylvania Secretary of State and; (4) such consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure to make or obtain which would not reasonably be expected to have a
material adverse effect on the Company or impair the ability of the Company to
perform its obligations under this Agreement in any material respect.
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SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
The Trust represents and warrants to the Company as follows:
(a) Organization, Standing and Power. The Trust is a business trust duly
organized, validly existing and in good standing under the laws of Delaware
and has the requisite power and authority to carry on its business as now
being conducted. The Trust is duly qualified or licensed to do business and is
in good standing in the Commonwealth of Pennsylvania, and is not required to
be so qualified or licensed in any other jurisdiction.
(b) Capital Structure. The authorized capital stock of the Trust consists of
150,000,000 shares of beneficial interest, consisting of four classes as
follows: (i) 125,000 shares of Series B Cumulative Preferred Shares, no par
value per share, none of which are issued and outstanding, (ii) 75,000 shares
of Series C Preferred Shares, no par value per share, none of which are issued
and outstanding as of February 20, 1998 (4,000 shares after giving effect to
the 1998 Stock Dividend hereinafter defined), (iii) 99,000 Class A Common
Shares, no par value per share, 2,000 of which are issued and outstanding, and
(iv) 149,700,000 Class B Common Shares, no par value per share, 27,809,000 of
which are issued and outstanding as of February 20, 1998 (55,618,000 shares
after giving effect to the 1998 Stock Dividend). Except for the shares of
restricted stock, stock appreciation rights and stock options issued and/or
granted under the Trust's Restricted Stock Plan, Stock Appreciation Rights
Plan and Stock Incentive Plan (the "Prior Stock Plan") which, as of February
20, 1998, aggregated 1,411,000 restricted shares of Class B Common Shares
(2,822,000 shares after giving effect to the 1998 Stock Dividend) and
1,332,400 shares of Class B Common Shares (2,664,800 shares after giving
effect to the 1998 Stock Dividend), and except as set forth in the first
sentence of this paragraph, there are no outstanding stock appreciation rights
or rights to receive shares of the Trust on a deferred basis and no shares of
capital stock or beneficial interests of the Trust are issued, reserved for
issuance or outstanding, except for the one for one stock dividend declared on
February 20, 1998 to be paid on April 1, 1998 to shareholders of record on
March 17, 1998 (the "1998 Stock Dividend"). All outstanding shares of
beneficial interest of the Trust are duly authorized, validly issued, fully
paid and nonassessable, and subject to the Shareholder Rights Agreement.
(c) Authority. The Trust has all requisite power and authority under the
DBTA and the Declaration to enter into this Agreement and, subject to the
Trust Shareholder Approval (as defined herein), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
by the Trust and the consummation by the Trust of the transactions
contemplated by this Agreement have been duly authorized by all necessary
action required under the DBTA and the Declaration on the part of the Trust,
subject to the Trust Shareholder Approval. This Agreement has been duly
executed and delivered by the Trust and constitutes a valid and binding
obligation of the Trust, enforceable against the Trust in accordance with its
terms. The consummation of the Merger contemplated by this Agreement requires
the affirmative vote of the holders of a majority of the outstanding Trust
Class A Common Shares and Trust Class B Common Shares, each voting separately
as a class ("Trust Shareholder Approval").
(d) Ownership of the Company. The Trust owns all of the outstanding capital
stock of the Company, free and clear of all liens and encumbrances except for
encumbrances created under the Pledge Agreement, and has duly approved this
Agreement in its capacity as the sole shareholder of the Company.
(e) Noncontravention. Subject to (i) the Trust Shareholder Approval, (ii)
compliance with the terms of Sections 8.1 and 8.2 of the Senior Credit
Agreement and (iii) compliance with Section 6 of the Pledge Agreement, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement by the Trust will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of the Trust under,
(i) the Restated Declaration of Trust of the Trust, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Trust
or its properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any
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judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Trust or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or liens that individually or in the aggregate would not (x) have a
material adverse effect on the Trust, (y) impair the ability of the Trust to
perform its obligations under this Agreement in any material respect or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to the Trust in connection with the execution and
delivery of this Agreement by the Trust or the consummation by the Trust of
the transactions contemplated by this Agreement, except for (1) the filing
with the Commission of a definitive proxy statement relating to the Special
Meeting (as defined herein) (such proxy statement, as amended or supplemented
from time to time, the "Proxy Statement"), (2) the filing of the Certificate
of Merger with the Delaware Secretary of State and the Articles of Merger with
the Pennsylvania Secretary of State; and (3) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure to make or
obtain which would not reasonably be expected to have a material adverse
effect on the Trust or impair the ability of the Trust to perform its
obligations under this Agreement in any material respect.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. PREPARATION OF THE PROXY STATEMENT AND S-4 REGISTRATION
STATEMENT; SPECIAL MEETING.
(a) As soon as practicable following the date of this Agreement, the Company
and the Trust shall prepare and file with the Commission the Proxy Statement
and the S-4 Registration Statement. The Trust and the Company shall use all
reasonable efforts to cause the S-4 Registration Statement to be declared
effective by the Commission as soon as practicable following the filing
thereof with the Commission. The Trust will use all reasonable efforts to
cause the Proxy Statement to be mailed to holders of the Trust's beneficial
interests as promptly as practicable after the effectiveness of the S-4
Registration Statement.
(b) The Trust will, as soon as practicable following the effectiveness of
the S-4 Registration Statement, duly call, give notice of, convene and hold a
meeting of the holders of its beneficial interests (the "Special Meeting") for
the purpose of obtaining the approval of the holders of a majority of the
Trust Class A Common Shares and Trust Class B Common Shares, each voting
separately as a class, of this Agreement and the transactions contemplated
hereby (the "Trust Shareholder Approval"). The Trust will, through its Board
of Trustees, recommend to the holders of its beneficial interests the adoption
of this Agreement and the approval of the transactions contemplated hereby.
SECTION 4.02. STOCK OPTION AND BENEFIT PLANS.
At the Effective Time, the Company shall assume the rights and obligations
of the Trust under the Trust's Prior Stock Plan. The Company shall treat as
having been issued under its Stock Incentive Plan all shares of restricted
stock, stock appreciation rights and stock options issued under the Prior
Stock Plan. At the Effective Time, each share of restricted stock, stock
appreciation right and stock option issued or granted under the Prior Stock
Plan shall be converted automatically into a share of restricted stock, stock
appreciation right or stock option, as the case may be, of or with respect to
Class B Common Stock. The Board of Directors of the Company and the Board of
Trustees of the Trust shall take all actions necessary to carry into effect
the intent of this Section 4.02. The Company shall, as soon as practicable
following the Effective Time, register on Form S-8 or such other form as may
be prescribed by the Commission the securities to be issued by the Company in
connection with the assumption of the Trust's obligations under the Prior
Stock Plan.
SECTION 4.03. PREPARATION OF S-1 REGISTRATION STATEMENT.
As soon as practicable following the date of this Agreement, the Company,
with the cooperation of the Trust, shall prepare and file with the Commission
a Registration Statement on Form S-1 with respect to the
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Offering setting forth the terms of such Offering as the Company, in its sole
discretion, may determine, including timing and pricing of the Offering, the
number of the shares to be offered by the Company and any selling
shareholders, the selection of underwriters and all other matters relating to
the Offering. The Offering will be subject to prevailing market conditions and
other factors as may be taken into account by the Board of Directors of the
Company. Neither the Trust nor the Company shall be obligated to cause the S-1
Registration Statement to be declared effective by the Commission, if in
either party's judgment the Offering should not proceed.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Trust Shareholder Approval. The Trust Shareholder Approval shall have
been obtained.
(b) No Appraisal Rights. In connection with the Merger, there shall not be
written demands or objections made and not withdrawn or otherwise lost by
Dissenting Shareholders who in the aggregate hold at least 2/3 of the total
outstanding Trust Class B Common Shares held by all holders who are entitled
to seek appraisal rights under Section 8.7 of the Declaration.
(c) No Injunctions or Restraints. No judgment, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect.
(d) Effective Registration Statement. The S-4 Registration Statement filed
by the Company with respect to the Merger shall have been declared effective,
and no stop order or proceeding seeking a stop order is in effect or has been
instituted.
(e) Consummation of Offering. The S-1 Registration Statement filed by the
Company with respect to the Offering shall have been declared effective, and
no stop order or proceeding seeking stop order is in effect or has been
instituted, and the Offering shall have been made on terms and conditions
(including size and price) satisfactory to the Company and the Trust and shall
be consummated on the Closing Date concurrently with the Merger.
SECTION 5.02. CONDITIONS TO OBLIGATION OF THE TRUST
The obligation of the Trust to effect the Merger is further subject to
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such date).
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Consents and Notices. The Company shall have received any material third
party or governmental consent and shall have provided any material notice or
other document required to be provided by it in connection with the
transactions contemplated by this Agreement, including, without limitation,
the consent of
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PNC Bank, National Association pursuant to the Senior Credit Agreement and the
Note Purchase Agreement, and the provision of the notice required by the
Pledge Agreement.
(d) Effective Registration Statement. The S-4 Registration Statement filed
by the Company with respect to the Merger shall have been declared effective,
and no stop order or proceeding seeking a stop order is in effect or has been
instituted.
SECTION 5.03. CONDITIONS TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Trust set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations expressly relate to an
earlier date (in which case as of such date).
(b) Performance of Obligations of the Trust. The Trust 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.
(c) Consents. The Trust shall have received any material third party or
governmental consent and shall have provided any material notice or other
document required to be provided by it in connection with the transactions
contemplated by this Agreement, including, without limitation, obtaining the
consent and providing the notice and proxies required by the Senior Credit
Agreement and providing the notices required by the Pledge Agreement.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the Trust Shareholder Approval:
(a) by mutual consent of the Trust and the Company;
(b) by either the Trust or the Company:
(i) if a court of competent jurisdiction or other governmental entity
shall have issued a nonappealable final order, decree or ruling or taken
any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger;
(ii) if at the Special Meeting (including any adjournment or postponement
thereof), the requisite vote of the holders of the Trust Class A Common
Shares and Trust Class B Common Shares in favor of this Agreement and the
Merger shall not have been obtained; or
(iii) if the registration statement relating to the Offering shall not
have become effective under the Securities Act of 1933, as amended, or the
Offering shall have been abandoned or not otherwise consummated.
SECTION 6.02. EFFECT OF TERMINATION
In the event of termination of this Agreement by either the Company or the
Trust as provided in Section 6.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of the
Trust, the Company or their respective officers, directors, trustees,
shareholders or affiliates.
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SECTION 6.03. AMENDMENT
This Agreement may be amended at any time by action taken or authorized by
the Board of Trustees of the Trust and the Board of Directors of the Company;
provided, however, that after the Trust Shareholder Approval is obtained, no
amendment shall be made which by law requires further approval by the holders
of Trust Class A Common Shares or Trust Class B Common Shares without such
further approval.
SECTION 6.04. EXTENSION; WAIVER
The Company and the Trust, by action taken or authorized by the Board of
Directors or the Board of Trustees, respectively, may extend the time for
performance of the obligations or other acts of the other party to this
Agreement, may waive inaccuracies in the representations or warranties
contained in this Agreement, and may waive compliance with any agreements or
conditions contained in this Agreement. The failure of either party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 7.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 7.02. COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
SECTION 7.03. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement constitutes the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and is not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 7.04. GOVERNING LAW
Except as otherwise specifically referred to herein, this Agreement shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof; except that the Merger
contemplated hereby shall be governed by the laws of the State of Delaware and
the Commonwealth of Pennsylvania.
SECTION 7.05. ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by either party without the prior written consent of the other
party. Any assignment in violation of the preceding sentence shall be void.
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.
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SECTION 7.06. FEES AND EXPENSES
All fees, costs and expenses incurred by the Trust and the Company in
connection with this Agreement and the transactions contemplated hereby shall
be paid (i) by the Trust if the Merger does not occur and (ii) by the Company
if the Merger occurs.
IN WITNESS WHEREOF, the Trust and the Company have caused this Agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date first written above.
FEDERATED INVESTORS
By:
-------------------------------
Name:
Title:
FEDERATED INVESTORS, INC.
By:
-------------------------------
Name:
Title:
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EXHIBIT 3.01
RESTATED ARTICLES OF INCORPORATION OF FEDERATED INVESTORS, INC.
-------------------------
FIRST: Name. The name of the Corporation is FEDERATED INVESTORS, INC.
SECOND: Registered Office. The location and post office address of the
registered office of the Corporation in the Commonwealth of Pennsylvania is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222, in the County of Allegheny.
THIRD: Incorporation. The Corporation was incorporated on October 18, 1957
under the Business Corporation Law of 1933 of the Commonwealth of Pennsylvania
for the purpose or purposes to advise, counsel, and make recommendations on
investment, economic, business and allied matters to individuals,
partnerships, corporations and other entities; to buy, sell and otherwise deal
in stocks, bonds, mutual funds, investment plans and investment securities of
all kinds; and generally to engage in the business of investment adviser and
investment broker-dealer for itself and as agent for others, as well as to
have unlimited power to engage in and to do any lawful act concerning any and
all lawful business for which corporations may be incorporated under such
Business Corporation Law.
FOURTH: Term. The term for which the Corporation is to exist is perpetual.
FIFTH: Capital Stock.
A. Classes and Number of Shares. The aggregate number of shares which the
Corporation shall have authority to issue is One Billion, Twenty Thousand
(1,000,020,000) shares, consisting of (1) Twenty Thousand (20,000) shares of
Class A Common Stock, of no par value, (2) Nine Hundred Million (900,000,000)
shares of Class B Common Stock, of no par value, and (3) One Hundred Million
(100,000,000) shares of Preferred Stock, of no par value. The Board of
Directors of the Corporation shall have the full authority permitted by law to
divide the shares of Preferred Stock into one or more series, to determine the
designation and the number of shares of any series (within the total number of
shares of the class authorized by these Restated Articles of Incorporation),
and to determine the voting rights (whether full, limited, multiple,
fractional or no voting rights), preferences, limitations and special rights,
if any, or any series. Any such division and any such determination may be
made by action of the Board of Directors from time to time and shall
constitute an amendment of this Article FIFTH.
B. Issuance of the Common Stock and the Preferred Stock. Subject to the
preemptive rights of the holders of the Class A Common Stock as hereinafter
provided, the Board of Directors of the Corporation may from time to time
authorize by resolution the issuance of any and all shares of Class A Common
Stock, Class B Common Stock and Preferred Stock herein authorized for such
purposes, in such amounts, to such persons (including any corporation or other
business entity), for such consideration, and in the case of the Preferred
Stock, in one more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the shareholders, except as
otherwise required by applicable law.
C. Powers and Rights of the Common Stock.
1. Voting Rights and Powers. Prior to the agreement date hereinafter
defined in this Article FIFTH (hereinafter sometimes called the "Agreement
Date"), except as otherwise provided in this Article FIFTH or by applicable
law, the holders of the outstanding shares of Class B Common Stock shall
have no voting rights; the entire voting power of the Corporation shall be
vested in the holders of the outstanding shares of
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Class A Common Stock and, with respect to all matters upon which
shareholders are entitled to vote or to which shareholders are entitled to
give consent, each of such holders shall be entitled to cast thereon one
vote in person or by proxy for each share of Class A Common Stock standing
in his or her name. From and after the Agreement Date, with respect to all
matters upon which shareholders are entitled to vote or to which
shareholders are entitled to give consent, the holders of the outstanding
shares of Class A Common Stock and the holders of outstanding shares of
Class B Common Stock, except as otherwise provided herein, shall vote
together without regard to class, and every holder of the outstanding
shares of the Class A Common Stock shall be entitled to cast thereon one
thousand (1,000) votes in person or by proxy for each share of the Class A
Common Stock standing in his or her name and every holder of the
outstanding shares of the Class B Common Stock shall be entitled to cast
thereon one vote in person or by proxy for each share of Class B Common
Stock standing in his or her name; except, however, that holders of the
Class A Common Stock, voting separately as a class with each holder of the
outstanding shares of Class A Common Stock being entitled to one vote in
person or by proxy for each share of the Class A Common Stock standing in
his or her name, shall have the right to elect that number of directors so
that four-tenths ( 4/10) (calculated to the next highest whole number) of
the total number of directors of the Corporation fixed from time to time
by, or in the manner provided for in, the Bylaws of the Corporation, shall
have been elected by the holders of the Class A Common Stock separately.
With respect to any proposed amendment to these Restated Articles of
Incorporation which would increase or decrease the number of authorized
shares of either Class A Common Stock or Class B Common Stock, or alter or
change the powers, preferences, relative voting power or special rights of
the shares of Class A Common Stock or Class B Common Stock so as to affect
them adversely, the approval of a majority of the votes entitled to be cast
by the holders of the class affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the approval of a
majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock voting together without regard to
class as hereinbefore provided.
2. Exceptions. Notwithstanding anything contained herein to the contrary,
prior to the Agreement Date, without the consent (given in writing or by
vote at any regular or special meeting of the shareholders of the
Corporation) of the holders of a majority of the then outstanding shares of
Class B Common Stock, the Corporation shall not:
(a) merge, consolidate with or otherwise acquire any corporation or
other business entity; provided, however, that, in a transaction (i) in
which the Corporation is the surviving entity and (ii) pursuant to
which these Restated Articles of Incorporation have not been amended,
altered, repealed or superseded, the Corporation may, without such
consent, merge, consolidate with or otherwise acquire any corporation
or other business entity;
(b) sell, lease, exchange or otherwise dispose of all or
substantially all of the assets of the Corporation or any subsidiary
thereof to other than a wholly-owned subsidiary of the Corporation;
provided, however, that, (i) in any transaction or series of related
transactions not exceeding in value One Hundred Million Dollars
($100,000,000.00) in the aggregate (taking into account all liabilities
assumed by the Corporation or its subsidiaries in any such transaction
or transactions) involving all or substantially all of the assets of
any subsidiary, or (ii) in any transaction or series of related
transactions involving a securitization or other receivables sale
transaction, the Corporation may, without such consent, sell, lease,
exchange or otherwise dispose of all or substantially all of the assets
of such subsidiary;
(c) effect any amendment to these Restated Articles of Incorporation
or the Bylaws of the Corporation that adversely affects the rights,
powers or preferences of the shares of Class B Common Stock; or
(d) liquidate, dissolve or otherwise wind up the affairs of the
Corporation.
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3. Board of Directors.
a. Number. The Board of Directors of the Corporation shall consist of
at least five members, all of whom prior to the Agreement Date shall be
elected by the holders of the Class A Common Stock voting separately as
a class as hereinbefore provided and at least two of whom from and
after the Agreement Date shall be elected by the holders of the Class A
Common Stock voting separately as a class as hereinbefore provided.
b. Standing and Term. All directors, whether elected by the holders
of the Class A Common Stock voting separately as a class or elected by
the holders of both the Class A Common Stock and the Class B Common
Stock voting together, shall have equal standing, serve terms of equal
duration and have equal voting powers.
c. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled
by a majority vote of the remaining directors then in office, even
though less than a quorum; provided however, that any vacancies and
newly created directorships involving directors who have been or shall
be elected by the holders of the Class A Common Stock voting separately
as a class as hereinbefore provided shall be filled by a majority vote
of the remaining directors then in office elected by the holders of the
Class A Common Stock voting separately as a class and that any
vacancies and newly created directorships involving directors who have
been or shall be elected by the holders of the Class A Common Stock and
the Class B Common Stock voting together as hereinbefore provided shall
be filled by a majority of the remaining directors then in office
elected by the holders of the Class A Common Stock and the Class B
Common Stock voting together.
d. Removal. Directors elected by the holders of the Class A Common
Stock voting separately as a class, and directors filling vacancies and
newly created directorships involving directors who have been or shall
be elected by the holders of the Class A Common Stock voting separately
as a class as hereinbefore provided, may be removed, with or without
cause, only by the vote or consent of a majority of the votes then
entitled to be cast by the holders of the Class A Common Stock, voting
separately as a class. Directors elected by the holders of the Class A
Common Stock and the Class B Common Stock voting together without
regard to class, and directors filling vacancies and newly created
directorships, other than those involving directors who have been or
shall be elected by the holders of the Class A Common Stock voting
separately as a class as hereinbefore provided, may be removed, with or
without cause, only by the vote or consent of a majority of the votes
then entitled to be cast by the holders of the Class A Common Stock and
the Class B Common Stock, voting together without regard to class.
4. Dividends and Distributions. Each share of Class A Common Stock and
each share of Class B Common Stock shall be equal in respect of rights to
dividends and distributions, when and as declared, whether in cash or in
the form of stock or other property of the Corporation; except, however,
that, in the case of dividends or other distributions payable in stock of
the Corporation, other than Preferred Stock, including distributions
pursuant to stock split-ups or divisions, only shares of Class A Common
Stock shall be distributed with respect to the Class A Common Stock and
only shares of Class B Common Stock shall be distributed with respect to
the Class B Common Stock.
5. Preemptive Rights. Each holder of any shares of Class A Common Stock
then outstanding shall be entitled to a preemptive right to purchase or
subscribe for any unissued shares of Class A Common Stock to be issued by
the Corporation for any reason, including any increase of the authorized
number of shares of Class A Common Stock, or for any additional shares of
any class of the capital stock of the Corporation or any bonds,
certificates of indebtedness, debentures or other securities convertible
into shares of Class A Common Stock, or carrying any rights to purchase
shares of Class A Common Stock, whether such shares or bonds, certificates
of indebtedness, debentures or other securities shall be issued for cash,
property or
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other lawful consideration. The holders of the Class B Common Stock shall
have no preemptive rights to subscribe for any shares of any class of stock
of the Corporation, whether now or hereafter authorized.
6. Other Rights. Except as otherwise required by applicable law or as
otherwise provided in these Restated Articles of Incorporation, each share
of Class A Common Stock and each share of Class B Common Stock shall have
identical powers, preferences and rights, including rights in liquidation.
Upon liquidation of the Corporation, holders of Class A Common Stock and
holders of Class B Common Stock are entitled to share ratably in the assets
thereof that may be available for distribution after satisfaction of
creditors. In addition, in connection with a Company Sale (as hereinafter
defined), the holders of the Class A Common Stock and the Class B Common
Stock shall receive the same amount of consideration per share,
notwithstanding any differences in voting rights. The term "Company Sale"
shall be deemed to include the following: (A) the acquisition of the
Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization,
merger, consolidation or stock purchase) and (B) a sale of all or
substantially all of the assets of the Corporation. In any Company Sale, if
the consideration received by the Corporation or its stockholders, as the
case may be, is other than cash, its value, as determined in good faith by
the Board of Directors, will be deemed its fair market value.
7. Duration of Class Rights and Powers. At any time when there shall be
no shares of Class A Common Stock outstanding but there shall be shares of
Class B Common Stock outstanding, except as otherwise provided in this
Article FIFTH or by applicable law, without any action by the Board of
Directors or the holders of the shares of Class B Common Stock outstanding,
the entire voting power of the Corporation shall then be vested in the
holders of the outstanding shares of Class B Common Stock and, with respect
to all matters upon which shareholders are entitled to vote or to which
shareholders are entitled to give consent, each of such holders shall be
entitled to cast thereon one vote in person or by proxy for each share of
Class B Common Stock standing in his or her name; and the provisions of
these Restated Articles of Incorporation which provide for different voting
rights for the Class A Common Stock shall not be of any effect.
D. Powers and Rights of the Preferred Stock. The voting rights, preferences,
limitations and special rights, if any, pertaining to the Preferred Stock, or
any series thereof, shall be such as may be fixed by the Board of Directors of
the Corporation in its sole discretion, authority so to do being hereby
expressly vested in the Board of Directors.
E. Agreement Date. For the purposes of this Article FIFTH, the term
"Agreement Date" as used herein shall mean the first date on which the Company
shall execute and deliver, and enter into, a legally binding and enforceable
agreement providing for the issue by the Company of shares of Class B Common
Stock in a transaction constituting a business combination which, for
financial reporting purposes, shall be accounted for as a pooling of interests
in accordance with generally accepted accounting principles.
F. Shares Represented by Certificates and Uncertificated Shares. The shares
of the Corporation of any class or series shall be represented by certificates
or shall be uncertificated shares.
SIXTH: No Cumulative Voting. The shareholders of the Corporation shall not
have the right to cumulate their votes for election of directors of the
Corporation.
SEVENTH: Amendment. Subject to the provisions of Article FIFTH hereof, these
Restated Articles of Incorporation may be amended in the manner prescribed at
the time by applicable law; and all rights conferred upon shareholders in
these Restated Articles of Incorporation are granted subject to this
reservation.
EIGHTH: Restatement. These Restated Articles of Incorporation supersede the
original Articles of Incorporation of the Corporation and all amendments
thereto.
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EXHIBIT 3.02
FEDERATED INVESTORS, INC.
------------
RESTATED BYLAWS
------------
Adopted , 1998
<PAGE>
RESTATED BYLAWS
OF FEDERATED INVESTORS, INC.
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I OFFICES AND FISCAL YEAR
Section 1.01 Registered office............................................ 4
Section 1.02 Other Offices................................................ 4
Section 1.03 Fiscal Year.................................................. 4
ARTICLE II NOTICES--WAIVERS--MEETINGS GENERALLY
Section 2.01 Manner of Giving Notice...................................... 4
Section 2.02 Notice of Meetings of Board of Directors..................... 5
Section 2.03 Notice of Meeting of Shareholders............................ 5
Section 2.04 Waiver of Notice............................................. 5
Section 2.05 Modification of Proposal Contained in Notice................. 5
Section 2.06 Exception to Requirement of Notice........................... 5
Section 2.07 Use of Conference Telephone and Similar Equipment............ 6
ARTICLE III SHAREHOLDERS
Section 3.01 Place of Meeting............................................. 6
Section 3.02 Annual Meeting............................................... 6
Section 3.03 Special Meetings............................................. 6
Section 3.04 Quorum and Adjournment....................................... 6
Section 3.05 Action by Shareholders....................................... 7
Section 3.06 Organization of Meetings..................................... 7
Section 3.07 Voting Rights of Shareholders................................ 7
Section 3.08 Voting and Other Action by Proxy............................. 7
Section 3.09 Voting by Fiduciaries and Pledgees........................... 8
Section 3.10 Voting by Joint Holders of Shares............................ 8
Section 3.11 Voting by Corporations and Other Business Organizations...... 9
Section 3.12 Determination of Shareholders of Record...................... 9
Section 3.13 Voting Lists................................................. 10
Section 3.14 Judges of Election........................................... 10
Section 3.15 Consent of Shareholders in Lieu of Meeting................... 10
Section 3.16 Minors as Security Holders................................... 11
ARTICLE IV BOARD OF DIRECTORS
Section 4.01 Powers; Personal Liability................................... 11
Section 4.02 Qualifications and Selection of Directors.................... 11
Section 4.03 Number and Term of Office.................................... 12
Section 4.04 Vacancies.................................................... 12
Section 4.05 Removal of Directors......................................... 13
Section 4.06 Place of Meeting............................................. 13
Section 4.07 Organization of Meetings..................................... 13
Section 4.08 Regular Meetings............................................. 13
Section 4.09 Special Meetings............................................. 13
Section 4.10 Quorum of and Action by Directors............................ 13
Section 4.11 Executive and Other Committees............................... 13
Section 4.12 Compensation................................................. 14
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<C> <S> <C>
ARTICLE V OFFICERS
Section 5.01 Officers Generally........................................... 14
Section 5.02 Election and Term of Office.................................. 14
Section 5.03 Subordinate Officers, Committees and Agents.................. 14
Section 5.04 Removal of Officers and Agents............................... 15
Section 5.05 Vacancies.................................................... 15
Section 5.06 Authority.................................................... 15
Section 5.07 Chairman of the Board........................................ 15
Section 5.08 Vice Chairman................................................ 15
Section 5.09 President.................................................... 15
Section 5.10 Vice President............................................... 15
Section 5.11 Secretary.................................................... 15
Section 5.12 Treasurer.................................................... 15
Section 5.13 Salaries..................................................... 16
ARTICLE VI SHARE CERTIFICATES, TRANSFER, ETC.
Section 6.01 Share Certificates........................................... 16
Section 6.02 Issuance..................................................... 16
Section 6.03 Transfer..................................................... 16
Section 6.04 Record Holder of Shares...................................... 16
Section 6.05 Lost, Destroyed or Mutilated Certificates.................... 16
Section 6.06 Restriction on Transfer of Shares............................ 16
ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS
AND OTHER AUTHORIZED REPRESENTATIVES
Section 7.01 Scope of Indemnification..................................... 17
Section 7.02 Proceedings Initiated by Indemnified Representatives......... 18
Section 7.03 Advancing Expenses........................................... 18
Section 7.04 Securing of Indemnification Obligations...................... 18
Section 7.05 Payment of Indemnification................................... 18
Section 7.06 Arbitration.................................................. 19
Section 7.07 Contribution................................................. 19
Section 7.08 Mandatory Indemnification of Directors, Officers, Etc........ 19
Section 7.09 Contract Rights; Amendment or Repeal......................... 19
Section 7.10 Scope of Article............................................. 19
Section 7.11 Reliance on Provisions....................................... 20
Section 7.12 Interpretation............................................... 20
ARTICLE VIII MISCELLANEOUS
Section 8.01 Corporate Seal............................................... 20
Section 8.02 Checks....................................................... 20
Section 8.03 Contracts.................................................... 20
Section 8.04 Interested Directors or Officers; Quorum..................... 20
Section 8.05 Deposits..................................................... 21
Section 8.06 Corporate Records............................................ 21
Section 8.07 Financial Reports............................................ 21
Section 8.08 Amendment of Bylaws.......................................... 21
</TABLE>
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RESTATED BYLAWS
OF
FEDERATED INVESTORS, INC.
----------------
ARTICLE I
OFFICES AND FISCAL YEAR
Section 1.01. Registered Office. The registered office of the Corporation in
the Commonwealth of Pennsylvania shall be at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779 in the County of
Allegheny, until otherwise established by an amendment of the articles of the
Corporation or by the board of directors and a record of the change is filed
with the Pennsylvania Department of State in the manner provided by law.
Section 1.02. Other Offices. The Corporation may also have offices at such
other places within or without the Commonwealth of Pennsylvania as the board
of directors may from time to time appoint or the business of the Corporation
may require.
Section 1.03. Fiscal Year. The fiscal year of the Corporation shall end on
the last day of December in each year.
ARTICLE II
NOTICE--WAIVERS--MEETINGS GENERALLY
SECTION 2.01. MANNER OF GIVING NOTICE.
(a) General Rule. Whenever written notice is required to be given to any
person under the provisions of the Business Corporation Law of 1988 or by the
articles of the Corporation or these bylaws, it may be given to the person
either personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or
TWX (with answerback received) or courier service, charges prepaid, or by
facsimile transmission, to the address (or to the telex, TWX or facsimile
number) of the person appearing on the books of the Corporation or, in the
case of directors, supplied by the director to the Corporation for the purpose
of notice. If the notice is sent by mail, telegraph or courier service, it
shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telex or TWX, when
dispatched or, in the case of facsimile transmission, when received. A notice
of meeting shall specify the place, day and hour of the meeting and any other
information required by any other provision of the Business Corporation Law of
1988, the articles of the Corporation, or these bylaws.
(b) Adjourned Shareholder Meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken, unless
the board of directors fixes a new record date for the adjourned meeting or
the Business Corporation Law of 1988 requires notice of the business to be
transacted and that notice has not previously been given.
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Section 2.02. Notice of Meetings of Board of Directors. Notice of a regular
meeting of the board of directors need not be given. Notice of every special
meeting of the board of directors shall be given to each director by telephone
or in writing at least 72 hours (in the case of notice by telephone, telex,
TWX or facsimile transmission, telegraph, courier service or express mail) or
five days (in the case of notice by first class mail) before the time at which
the meeting is to be held. Every such notice shall state the time and place of
the meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board need be specified in the notice of the
meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule. Written notice of every meeting of the shareholders shall
be given by, or at the direction of, the secretary to each shareholder of
record entitled to vote at the meeting at least:
(1) ten days prior to the day named for a meeting called to consider a
fundamental change under 15 Pa.C.S. Chapter 19; or
(2) five days prior to the day named for the meeting in any other case.
If the secretary neglects or refuses to give notice of a meeting, the person
or persons calling the meeting may do so.
(b) Contents. In the case of a special meeting of shareholders, the notice
shall specify the general nature of the business to be transacted.
(c) Notice of Action by Shareholders on By-laws. In the case of a meeting of
shareholders that has as one of its purposes, action on the bylaws, written
notice shall be given to each shareholder entitled to vote at the meeting that
the purpose, or one of the purposes, of the meeting is to consider the
adoption, amendment or repeal of the bylaws. There shall be included in, or
enclosed with, the notice a copy of the proposed amendment or a summary of the
changes to be effected thereby.
Section 2.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is required to be given
under the provisions of the Business Corporation Law of 1988, the articles of
the Corporation or these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of the notice.
Neither the business to be transacted at, nor the purpose of, a meeting need
be specified in the waiver of notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. Modification of Proposal Contained in Notice. Whenever the
language of a proposed resolution is included in a written notice of a meeting
required to be given under the provisions of the Business Corporation Law of
1988 or the articles of the Corporation or these bylaws, the meeting
considering the resolution may without further notice adopt it with such
clarifying or other amendments as do not enlarge its original purpose.
Section 2.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is required to be
given to any person under the provisions of the Business Corporation Law of
1988 or by the articles of the Corporation or these bylaws or by the terms of
any agreement or other instrument or as a condition precedent to taking any
corporate action and communication with that person is then unlawful, the
giving of the notice or communication to that person shall not be required.
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(b) Shareholders Without Forwarding Addresses. Notice or other
communications shall not be sent to any shareholder with whom the Corporation
has been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder
has otherwise failed to provide the Corporation with a current address.
Whenever the shareholder provides the Corporation with a current address, the
Corporation shall commence sending notices and other communications to the
shareholder in the same manner as to other shareholders.
Section 2.07 Use of Conference Telephone and Similar Equipment. One or more
persons may participate in a meeting of the board of directors or the
shareholders of the Corporation by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at the meeting.
ARTICLE III
SHAREHOLDERS
Section 3.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the registered office of the Corporation unless
another place is designated by the board of directors in the notice of a
meeting.
Section 3.02. Annual Meeting. The board of directors may fix the date and
time of the annual meeting of the shareholders; but, if no such date and time
is fixed by the board, the meeting for any calendar year shall be held on the
first Tuesday in May in such year, if not a legal holiday under the laws of
the Commonwealth of Pennsylvania, and, if a legal holiday, then on the next
succeeding business day, not a Saturday, at ten o'clock a.m., local time. At
the meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder then entitled to vote may
call the meeting at any time thereafter.
Section 3.03. Special Meetings.
(a) Call of Special Meetings. Special meetings of the shareholders may be
called at any time (1) by the board of directors or (2) unless otherwise
provided in the articles of the Corporation, by shareholders entitled to cast
at least 20% of the votes that all shareholders are entitled to cast at the
particular meeting.
(b) Fixing of Time for Meeting. At any time, upon written request of any
person who has duly called a special meeting, it shall be the duty of the
secretary to fix the time of meeting which shall be held not more than 60 days
after the receipt of the request. If the secretary neglects or refuses to fix
the time of the meeting, the person or persons calling the meeting may do so.
Section 3.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the Corporation duly called
shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
votes that all shareholders are entitled to cast on a particular matter to be
acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the Corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
board of directors of the Corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly organized
meeting can continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
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(c) Adjournment for Lack of Quorum. If a meeting cannot be organized because
a quorum has not attended, those present may, except as provided in the
Business Corporation Law of 1988, adjourn the meeting to such time and place
as they may determine.
(d) Adjournments Generally. Any meeting at which directors are to be elected
shall be adjourned only from day to day, or for such longer periods not
exceeding 15 days each as the shareholders present and entitled to vote shall
direct, until the directors have been elected. Any other regular or special
meeting may be adjourned for such period as the shareholders present and
entitled to vote shall direct.
(e) Electing Directors at Adjourned Meeting. Those shareholders entitled to
vote who attend a meeting called for the election of directors that has been
previously adjourned for lack of a quorum, although less than a quorum as
fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(f) Other Action in Absence of Quorum. Those shareholders entitled to vote
who attend a meeting of shareholders that has been previously adjourned for
one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall
nevertheless constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if the notice states that those
shareholders who attend the adjourned meeting shall nevertheless constitute a
quorum for the purpose of acting upon the matter.
Section 3.05. Action by Shareholders. Except as otherwise provided in the
Business Corporation Law of 1988 or the articles of the Corporation or these
bylaws, whenever any corporate action is to be taken by vote of the
shareholders of the corporation, it shall be authorized upon receiving the
affirmative vote of a majority of the votes cast by all shareholders entitled
to vote thereon and, if any shareholders are entitled to vote thereon as a
class, upon receiving the affirmative vote of a majority of the votes cast by
the shareholders entitled to vote as a class.
Section 3.06. Organization of Meetings. At every meeting of the
shareholders, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the president, the vice
presidents in their order of rank and seniority, or a person chosen by
majority vote of the shareholders present and entitled to vote, shall act as
chairman of the meeting. The secretary or, in the absence of the secretary, an
assistant secretary, or, in the absence of the secretary and assistant
secretaries, a person appointed by the chairman of the meeting, shall act as
secretary.
Section 3.07. Voting Rights of Shareholders. Unless otherwise provided in
the articles of the Corporation, every shareholder of the Corporation shall be
entitled to one vote for every share standing in the name of the shareholder
on the books of the Corporation.
Section 3.08. Voting and Other Action by Proxy.
(a) General Rule.
(1) Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders, or the expression of consent or dissent to corporate action
in writing, by a proxy of a shareholder, shall constitute the presence of,
or vote or action by, or written consent or dissent of the shareholder.
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(3) Where two or more proxies of a shareholder entitled to vote are
present, the Corporation shall, unless otherwise expressly provided in the
proxy, accept as the vote of all shares represented thereby the vote cast
by a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted or upon the manner of voting
the shares, the voting of the shares shall be divided equally among those
persons.
(b) Minimum Requirements. Every proxy shall be executed in writing by the
shareholder or by the duly authorized attorney-in-fact of the shareholder and
filed with the secretary of the Corporation. A telegram, telex, cablegram,
datagram or similar transmission from a shareholder or attorney-in-fact, or a
photographic, facsimile or similar reproduction of a writing executed by a
shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of this subsection;
and
(2) shall be so treated if it sets forth a confidential and unique
identification number or other mark furnished by the corporation to the
shareholder for the purposes of a particular meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest, shall be revocable
at will, notwithstanding any other agreement or any provision in the proxy to
the contrary, but the revocation of a proxy shall not be effective until
written notice thereof has been given to the secretary of the Corporation. An
unrevoked proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A proxy shall
not be revoked by the death or incapacity of the maker unless, before the vote
is counted or the authority is exercised, written notice of the death or
incapacity is given to the secretary of the corporation.
(d) Expenses. Unless otherwise restricted in the articles of the
Corporation, the Corporation shall pay the reasonable expenses of solicitation
of votes, proxies or consent of shareholders entitled to vote by or on behalf
of the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees. Shares of the Corporation
standing in the name of a trustee or other fiduciary and shares held by an
assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a
pledgee or nominee.
Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the Corporation are held jointly or as
tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or by proxy,
all of the shares standing in the names of such persons shall be deemed to
be represented for the purpose of determining a quorum and the Corporation
shall accept as the vote of all the shares the vote cast by a joint owner
or a majority of them; and
(2) if the persons are equally divided upon whether the shares held by
them shall be voted or upon the manner of voting the shares, the voting of
the shares shall be divided equally among the persons without prejudice to
the rights of the joint owners or the beneficial owners thereof among
themselves.
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(b) Exception. If there has been filed with the secretary of the corporation
a copy, certified by an attorney at law to be correct, of the relevant
portions of the agreement under which the shares are held or the instrument by
which the trust or estate was created or the order of court appointing them or
of an order of court directing the voting of the shares, the persons specified
as having such voting power in the document latest in date of operative effect
so filed, and only those persons, shall be entitled to vote the shares but
only in accordance therewith.
Section 3.11. Voting by Corporations and Other Business Organizations.
(a) Voting by Corporate Shareholders. Any corporation or other business
organization that is a shareholder of this corporation may vote by any of its
officers or agents, or by proxy appointed by any officer or agent, unless some
other person, (i) in the case of such corporation, by resolution of the board
of directors or a provision of its articles or bylaws, or (ii) in the case of
such business organization, by resolution of its governing body or a provision
of its charter or bylaws or their equivalent, a copy of which resolution or
provision certified to be correct by one of its officers, has been filed with
the secretary of this Corporation, is appointed its general or special proxy
in which case that person shall be entitled to vote the shares.
(b) Controlled Shares. Shares of this Corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board of
directors of this Corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The board of directors may fix a time prior to the
date of any meeting of shareholders as a record date for the determination of
the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall not be more than 60
days prior to the date of the meeting of shareholders. Only shareholders of
record on the date fixed shall be so entitled notwithstanding any transfer of
shares on the books of the Corporation after any record date fixed as provided
in this subsection. The board of directors may similarly fix a record date for
the determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the board fixes a new record date for the adjourned
meeting.
(b) Determination When a Record Date is Not Fixed. If a record date is not
fixed:
(1) The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on
the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day immediately preceding the day
on which the meeting is held.
(2) The record date for determining shareholders entitled to:
(i) express consent or dissent to corporate action in writing without a
meeting, when prior action by the board of directors is not necessary;
(ii) call a special meeting of the shareholders; or
(iii) propose an amendment of the articles of the Corporation;
shall be the close of business on the day on which the first written
consent or dissent, request for a special meeting or petition proposing an
amendment of the articles is filed with the secretary of the Corporation.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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Section 3.13. Voting Lists.
(a) General Rule. The officer or agent having charge of the transfer books
for shares of the Corporation shall make a complete list of the shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical
order, with the address of and the number of shares held by each. The list
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
(b) Effect of List. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at a meeting prior to a
demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to
who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
Section 3.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders of the
Corporation, the board of directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder entitled to vote shall, appoint
judges of election at the meeting. The number of judges shall be one or three.
A person who is a candidate for office to be filled at the meeting shall not
act as a judge.
(b) Vacancies. In case any person appointed as a judge fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
board of directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges
of election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the meeting, or of any
shareholder, the judges of election shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate
of any fact found by them. Any report or certificate made by them shall be
prima facie evidence of the facts stated therein.
Section 3.15. Consent of Shareholders in Lieu of Meeting.
(a) Unanimous Written Consent. Any action required or permitted to be taken
at a meeting of the shareholders or of a class of shareholders may be taken
without a meeting if, prior or subsequent to the action, a consent or consents
thereto by all of the shareholders who would be entitled to vote at a meeting
for such purpose shall be filed with the secretary of the Corporation.
(b) Partial Written Consent. Any action required or permitted to be taken at
a meeting of the shareholders or of a class of shareholders may be taken
without a meeting upon the written consent of shareholders who would have been
entitled to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all shareholders entitled to vote
thereon were present and voting. The consents shall be filed with the
secretary of the Corporation. The action shall not become effective until
after at least ten days' written notice of the action has been given to each
shareholder entitled to vote thereon who has not consented thereto.
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Section 3.16. Minors as Security Holders. The Corporation may treat a minor
who holds shares or obligations of the Corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the Corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.01. Powers; Personal Liability.
(a) General Rule. Unless otherwise provided by statute, all powers vested by
law in the Corporation shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the
direction of, the board of directors.
(b) Personal Liability of Directors.
(1) A director shall not be personally liable, as such, for monetary
damages for any action taken unless:
(i) the director has breached or failed to perform the duties of his
or her office under 15 Pa.C.S. Such. 17B; and
(ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(2) Paragraph (1) shall not apply to:
(i) the responsibility or liability of a director pursuant to any
criminal statute, or
(ii) the liability of a director for the payment of taxes pursuant to
Federal, State or local law.
Any repeal, amendment or modification of the bylaw set forth in this Section
4.01 (b) shall not adversely affect any right or protection existing at the
time of such repeal, amendment or modification to which a director or former
director may be entitled hereunder. The rights conferred by this bylaw shall
continue as to any person who has ceased to be a director of the Corporation
and shall inure to the benefit of the heirs, executors and administrators of
such person.
(c) Notation of Dissent. A director who is present at a meeting of the board
of directors, or of a committee of the board, at which action on any corporate
matter is taken on which the director is generally competent to act, shall be
presumed to have assented to the action taken unless his or her dissent is
entered in the minutes of the meeting or unless the director files a written
dissent to the action with the secretary of the meeting before the adjournment
thereof or transmits the dissent in writing to the secretary of the
Corporation immediately after the adjournment of the meeting. The right to
dissent shall not apply to a director who voted in favor of the action.
Nothing in this section shall bar a director from asserting that minutes of
the meeting incorrectly omitted his or her dissent if, promptly upon receipt
of a copy of such minutes, the director notifies the secretary, in writing, of
the asserted omission or inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the Corporation shall be a natural
person of full age who need not be a resident of Pennsylvania or a shareholder
of the Corporation.
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(b) Nomination of Directors. Nominations for the election of directors by
the shareholders entitled to vote therefor may be made by the board of
directors or by any shareholder entitled to vote for the election thereof;
provided, however, that in the case of any nomination by such shareholder,
advance written notice of such nomination shall be received by the secretary
of the Corporation by certified mail no later than (i) 90 days prior to the
anniversary of the previous year's annual meeting of shareholders, or (ii)
with respect to an election of directors to be held at a special meeting of
shareholders or at an annual meeting, the tenth day following the date on
which notice of such meeting is first given to the shareholder. Each such
notice of such nomination shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice, (ii)
the principal occupation of employment of each such nominee, and (iii) the
number and class of shares of stock of the Corporation which are beneficially
owned by each such nominee. In addition, the shareholder making such
nomination shall promptly provide any other information reasonably requested
by the secretary of the Corporation.
(c) Election of Directors. Except as otherwise provided in these bylaws,
directors of the Corporation shall be elected by the shareholders entitled to
vote. In elections for directors, voting need not be by ballot unless required
by vote of the shareholders before the voting for election of directors
begins. The candidates receiving the highest number of votes from each class
or group of classes, if any, entitled to elect directors separately up to the
number of directors to be elected by the class or group of classes shall be
elected. If at any meeting of shareholders, directors of more than one class
are to be elected, each class of directors shall be elected in a separate
election.
(d) Cumulative Voting. The shareholders of the Corporation shall not have
the right to cumulate their votes for election of directors of the
Corporation.
Section 4.03. Number and Term of Office.
(a) Number. The board of directors shall consist of such number of
directors, not less than five nor more than fifteen, as may be determined from
time to time by resolution of the board of directors.
(b) Term of Office. Each director shall hold office until the expiration of
the term of one year for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
(c) Resignation. Any director may resign at any time upon written notice to
the Corporation. The resignation shall be effective upon receipt thereof by
the Corporation or at such subsequent time as shall be specified in the notice
of resignation.
Section 4.04. Vacancies.
(a) General Rule. Unless otherwise provided in the articles of
incorporation, vacancies in the board of directors, including vacancies
resulting from an increase in the number of directors, may be filled by a
majority vote of the remaining members of the board though less than a quorum,
or by a sole remaining director, and each person so selected shall be a
director to serve for the balance of the unexpired term, and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal.
(b) Action by Resigned Directors. Unless otherwise provided in the articles
of incorporation, when one or more directors resign from the board effective
at a future date, the directors then in office, including those who have so
resigned, shall have power by the applicable vote to fill the vacancies, the
vote thereon to take effect when the resignations become effective.
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Section 4.05. Removal of Directors.
(a) Removal by the Shareholders. The entire board of directors, or any class
of the board, or any individual director may be removed from office without
assigning any cause by the vote of shareholders, or of the holders of a class
or series of shares, entitled to elect directors, or the class of directors.
In case the board or a class of the board or any one or more directors are so
removed, new directors may be elected at the same meeting.
(b) Removal by the Board. The board of directors may declare vacant the
office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 50 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a
meeting of the board of directors.
Section 4.06. Place of Meetings. Meetings of the board of directors may be
held at such place within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or as may be designated in
the notice of the meeting.
Section 4.07. Organization of Meetings. At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the president, the vice
presidents in their order of rank and seniority, or a person chosen by
majority vote of the directors present, shall act as chairman of the meeting.
The secretary or, in the absence of the secretary, an assistant secretary, or,
in the absence of the secretary and assistant secretaries, a person appointed
by the chairman of the meeting, shall act as secretary.
Section 4.08. Regular Meetings. Regular meetings of the board of directors
shall be held at such time and place as shall be designated from time to time
by resolution of the board of directors.
Section 4.09. Special Meetings. Special meetings of the board of directors
shall be held whenever called by the chairman or by two or more of the
directors.
Section 4.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of the Corporation
shall be necessary to constitute a quorum for the transaction of business, and
the acts of a majority of the directors present and voting at a meeting at
which a quorum is present shall be the acts of the board of directors.
(b) Action by Written Consent. Any action required or permitted to be taken
at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the secretary of the Corporation.
Section 4.11. Executive and Other Committees.
(a) Establishment and Powers. The board of directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees to consist of one or more directors of the Corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring approval of
shareholders under the Business Corporation Law of 1988.
(2) The creation or filling of vacancies in the board of directors.
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(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board that by its
terms is amendable or repealable only by the board of directors.
(5) Action on matters committed by a resolution of the board of directors
to another committee of the board.
(b) Alternate Committee Members. The board of directors may designate one or
more directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
(c) Term. Each committee of the board of directors shall serve at the
pleasure of the board.
(d) Committee Procedures. The term "board of directors" or "board," when
used in any provision of these bylaws relating to the organization or
procedures of or the manner of taking action by the board of directors, shall
be construed to include and refer to any executive or other committee of the
board.
Section 4.12. Compensation. The board of directors shall have the authority
to fix the compensation of directors for their services as directors and a
director may be a salaried officer of the corporation.
ARTICLE V
OFFICERS
Section 5.01. Officers Generally.
(a) Number. Qualifications and Designation. The officers of the Corporation
shall be a chairman of the board of directors, a vice chairman, a president, a
secretary, a treasurer, and such other officers as may be elected in
accordance with the provisions of Section 5.03. Except for the chairman of the
board who shall be a member of the board of directors, officers may but need
not be directors or shareholders of the Corporation. The chairman, vice
chairman, president and secretary shall be natural persons of full age. The
treasurer may be a corporation, but if a natural person shall be of full age.
Any number of offices may be held by the same person.
(b) Resignations. Any officer may resign at any time upon written notice to
the Corporation. The resignation shall be effective upon receipt thereof by
the Corporation or at such subsequent time as may be specified in the notice
of resignation.
(c) Bonding. The Corporation may secure the fidelity of any or all of its
officers by bond or otherwise.
Section 5.02. Election and Term of Office. The officers of the Corporation,
except those elected by delegated authority pursuant to Section 5.03, shall be
elected annually by the board of directors, and each such officer shall hold
office for a term of one year and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
Section 5.03. Subordinate Officers, Committees and Agents. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more vice presidents, one or more assistant
secretaries, and one or more assistant treasurers, each of whom shall hold
office for such period, have such authority, and perform such duties as are
provided in these bylaws or as the board of directors may from time to time
determine. The board
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of directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents, or
committees thereof and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer or agent of the
Corporation may be removed by the board of directors with or without cause.
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 5.06. Authority. All officers of the Corporation, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided by or pursuant
to resolutions or orders of the board of directors or, in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.
Section 5.07. The Chairman of the Board. The chairman of the board of
directors shall be the chief executive officer of the Corporation and shall
have general supervision over the business and operations of the Corporation,
subject, however, to the control of the board of directors. The chairman of
the board, or, in the absence of the chairman, the president, shall preside at
all meetings of the shareholders and of the board of directors.
Section 5.08. The Vice Chairman. The vice chairman shall perform such duties
as may from time to time be assigned to him by the board of directors, the
chairman of the board or the president.
Section 5.09. The President. The president shall be the chief operating
officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject, however, to the control
of the chairman of the board of directors. The president shall sign, execute
and acknowledge, in the name of the corporation, deeds, mortgages, bonds,
contracts or other instruments authorized by the board of directors, except in
cases where the signing and execution thereof shall be expressly delegated by
the board of directors, or by these bylaws, to some other officer or agent of
the Corporation; and, in general, shall perform all duties incident to the
office of president and such other duties as from time to time may be assigned
by the board of directors or the chairman of the board.
Section 5.10. The Vice Presidents. The vice presidents shall perform the
duties of the president in the absence of the president and such other duties
as may from time to time be assigned to them by the board of directors or the
president.
Section 5.11. The Secretary. The secretary or an assistant secretary shall
attend all meetings of the shareholders and of the board of directors and
shall record all the votes of the shareholders and of the directors and the
minutes of the meetings of the shareholders and of the board of directors and
of committees of the board in a book or books to be kept for that purpose;
shall see that notices are given and records and reports properly kept and
filed by the Corporation as required by law; shall be the custodian of the
seal of the Corporation and see that it is affixed to documents executed on
behalf of the Corporation under its seal; and, in general, shall perform all
duties incident to the office of the secretary, and such other duties as may
from time to time be assigned by the board of directors or the president.
Section 5.12. The Treasurer. The treasurer or an assistant treasurer shall
have or provide for the custody of the funds or other property of the
Corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
Corporation; shall deposit all funds in his or her custody as treasurer in
such banks or other places of deposit as the board of directors may from time
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to time designate; shall, whenever so required by the board of directors,
render an account showing all transactions as treasurer and the financial
condition of the corporation; and, in general, shall discharge such other
duties as may from time to time be assigned by the board of directors or the
president.
Section 5.13. Salaries. The salaries of the officers elected by the board of
directors shall be fixed from time to time by the board of directors or by
such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to
elect such officers or to retain or appoint such employees or other agents has
been delegated pursuant to Section 5.03. No officer shall be prevented from
receiving such salary or other compensation by reason of the fact that the
officer is also a director of the Corporation.
ARTICLE VI
SHARE CERTIFICATES. TRANSFER, ETC.
Section 6.01. Share Certificates. Certificates for shares of the Corporation
shall be in such form as approved by the board of directors, and shall state
that the Corporation is incorporated under the laws of the Commonwealth of
Pennsylvania, the name of the person to whom issued, and the number and class
of shares and the designation of the series (if any) that the certificate
represents. The share register or transfer books and blank share certificates
shall be kept by the secretary or by any transfer agent or registrar
designated by the board of directors for that purpose.
Section 6.02. Issuance. The share certificates of the Corporation shall be
numbered and registered in the share register or transfer books of the
Corporation as they are issued. They shall be signed by the president or a
vice president and by the secretary or an assistant secretary or the treasurer
or an assistant treasurer; but where a certificate is signed by a transfer
agent or a registrar, the signature of any corporate officer upon the
certificate may be a facsimile, engraved or printed. In case any officer who
has signed, or whose facsimile signature has been placed upon, any share
certificate shall have ceased to be such officer because of death, resignation
or otherwise, before the certificate is issued, it may be issued with the same
effect as if the officer had not ceased to be such at the date of its issue.
The provisions of this Section 6.02 shall be subject to any inconsistent or
contrary agreement at the time between the Corporation and any transfer agent
or registrar.
Section 6.03. Transfer. Transfers of shares shall be made on the share
register or transfer books of the Corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made
inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
Div. 8, or other provisions of law.
Section 6.04. Record Holder of Shares. The Corporation shall be entitled to
treat the person in whose name any share or shares of the Corporation stand on
the books of the Corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of any
shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may, in its discretion, cause a new certificate or certificates to
be issued to the holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of
the certificate, upon satisfactory proof of the loss or destruction and, if
the board of directors shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as the board may direct.
Section 6.06. Restriction on Transfer of Shares.
(a) Initial Underwritten Registration. In the event that the Corporation at
any time prepares and files a registration statement registering shares of
capital stock of the Corporation to be sold to, or otherwise distributed
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by, underwriters under the Securities Act of 1933, as the initial public
offering by the Corporation of such shares, a shareholder shall not sell,
transfer or otherwise dispose of the shares of capital stock of the
Corporation held, directly or indirectly, prior to such initial public
offering, in any public sale or distribution, including a sale pursuant to
Rule 144 (or any successor provision) under the Securities Act of 1933, during
the period of seven days prior to, and 180 days after, the day when the
registration statement has become effective, except as part of the sale to, or
distribution by, the underwriters.
(b) Waiver by Board of Directors. Notwithstanding anything contained in
these bylaws to the contrary, the Board of Directors of the Corporation may
waive any restrictions set forth in this Section 6.06 as it applies to any
shareholder or shareholders at any time or from time to time.
(c) Certificate Legend. All certificates for shares of the Corporation shall
have the following legend printed or stamped thereon:
"The shares represented by this certificate may not be sold, assigned,
transferred, pledged or otherwise disposed of, except in accordance with
the terms and conditions of the bylaws of the corporation."
(d) Status of Bylaws. Notwithstanding any other provision of these bylaws or
of the Business Corporation Law of 1988, the bylaw in this Section 6.06 shall
constitute a contract among the shareholders of the Corporation, and shall not
be amended without their unanimous consent.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER
AUTHORIZED REPRESENTATIVES
Section 7.01. Scope of Indemnification.
(a) General Rule. The Corporation shall indemnify an indemnified
representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party
or otherwise by reason of the fact that such person is or was serving in an
indemnified capacity, including, without limitation, liabilities resulting
from any actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, negligence, gross negligence or act giving rise to
strict or products liability, except:
(1) where the indemnification is expressly prohibited by applicable law;
(2) where the conduct of the indemnified representative has been finally
determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or recklessness within the
meaning of 15 Pa.C.S. (S) 1746(b) or any superseding provision of law
sufficient in the circumstances to bar indemnification against
liabilities arising from the conduct; or
(ii) to be based upon or attributable to the receipt by the
indemnified representative from the Corporation of a personal benefit
to which the indemnified representative is not legally entitled; or
(3) to the extent the indemnification has been finally determined in a
final adjudication pursuant to Section 7.06 to be otherwise unlawful.
(b) Partial Payment. If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the Corporation shall indemnify the
indemnified representative to the maximum extent for such portion of the
liabilities.
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(c) Presumption. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative
is not entitled to indemnification.
(d) Definitions. For the purposes of this Article VII:
(1) "indemnified capacity" means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the Corporation, or, at the request
of the Corporation, as a director, officer, employee, agent, fiduciary or
trustee of another corporation, limited liability company, partnership,
joint venture, trust, employee benefit plan or other entity or enterprise;
(2) "indemnified representative" means any and all directors and officers
of the Corporation and any other person designated as an indemnified
representative by the board of directors of the Corporation (which may, but
need not, include any person serving at the request of the corporation, as
a director, officer, employee, agent, fiduciary or trustee of another
corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or other entity of enterprise);
(3) "liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or cost or expense, of any nature (including,
without limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or completed action, suit,
appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of its security
holders or otherwise.
Section 7.02. Proceedings Initiated by Indemnified
Representatives. Notwithstanding any other provision of this Article VII, the
Corporation shall not indemnify under this Article an indemnified
representative for any liability incurred in a proceeding initiated (which
shall not be deemed to include counterclaims or affirmative defenses) or
participated in as an intervenor or amicus curiae by the person seeking
indemnification unless the initiation of or participation in the proceedings
is authorized, either before or after its commencement, by the affirmative
vote of a majority of the directors in office. This section shall not apply to
reimbursement of expenses incurred in successfully prosecuting or defending an
arbitration under Section 7.06 or otherwise successfully prosecuting or
defending the rights of an indemnified representative granted by or pursuant
to this Article.
Section 7.03. Advancing Expenses. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) incurred in good faith by an
indemnified representative in advance of the final disposition of a proceeding
described in Section 7.01 or the initiation of or participation in a
proceeding which is authorized pursuant to Section 7.02 upon receipt of an
undertaking by or on behalf of the indemnified representative to repay the
amount if it is ultimately determined pursuant to Section 7.06 that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article. The financial ability of an indemnified representative to repay an
advance shall not be a prerequisite to the making of the advance.
Section 7.04. Securing of Indemnification Obligations. To further effect,
satisfy or secure the indemnification obligations provided herein or
otherwise, the Corporation may maintain insurance, obtain a letter of credit,
act as selfinsurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the Corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.
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Section 7.05. Payment of Indemnification. An indemnified representative
shall be entitled to indemnification within 30 days after a written request
for indemnification has been delivered to the secretary of the Corporation.
Section 7.06. Arbitration.
(a) General Rule. Any dispute related to the right to indemnification,
contribution or advancement of expenses as provided under this Article, except
with respect to indemnification for liabilities arising under the Securities
Act of 1933 that the Corporation has undertaken to submit to a court for
adjudication, shall be decided only by arbitration in the metropolitan area in
which the principal executive offices of the Corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of
the American Arbitration Association, or any successor to the functions
thereof, before a panel of three arbitrators, one of whom shall be selected by
the Corporation, the second of whom shall be selected by the indemnified
representative and third of whom shall be selected by the other two
arbitrators. In the absence of the American Arbitration Association or such
successor, or if for any reason arbitration under the arbitration rules of the
American Arbitration Association or such successor cannot be initiated, or if
one of the parties fails or refuses to select an arbitrator or if the
arbitrators selected by the corporation and the indemnified representative
cannot agree on the selection of the third arbitrator within 30 days after
such time as the Corporation and the indemnified representative have each been
notified of the selection of the other's arbitrator, the necessary arbitrator
or arbitrators shall be selected by the presiding judge of the court of
general jurisdiction in such metropolitan area.
(b) Burden of Proof. The party or parties challenging the right of an
indemnified representative to the benefits of this Article VII shall have the
burden of proof.
(c) Expenses. The Corporation shall reimburse an indemnified representative
for the expenses (including attorneys' fees and disbursements) incurred in
successfully prosecuting or defending such arbitration.
(d) Effect. Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction, except that the
Corporation shall be entitled to interpose as a defense in any such judicial
enforcement proceeding any prior final judicial determination adverse to the
indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article VII. This arbitration
provision shall be specifically enforceable.
Section 7.07. Contribution. If the indemnification provided for in this
Article VII or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the Corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to effect the intent of this Article or
otherwise.
Section 7.08. Mandatory Indemnification of Indemnified Representatives. To
the extent that a representative of the Corporation has been successful on the
merits or otherwise in defense of any action or proceeding referred to in 15
Pa.C.S. (S)(S) 1741 or 1742 or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection therewith.
Section 7.09. Contract Rights; Amendment or Repeal. All rights under this
Article VII shall be deemed a contract between the Corporation and the
indemnified representative pursuant to which the Corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment
or modification hereof shall be prospective only and shall not affect any
rights or obligations then existing.
Section 7.10. Scope of Article. The rights granted by this Article VII shall
not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise both as to action in an
19
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indemnified capacity and as to action in any other capacity. The
indemnification, contribution and advancement of expenses provided by, or
granted pursuant to, this Article shall continue as to a person who has ceased
to be an indemnified representative in respect of matters arising prior to
such time, and shall inure to the benefit of the heirs and personal
representatives of such a person.
Section 7.11. Reliance on Provisions. Each person who shall act as an
indemnified representative of the Corporation shall be deemed to be doing so
in reliance upon the rights provided by this Article VII.
Section 7.12. Interpretation. The provisions of this Article VII are
intended to constitute bylaws authorized by 15 Pa.C.S. (S) 1746.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Corporate Seal. The Corporation shall have a corporate seal in
the form of a circle containing the name of the Corporation, the year of
incorporation and such other details as may be approved by the board of
directors.
Section 8.02. Checks. All checks, notes, bills of exchange or other orders
in writing shall be signed by such person or persons as the board of directors
or any person authorized by resolution of the board of directors may from time
to time designate.
Section 8.03. Contracts.
(a) General Rule. Except as otherwise provided in the Business Corporation
Law of 1988 in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to
enter into any contract or to execute or deliver any instrument on behalf of
the corporation, and such authority may be general or confined to specific
instances.
(b) Statutory Form of Execution of Instruments. Any note, mortgage, evidence
of indebtedness, contract or other document, or any assignment or endorsement
thereof, executed or entered into between the corporation and any other
person, when signed by one or more officers or agents having actual or
apparent authority to sign it, or by the president or vice president and
secretary or assistant secretary or treasurer or assistant treasurer of the
Corporation, shall be held to have been properly executed for and in behalf of
the Corporation, without prejudice to the rights of the Corporation against
any person who shall have executed the instrument in excess of his or her
actual authority.
Section 8.04. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the corporation and one
or more of its directors or officers or between the Corporation and another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise in which one or more of its directors or officers are
directors or officers or have a financial or other interest, shall not be void
or voidable solely for that reason, or solely because the director or officer
is present at or participates in the meeting of the board of directors that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for that purpose, if:
(1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors and the board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though
the disinterested directors are less than a quorum;
20
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(2) the material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the board of directors or
the shareholders.
(b) Quorum. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board that authorizes a contract or
transaction specified in subsection (a).
Section 8.05. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies
or other depositaries as the board of directors may approve or designate, and
all such funds shall be withdrawn only upon checks signed by such one or more
officers or employees as the board of directors shall from time to time
determine.
Section 8.06. Corporate Records.
(a) Required Records. The Corporation shall keep complete and accurate books
and records of account, minutes of the proceedings of the incorporators,
shareholders and directors and a share register giving the names and addresses
of all shareholders and the number and class of shares held by each. The share
register shall be kept at either the registered office of the Corporation in
the Commonwealth of Pennsylvania or at its principal place of business
wherever situated or at the office of its registrar or transfer agent. Any
books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written verified
demand stating the purpose thereof, have a right to examine, in person or by
agent or attorney, during the usual hours for business for any proper purpose,
the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to the interest of the person as a shareholder. In every instance
where an attorney or other agent is the person who seeks the right of
inspection, the demand shall be accompanied by a verified power of attorney or
other writing that authorizes the attorney or other agent to so act on behalf
of the shareholder. The demand shall be directed to the corporation at its
registered office in the Commonwealth of Pennsylvania or at its principal
place of business wherever situated.
Section 8.07. Financial Reports. Unless otherwise agreed between the
Corporation and a shareholder, the Corporation shall furnish to its
shareholders annual financial statements, including at least a balance sheet
as of the end of each fiscal year and a statement of income and expenses for
the fiscal year. The financial statement shall be prepared on the basis of
generally accepted accounting principles, if the Corporation prepares
financial statements for the fiscal year on that basis for any purpose, and
may be consolidated statements of the Corporation and one or more of its
subsidiaries. The financial statements shall be mailed by the Corporation to
each of its shareholders entitled thereto within 120 days after the close of
each fiscal year and, after the mailing and upon written request, shall be
mailed by the Corporation to any shareholder or beneficial owner entitled
thereto to whom a copy of the most recent annual financial statements has not
previously been mailed. Statements that are audited or reviewed by a public
accountant shall be accompanied by the report of the accountant; in other
cases, each copy shall be accompanied by a statement of the person in charge
of the financial records of the corporation:
(1) Stating his or her reasonable belief as to whether or not the
financial statements were prepared in accordance with generally accepted
accounting principles and, if not, describing the basis of presentation.
(2) Describing any material respects in which the financial statements
were not prepared on a basis consistent with those prepared for the
previous year.
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This Section 8.07 shall not apply to the Corporation if it shall be required
by the Securities Exchange Act of 1934 or any other law to file financial
statements at least once a year in a public office.
Section 8.08. Amendment of Bylaws. These bylaws may be amended or repealed,
or new bylaws may be adopted, either (i) subject to the provisions of the
articles of the Corporation, by vote of the shareholders entitled to vote at
any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders, and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by vote of a majority
of the board of directors of the Corporation in office at any regular or
special meeting of directors. Any change in these bylaws shall take effect
when adopted unless otherwise provided in the resolution effecting the change.
22
<PAGE>
EXHIBIT 4.04
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of August 1, 1989 by and between
Federated Investors, a Delaware business trust (the "Company"), and Westinghouse
Credit Corporation, a Delaware corporation (Westinghouse Credit Corporation and
its successors and assigns are referred to as "WCC").
1. Authorization and Sale of Securities. Company has authorized and
------------------------------------
shall issue and sell to WCC 1,200,000 shares of Class B Common Shares (the
"Class B Stock").
The certificates representing the Class B Stock shall be dated as of
the date hereof. The terms of the Class B Stock are as set forth on Exhibit 1
hereto. (Capitalized terms defined (expressly or by incorporation by reference
to other documents) in the Financing Agreement shall have the same meanings when
used herein unless otherwise defined herein or unless the context otherwise
requires.)
2. Sale and Purchase Price of Securities. Subject to the terms and
-------------------------------------
conditions hereof, Company agrees to sell to WCC, and WCC agrees to purchase
from Company, 1,200,000 shares of Class B Stock for an aggregate purchase price
of $3,000,000.
3. Delivery of Certificates. On the date hereof and subject to that
------------------------
certain Pledge Agreement of even date herewith between WCC and the Senior
Lenders, Company will deliver to WCC certificates which will be registered in
WCC's name and will represent 1,200,000 shares of Class B Stock, against
delivery by WCC to Company of $3,000,000 by wire transfer of federal funds in
payment of the total purchase price.
4. Conditions Precedent to Closing.
-------------------------------
WCC's obligation to purchase from Company and Company's
obligation to issue the Class B Stock to WCC is subject to satisfaction of each
of the following conditions:
4.1 Delivery of Financing Agreement and Term Notes. The
----------------------------------------------
transactions contemplated by the Financing Agreement shall have been
consummated.
4.2 Other Documents. WCC shall have received from Company such
---------------
other documents as WCC may reasonably request either to vest in WCC the rights
intended to be granted by this Agreement or to confirm compliance by Company
with this Agreement.
<PAGE>
5. Restriction on Transfer of the Class B Stock.
--------------------------------------------
5.1 Legend. The certificates representing the Class B Stock
------
issued to WCC shall be endorsed with the following legends:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, (the
"Securities Act") or applicable state securities laws (the "State
Laws") and may not be sold, transferred, assigned or otherwise
distributed for value unless there is an effective registration
statement under the Securities Act and the State Laws covering
such securities or the Company receives from the holder of these
securities an opinion of counsel experienced in federal
securities law matters, which opinion shall be reasonably
acceptable to the Company, stating that such sale, transfer,
assignment or distribution is exempt from the registration and
prospectus delivery requirements of the Securities Act and the
State Laws. The securities evidenced by this certificate are
subject to provisions governing exchange and transfer
restrictions contained in the Stock Purchase dated August 1,
1989, between the Company and Westinghouse Credit Corporation."
"No transfer of this instrument or such securities shall be
made within twelve (12) months after the date of purchase except
as permitted by the Pennsylvania Securities Act of 1972."
5.2 Pennsylvania Securities Act Notice. IN ACCORDANCE WITH
----------------------------------
SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED AND
PRESENTLY IN EFFECT, WCC MAY ELECT, WITHIN (2) BUSINESS DAYS AFTER THE DATE OF
RECEIPT BY THE COMPANY OF THIS AGREEMENT EXECUTED BY AND BINDING ON WCC, TO
WITHDRAW FROM THIS AGREEMENT AND RECEIVE A FULL REFUND OF ANY PURCHASE PRICE
PAID HEREUNDER. ANY WITHDRAWAL HEREUNDER SHALL BE WITHOUT ANY FURTHER LIABILITY
TO THE COMPANY OR ANY OTHER PERSON. TO ACCOMPLISH SUCH WITHDRAWAL HEREUNDER, WCC
NEED ONLY SEND TO THE COMPANY A LETTER OR TELEGRAM TO THE COMPANY INDICATING ITS
INTENTION TO WITHDRAW; PROVIDED; HOWEVER, THAT SUCH LETTER OR TELEGRAM SHALL BE
SENT OR POSTMARKED PRIOR TO THE END OF SUCH SECOND BUSINESS DAY. IT IS PRUDENT
TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT
IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED. IN THE CASE OF
AN ORAL REQUEST TO WITHDRAW, WCC SHALL ASK FOR WRITTEN CONFIRMATION THAT SUCH
REQUEST HAS BEEN RECEIVED.
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<PAGE>
5.3 Removal of Legend. The first sentence of the legend endorsed
-----------------
on the certificates representing the Class B Stock pursuant to Section 5.1
hereof shall be removed, and Company shall issue a certificate or certificates
without such legend to WCC, if the Class B Stock is being disposed of pursuant
to a registration under the Securities Act and pertinent State Laws or if such
holder provides Company with an opinion of counsel for such holder (concurred in
by counsel for Company) to the effect that a sale, transfer, assignment or
distribution of such Class B Stock may be made without registration.
5.4 Register of Securities. The recording of ownership and
----------------------
transfers of the Class B Stock shall be performed in conformity with the
provisions of the Company's Restated Declaration of Trust dated as of July 28,
1989 (the "Declaration of Trust").
5.5 Stop Transfer Order. A stop transfer order shall be placed
-------------------
on Company's stock records or with Company's transfer agent preventing transfer
of any of the Class B Stock or shares issued in replacement thereof pending
compliance with the conditions set forth in any such legend.
6. Representations and Warranties by Company. Company represents and
-----------------------------------------
warrants to WCC that:
6.1 Incorporation by Reference. The representations and
--------------------------
warranties of Company set forth in the Financing Agreement are incorporated by
reference as if fully set forth in this Agreement and shall survive the
execution and delivery of this Agreement in the same manner as the other
representations and warranties of Company contained in this Agreement
notwithstanding payment in full of the Term Loans.
6.2 Class B Stock. The Class B Stock, when issued and purchased
-------------
pursuant to the terms of this Agreement, will be duly and validly authorized,
issued and outstanding, fully paid, nonassessable and free and clear of all
pledges, liens, encumbrances and restrictions, except as set forth in Section 5
hereof and except for the Pledge Agreement, the other Senior Loan Documents and
the Shareholder Rights Agreement.
6.3 Securities Laws. Based in part upon WCC's representations
---------------
and warranties contained in Section 7 of this Agreement, no consent,
authorization, approval, permit or order of or declaration to or filing with any
governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Class B Stock. Except for offers
made in compliance with applicable securities laws, Company has not, directly or
through an agent, offered the Class B Stock or any similar securities for sale
to, or solicited any offers to acquire such securities from, Persons other than
WCC. Under the circumstances contemplated hereby and based in
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<PAGE>
part on WCC's representations and warranties contained in Section 7 of this
Agreement, the offer, issuance, sale and delivery of the Class B Stock, under
current laws and regulations, will not require compliance with the prospectus
delivery or registration requirements of the Securities Act.
6.4 Beneficial Interests. The authorized shares of beneficial
--------------------
interest in Company consist of 1,000 Series A Cumulative Convertible Preferred
Shares, all of which are issued and outstanding, 125,000 Series B Cumulative
Preferred Shares and 75,000 Series C Preferred Shares, none of which are issued
and outstanding, 99,000 Class A Common Shares of which 1,000 shares are issued
and outstanding and 49,700,000 Class B Common Shares of which 13,999,000 shares
are issued and outstanding. All of the issued and outstanding shares of Company
are duly authorized, validly issued and outstanding, and fully paid and
nonassessable. As of the date hereof, there are no options, agreements, warrants
or similar rights to purchase any shares of beneficial interest of Company
except as provided on Schedule 6 to the Financing Agreement. When issued on the
Closing Date, the Class B Stock will constitute 6.2% of the issued and
outstanding Class B Stock of Company on a fully diluted basis determined as set
forth in Paragraph 9 of this Agreement. Neither the offer nor the issuance or
sale of the Class B Stock to WCC hereunder constitutes an event, under the
provisions of any securities issued or issuable by Company or by agreements with
respect to the issuance of securities by Company, which will either increase the
number of shares issuable pursuant to such provisions or decrease the
consideration per share to be received by the Company pursuant to such
provisions.
6.5 Corporate Acts and Proceedings. This Agreement has been duly
------------------------------
authorized by all necessary trust action and has been duly executed and
delivered by authorized officers of Company, and is the valid and binding
agreement of Company, enforceable in accordance with its terms. All trust action
necessary to the authorization, creation, issuance and delivery of the Class B
Stock has been taken on the part of Company.
6.6 Disclosure. No representation or warranty in this Agreement
----------
or in any writing furnished or to be furnished pursuant hereto or in connection
herewith contains or will contain any untrue statement of a material fact
required to make the statements herein or therein contained not misleading or
omits or will omit to state any material fact required to be stated herein or
therein or necessary to make the statements herein or therein not misleading.
7. Representations and Warranties of WCC. WCC represents and
-------------------------------------
warrants that:
7.1 Intent. The Class B Stock being acquired by WCC hereunder is
------
being purchased for WCC's own account and for investment purposes, and not with
the view to, or for resale in
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<PAGE>
connection with, any distribution or public offering thereof within the meaning
of the Securities Act.
7.2 No Registration of Class B Stock. WCC understands that (a)
--------------------------------
the shares of Class B Stock have not been registered under the Securities Act or
under the State Laws by reason of their issuance or contemplated issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Sections 4(2) and 4(6) thereof and pursuant to
registration exemptions under the State Laws; (b) the shares of Class B Stock
must be held in-definitely by WCC unless they are registered.under the
Securities Act and under State Laws or are exempt from registration; and (c) the
reliance of Company and others upon the aforesaid exemptions is predicated in
part upon this representation and warranty.
7.3 Restriction on Sales. WCC understands that no securities of
--------------------
Company are presently registered pursuant to Section 12 of the Securities
Exchange Act of 1934 or under the Securities Act, that the Company is not
currently required to comply with the reporting requirements of Section 13 of
the Securities Exchange Act of 1934, and that an exemption from registration
under the Securities Act is not presently available with respect to the Class B
Stock pursuant to Rule 144 promulgated under the Securities Act by the
Securities and Exchange Commission (the "Commission"), and that in any event WCC
may not sell the Class B Stock pursuant to Rule 144 prior to the expiration of a
two-year period after WCC has acquired the Class B Stock, and that any sales
pursuant to Rule 144 are limited in amount and can only be made in full
compliance with the provisions of Rule 144, which may include specific
requirements that Company is then providing information to the public with
respect to its business and financial affairs as provided by Rule 144 and may
restrict the number of shares of Class B Stock WCC may transfer.
7.4 Residence. WCC's principal office is located in the
---------
Commonwealth of Pennsylvania.
7.5 Institutional, Accredited Investor. WCC is a corporation (a)
----------------------------------
which has a tangible net worth on a consolidated basis, as reflected in its most
recent audited financial statements, of not less than $10,000,000 and (b) which
has had net earnings before taxes, not including extraordinary items, as
reflected on its audited financial statements, of not less than $1,000,000
during its most recent fiscal year or averaging $1,500,000 during its most
recent three fiscal years. The aggregate purchase price of the Class B Stock
does not exceed either 5% of WCC's tangible net worth or 20% of its total net
worth. As used in this paragraph, (a) "tangible net worth" shall include net
worth less the amount of all items of goodwill, preoperating, deferred or
development expenses, patents, trademarks, licenses or other similar accounts;
and (b) "most recent" audited financial statements shall mean audited financial
statements dated not
-5-
<PAGE>
more than 16 months prior to the date hereof. WCC is an "accredited investor"
under applicable federal securities laws and an "Institutional Investor" under
applicable Pennsylvania securities laws.
7.6 Availability of Information. Company has made available to
---------------------------
WCC the opportunity to ask questions of, and receive answers from, its officers
and directors, and any other Person acting on its behalf, concerning the terms
and conditions of this Agreement and the transactions contemplated herein and to
obtain any other information requested by WCC to the extent Company possesses
such information or can acquire it without unreasonable effort or expense. WCC
has been afforded the opportunity to inspect, and to have its auditors or other
agents inspect, the books and records of Company.
7.7 Acts and Proceedings. This Agreement has been duly
--------------------
authorized by all necessary action on WCC's part pursuant to the laws of all
pertinent jurisdictions, has been duly executed and delivered by WCC, and is a
valid and binding Agreement of WCC enforceable in accordance with its terms.
8. Replacement of Certificates Representing Class B Stock. The
------------------------------------------------------
replacement of certificates representing Class B Stock which are lost, stolen,
destroyed or mutilated shall be governed by the provisions of the Company's By-
laws.
9. Dilution. In determining the number of shares of Class B Stock of
--------
1,200,000 which WCC is entitled to purchase under this Agreement, up to 400,000
shares of Class B Stock to be issued to the Jones Financial Companies and up to
1,931,035 shares of Class B Stock issuable under the Profit-Sharing Trust, stock
options, an ESOP or other employee stock arrangements (as set forth in Section
7(Q) of the Financing Agreement) will not be counted.
10. Non-Discrimination.
------------------
10.1 Public Offering. In the event of a proposed public offering
---------------
of any shares of beneficial interest of Company pursuant to a registration
statement filed with the Securities and Exchange Commission, WCC shall be
entitled to participate in any such public offering pro rata with all other
holders (except for The Standard Fire Insurance Company ("Standard Fire")) of
Class A Common Shares of Company ("Class A Stock") and Class B Stock to the
extent that any such holders are entitled to participate in any such public
offering. Nothing in this Agreement shall be interpreted or construed to require
Standard Fire to reduce the number of shares that it proposes to register in any
such offering. WCC shall share in all expenses of any
-6-
<PAGE>
such registration to the same extent as the other holders of Class A Stock and
Class B Stock who are participating in the offering.
10.2 Issuances to Third Parties. In the event that Company
--------------------------
offers to issue any shares of Class A Stock or Class B Stock to any member of
the Management Circle after the date hereof, then WCC shall be entitled to
purchase, at the same price as such member of the Management Circle is
purchasing such shares, WCC's pro rata share of Class A Stock or Class B Stock;
provided, however, that WCC shall not be entitled to purchase its pro rata share
of up to 1,931,035 shares of Class B Stock issuable under the Profit-Sharing
Trust, stock options, an ESOP or other employee stock arrangements (as set forth
in Section 7(Q) of the Financing Agreement). WCC's percentage ownership of
Company shall be diluted on the same basis as the percentage ownership of all
other holders of Class A Stock and Class B Stock in the event the Company issues
any shares of Class A Stock or Class B Stock to any Unrelated Third Party or in
the event of a public offering of Class B Stock by Company. For purposes of this
Section 10.2, the terms "Management Circle" and "Unrelated Third Party" shall
have the meanings ascribed thereto in the Shareholder Rights Agreement.
11. Termination of Transfer Restrictions. The restrictions on
------------------------------------
transferability hereunder shall terminate with respect to the shares of Class B
Stock pledged by WCC under the Pledge Agreement upon (a) the enforcement by the
Agent of any rights under the pledge provided for in the Pledge Agreement, or
(b) at the request of the Agent, at any time when an Event of Default (as
defined in the Senior Credit Agreement) has occurred and is continuing in
connection with a bona fide work-out of the debts of the Company.
12. Pledge Agreement. The shares of Class B Stock issued to WCC under
----------------
this Agreement are being pledged to the Senior Lender pursuant to the Pledge
Agreement. WCC agrees to execute and deliver the Pledge Agreement, the
certificates representing the 1,200,000 shares of Class B Stock issued to WCC,
stock power and other instruments required or contemplated by the terms of the
Pledge Agreement or other Senior Loan Documents.
13. Complete Agreement, Changes, Waivers, and Other Alternatives.
------------------------------------------------------------
This Agreement and the Financing Agreement contain the entire agreement between
Company and WCC with respect to the Class B Stock, and all prior understandings,
agreements and statements relating thereto are merged herein. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, unless a statement in writing is signed by the party against
which enforcement of the change, waiver, discharge or termination is sought.
14. Notices. All notices, requests, consents and other required or
-------
permitted hereunder shall be in
-7-
<PAGE>
writing and shall be delivered in person, mailed first-class postage prepaid,
registered or certified mail, or sent by telegram, telecopy, express courier
service or hand delivery, to the address set forth below or to such other
address as may be designated by a notice in writing to the other party:
(a) if to WCC:
Westinghouse Credit Corporation
One Oxford Centre
Eighth Floor
301 Grant Street
Pittsburgh, PA 15219
Attention: Carmen J. Gigliotti
Telecopy: (412) 393-3158
(b) if to Company:
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attention: John W. McGonigle, Esq.
Telecopy: (412) 288-7578
Each such notice, request, or other communication shall for all purposes of this
Agreement be deemed effective or given when delivered personally, when sent and
receipt orally confirmed if made by telegram or telecopy or, in the case of
mailing, on the earlier to occur of actual receipt or the third day after
mailing in the manner provided in this paragraph.
15. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained or incorporated by reference herein shall survive the
execution and delivery of this Agreement, any investigation at any time made by
WCC or on WCC's behalf, and the sale and purchase of the Class B Stock and
payment therefor.
16. Parties in Interest. The terms and provisions of this Agreement
-------------------
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Class B Stock.
17. Headings. The headings of the sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
18. Choice of Law. The laws of the Commonwealth of Pennsylvania
-------------
shall govern the validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties except to the extent
that principles of corporate and business trust law are governed exclusively by
the
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<PAGE>
substantive laws of the state of organization of the entity in question.
19. Counterparts. This Agreement may be executed concurrently in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20. Limitation of Liability. WCC is expressly put on notice of the
-----------------------
limitation of liability as set forth in the Declaration of Trust of Company and
the declaration of trusts of certain of its Subsidiaries and agrees that the
obligations assumed by Company and its Subsidiaries pursuant to this Agreement
and the other Operative Documents be limited in any case to Company and its
Subsidiaries and their respective assets. WCC shall not seek satisfaction of
any obligation of Company or its Subsidiaries under this Agreement from any of
the shareholders of Company, the trustees, officers or employees of those
entities, or any of them.
21. No Transfers to Competitors. WCC may not sell, assign or
---------------------------
otherwise transfer any of the Class B Stock to any Person whose principal
business is in direct competition with Company's principal business or to any
Person that owns 50% of the equity of such Person.
The parties have executed this Agreement as of the date first above
written.
FEDERATED INVESTORS
By [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Vice President
WESTINGHOUSE CREDIT CORPORATION
By________________________________
Title: Vice President
-9-
<PAGE>
EXHIBIT 1
SECTION 4.4 COMMON SHARES.
-------------
4.4.1 RANK.
----
The Common Shares shall (a) rank junior to (i) the Series B Preferred
Shares with respect to the payment of dividends, redemption and liquidation
amounts, and (ii) the Series A Preferred Shares, with respect to the payment
(whether currently, upon liquidation as set forth in clauses (i) and (ii) of
section 4.2.3(a), or otherwise) of dividends, redemption and liquidation
amounts, and (b) be on a parity with the Series A Preferred Shares with respect
to Series A Secondary Distributions to the holders of Series A Preferred Shares
made in accordance with section 4.2.3(a) (iii). Except as otherwise expressly
provided in this Article IV, all Common Shares shall be identical and shall
entitle the holders thereof to the same rights and privileges.
4.4.2 DIVIDENDS; REPURCHASES.
----------------------
(a) Dividends. Subject to the provisions of sections 4.2 and 4.3,
from and after the date of issuance, the holders of outstanding Common Shares
shall be entitled to receive dividends on the Common Shares, to the exclusion of
the holders of Preferred Shares. All holders of Common Shares shall share
ratably, in accordance with the number of Shares held by each such holder, in
all dividends or distributions payable in cash, obligations of or beneficial
interests in the Trust or other property. All dividends or distributions
declared on Common Shares which are payable in Common Shares shall be declared
at the same rate on the Class A Common Shares and the Class B Common Shares but
shall be payable only in Class A Common Shares to the holders of Class A Common
Shares and in
-10-
<PAGE>
Class B Common Shares to the holders of Class B Common Shares.
(b) Repurchases. The Trust shall not make or agree to make a
-----------
Repurchase of any Common Shares or Options except in accordance with section 3.4
of the Shareholder Agreement.
4.4.3 SHARE SPLITS.
------------
The Trust shall not in any manner subdivide or combine the outstanding
Shares of one class of Common Shares unless the outstanding Shares of the other
classes of Common Shares shall be proportionately subdivided or combined.
4.4.4 LIQUIDATION.
-----------
In the event of any Liquidation of the Trust, after payment (a) of all
Series A Primary Distributions shall have been made to the holders of
outstanding Series A Preferred Shares, and (b) of all Series B Liquidation
Payments shall have been made to the holders of outstanding Series B Preferred
Shares, the holders of Class A Common Shares and Class B Common Shares shall be
entitled to share ratably with the holders of Series A Preferred Shares, in
accordance with the number of Shares held by each such holder (or, in the case
of the holders of Series A Preferred Shares, in accordance with the number of
Class B Common Shares that would be issued to such holders were the outstanding
Series A Preferred Shares converted into Class B Common Shares on the date fixed
for such Liquidation at the Conversion Rate that would apply were such date a
Conversion Notice Date), in the remaining assets of the Trust available for
distribution among the holders of the Common Shares.
4.4.5 VOTING RIGHTS
-------------
Except as otherwise provided in this Article IV or by law, the entire
voting power of the Trust shall be vested in the holders of Class A Common
Shares and each holder of Class A Common Shares shall be entitled to one vote
for each Class A Common Share held by such holder, provided that without the
--------
consent (given in writing or by vote at any regular or special meeting of
Shareholders) of the holders (or, in the case of clause (b), deemed holders) of
a majority of the aggregate of (a) the Class B
-11-
<PAGE>
Common Shares that are then outstanding, and (k) the Class B Common Shares that
would be issued to holders of the Series A Preferred Shares were the outstanding
Series A Preferred Shares converted into Class B Common Shares on the date such
consent is to be obtained at the Conversion Rate that would apply were such date
a Conversion Notice Date, the Trust shall not:
(i) merge, consolidate with or otherwise acquire any corporation or
other business entity, provided that in a transaction (A) not involving the
--------
transfer of any Shares, (B) in which the Trust is the surviving entity, and
(C) pursuant to which this Declaration of Trust has not been amended,
altered, repealed or superseded, the Trust may, without such consent,
merge, consolidate with or otherwise acquire: (x) a Wholly-Owned Subsidiary
of the Trust; or (Y) any corporation or business entity that was not, prior
to giving effect to such merger, consolidation or other acquisition or any
transaction relating thereto, a Wholly-Owned Subsidiary of the Trust, in
any transaction or series of related transactions not exceeding in value
Ten Million Dollars ($10,000,000) in the aggregate (taking into account all
liabilities assumed by the Trust or its Subsidiaries in any such
transaction or transactions);
(ii) sell, lease, exchange or otherwise dispose of all or
substantially all of the assets of the Trust or any Subsidiary thereof to
other than a Wholly-Owned Subsidiary of the Trust in any transaction or
series of related transactions exceeding value Ten Million Dollars
($10,000,000) in the aggregate (taking into account all liabilities assumed
by the Trust or its Subsidiaries in any such transaction or transactions);
(iii) (A) effect any amendment to this Declaration of Trust or the
By-laws of the Trust that adversely affects the rights, powers or
preferences of the Class B Common Shares or authorize any shares of
beneficial interest in the Trust other than the Preferred Shares and the
Common Shares, provided that the Trust may issue the Series C Preferred
--------
Shares without such consent, or (B) reclassify or recapitalize any Shares;
or
-12-
<PAGE>
(iv) liquidate, dissolve or otherwise wind up the affairs of the Trust
or file, or consent by answer or otherwise to the filing against the Trust
of, a petition for relief of reorganization or arrangement or any other
petition in bankruptcy, insolvency or similar law of any jurisdiction.
-13-
<PAGE>
EXHIBIT 4.05
EXHIBIT 1.2(d)
INTERCOMPANY SUBORDINATION AGREEMENT
THIS INTERCOMPANY SUBORDINATION AGREEMENT is dated as of June 15, 1996,
and is made by and among the entities listed on Schedule I attached hereto (each
being individually referred to herein as a "Company" and collectively as the
"Companies").
WITNESSETH THAT:
WHEREAS, pursuant to the Senior Secured Credit Agreement, dated as of
January 31, 1996, (as the same may hereafter be amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement") among Federated
Investors (the "Borrower"), the banks referred to in Section 1.1 therein (the
"Banks"), and PNC Bank, National Association, as agent (the "Agent") for the
Banks, the Companies have entered into the Intercompany Subordination
Agreement, dated as of January 31, 1996, for the benefit of the Agent and the
Banks; and
WHEREAS, pursuant to the Note Purchase Agreements of even date herewith (as
the same may hereafter be amended, restated, supplemented or otherwise modified
from time to time, the "Note Purchase Agreements") between the Borrower and the
several purchasers listed in Schedule A thereto (the "Purchasers"), the Borrower
proposes to issue $98,000,000 aggregate principal amount of its 7.96% Senior
Secured Notes due 2006 (the "Notes") and the Purchasers have agreed to purchase
such Notes; and
WHEREAS, the Companies are indebted to each other and/or it is contemplated
that the Companies may become indebted to each other (the Indebtedness of each
of the Companies to any other Company, now existing or hereafter incurred
(whether created directly or acquired by assignment or otherwise), and interest
and premiums, if any, thereon and other amounts payable in respect thereof are
hereinafter collectively referred to as the "Intercompany Indebtedness"); and
WHEREAS, the obligations of the Banks to make Loans and the Purchasers to
purchase the Notes are subject to the condition, among others, that the
Companies subordinate the Intercompany Indebtedness to the Indebtedness and all
other obligations of the Borrower or any other Company to the Agent or the Banks
pursuant to the Senior Loan Documents and to the holders from time to time of
the Notes (the "Noteholders") pursuant to the Note Purchase Agreements, the
Notes and the other Security Documents referred to in the Note Purchase
Agreements (collectively, the "Senior Debt") in the manner set forth herein; and
WHEREAS, pursuant to the Intercreditor and Collateral Agency Agreement,
dated as of June 15, 1996 (the "Intercreditor Agreement"), PNC Bank, National
Association, is acting as collateral agent (the "Collateral Agent") on behalf of
the Agent, the Banks and the Noteholders with respect to certain matters
relating to the Senior Loan Documents and the Note Purchase Agreements; and
WHEREAS, each capitalized term used herein shall, unless otherwise defined
herein, have the meaning specified in the Credit Agreement or the Note Purchase
Agreements.
<PAGE>
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
1. Intercompany Indebtedness Subordinated to Senior Debt. The recitals
-----------------------------------------------------
set forth above are hereby incorporated by reference. All Intercompany
Indebtedness shall be subordinate and subject in right of payment to the prior
indefeasible payment in full of all Senior Debt pursuant to the provisions
contained herein.
2. Payment Over of Proceeds Upon Dissolution, Etc., Upon any
-----------------------------------------------
distribution of assets of any Company in the event of (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to any
such Company or to its creditors, as such, or to its assets, or (b) any
liquidation, dissolution or other winding up of any such Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any marshalling of assets
and liabilities of any such Company (a Company distributing assets as set forth
herein being referred to in such capacity as a "Distributing Company"), then and
in any such event the Collateral Agent shall be entitled to receive, for the
benefit of the Agent, the Banks and the Noteholders as their respective
interests may appear, indefeasible payment in full of all amounts due or to
become due (whether or not an Event of Default has occurred under the terms of
the Senior Loan Documents or the Note Purchase Agreements or the Senior Debt has
been declared due and payable prior to the date on which it would otherwise have
become due and payable) on or in respect of any and all Senior Debt before the
holder of any Intercompany Indebtedness owed by the Distributing Company is
entitled to receive any payment on account of the principal of or interest on
such Intercompany Indebtedness, and to that end, the Collateral Agent shall be
entitled to receive, for application to the payment of the Senior Debt, any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in respect of the Intercompany
Indebtedness owed by the Distributing Company in any such case, proceeding,
dissolution, liquidation or other winding up event.
If, notwithstanding the foregoing provisions of this Section, a Company
which is owed Intercompany Indebtedness by a Distributing Company shall have
received any payment or distribution of assets from the Distributing Company of
any kind or character, whether in cash, property or securities, then and in such
event such payment or distribution shall be held in trust for the benefit of the
Agent, the Banks and the Noteholders as their respective interests may appear,
shall be segregated from other funds and property held by such Company, and
shall be forthwith paid over to the Collateral Agent in the same form as so
received (with any necessary endorsement) to be applied (in the case of cash) to
or held as collateral (in the case of noncash property or securities) for the
payment or prepayment of the Senior Debt in accordance with the terms of the
Credit Agreement and the Note Purchase Agreements.
The provisions of this Section shall not apply with respect to transactions
permitted under Section 8.2(j)(i) or (ii) of the Credit Agreement or Section
10.6(a) of the Note Purchase Agreements.
2
<PAGE>
3. No Commencement of any Proceeding. Each Company agrees that, so long
---------------------------------
as the Senior Debt shall remain unpaid, it will not commence, or join with any
creditor other than the Collateral Agent on behalf of the Banks, the Agent and
the Noteholders in commencing, any proceeding referred to in the first paragraph
of Section 2 against any other Company which owes it any Intercompany
Indebtedness.
4. Prior Payment of Senior Debt Upon Acceleration of Intercompany
--------------------------------------------------------------
Indebtedness. If any portion of the Intercompany Indebtedness owed by any
- ------------
Company becomes or is declared due and payable before its stated maturity, then
and in such event the Agent, the Banks and the Noteholders shall be entitled to
receive indefeasible payment in full of all amounts due and to become due on or
in respect of the Senior Debt (whether or not an Event of Default has occurred
under the terms of the Senior Loan Documents or the Note Purchase Agreements or
the Senior Debt has been declared due and payable prior to the date on which it
would otherwise have become due and payable) before the holder of any such
Intercompany Indebtedness is entitled to receive any payment thereon.
If, notwithstanding the foregoing, any Company shall make any payment of
Intercompany Indebtedness prohibited by the foregoing provisions of this
Section, such payment shall be paid over and delivered forthwith to the
Collateral Agent, for the benefit of the Agent, the Banks and the Noteholders as
their respective interests may appear.
The provisions of this Section shall not apply to any payment with respect
to which Section 2 hereof would be applicable.
5. No Payment When Senior Debt in Default; Optional Redemption. If any
-----------------------------------------------------------
Event of Default or Default or Potential Default shall have occurred and be
continuing or such an Event of Default or Default or Potential Default would
result from or exist after giving effect to a payment with respect to any
portion of the Intercompany Indebtedness, unless the Required Creditors (as such
term is defined in the Intercreditor Agreement) shall have consented to or
waived the same, so long as any of the Senior Debt shall remain outstanding, no
payment shall be made by the Company owing such Intercompany Indebtedness on
account of principal or interest on any portion of the Intercompany
Indebtedness. Notwithstanding the foregoing, each Company agrees that if an
Event of Default or Default or Potential Default, having occurred, thereafter
shall be cured and shall cease to continue, the subordination of the
Intercompany Indebtedness effected by the occurrence of such an Event of Default
or Default or Potential Default shall thereupon cease and terminate and payments
thereafter becoming due in the ordinary course may be made and received,
subject, however, to the provisions of the first sentence of this paragraph and
to the further proviso that if, within one hundred twenty (120) days after the
occurrence of the first Event of Default or Default or Potential Default to
occur after the execution of this Agreement, such Event of Default or Default or
Potential Default shall recur or there shall occur any other Event of Default or
Default or Potential Default, the subordination described in this Section 5
shall immediately and without any requirement of action or notice of whatever
kind by the Agent, the Banks or the Noteholders be reinstituted and remain in
full force and effect until all of the Senior Debt shall be satisfied in full
and the Revolving Credit Commitments, Term Loan
3
<PAGE>
Commitments and the Swing Loan Commitment of the Banks under the Credit
Agreement shall have expired, regardless of whether such Event of Default or
Default or Potential Default shall thereafter be cured.
If, notwithstanding the foregoing, any Company shall make any payment of
the Intercompany Indebtedness to another Company prohibited by the foregoing
provisions of this Section, such payment shall be paid over and delivered
forthwith to the Collateral Agent, for the benefit of the Agent, the Banks and
the Noteholders as their respective interests may appear.
The provisions of this Section shall not apply to any payment with respect
to which Section 2 hereof would be applicable.
6. Payment Permitted if No Default. Nothing contained in this Agreement
-------------------------------
shall prevent any of the Companies, at any time except during the pendency of
any of the conditions described in Sections 2, 4 and 5, other than as provided
in such Sections, from making payments at any time of principal of or interest
on any portion of the Intercompany Indebtedness, or the retention thereof by any
of the Companies of any money deposited with them for the payment of or on
account of the principal of or interest on the Intercompany Indebtedness.
7. Rights of Subrogation. Each Company agrees that no payment or
---------------------
distribution to the Agent, the Banks or the Noteholders pursuant to the
provisions of this Agreement shall entitle it to exercise any rights of
subrogation in respect thereof until the Senior Debt shall have been
indefeasibly paid in full and the Revolving Credit Commitments, Term Loan
Commitments and the Swing Loan Commitment shall have terminated.
8. Instruments Evidencing Intercompany Indebtedness. Each Company shall
------------------------------------------------
cause each instrument which now or hereafter evidences all or a portion of the
Intercompany Indebtedness to be conspicuously marked as follows:
"This instrument is subject to the terms of an Intercompany
Subordination Agreement dated as of June 15, 1996 in favor of PNC
Bank, National Association, as collateral agent, which Intercompany
Subordination Agreement is incorporated herein by reference.
Notwithstanding any contrary statement contained in the within
instrument, no payment on account of the principal thereof or interest
thereon shall become due or payable except in accordance with the
express terms of said Intercompany Subordination Agreement."
Each Company will further mark its books of account in such a manner as
shall be effective to give proper notice to the effect of this Agreement.
9. Agreement Solely to Define Relative Rights. The purpose of this
------------------------------------------
Agreement is solely to define the relative rights of the Companies, on the one
hand, and the Agent, the Banks and the Noteholders, on the other hand. Nothing
contained in this Agreement is intended to or shall impair, as between any of
the Companies and their creditors other than the Collateral Agent on behalf of
the Agent, the Banks and the Noteholders, the obligation of the Companies to
each
4
<PAGE>
other to pay the principal of and interest on the Intercompany Indebtedness as
and when the same shall become due and payable in accordance with its terms, or
is intended to or shall affect the relative rights among the Companies and their
creditors other than the Agent and the Banks, nor shall anything herein prevent
any of the Companies from exercising all remedies otherwise permitted by
applicable Law upon default under any agreement pursuant to which the
Intercompany Indebtedness is created, subject to the rights, if any, under this
Agreement of the Agent, the Banks and the Noteholders to receive cash, property
or securities otherwise payable or deliverable with respect to the Intercompany
Indebtedness.
10. No Implied Waivers of Subordination. No right of the Collateral Agent
-----------------------------------
on behalf of the Agent, the Bank or the Noteholders to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of any Company or by any act or failure to act
by the Agent, any Bank or any of the Noteholders, or by any non-compliance by
any Company with the terms, provisions and covenants of any agreement pursuant
to which the Intercompany indebtedness is created, regardless of any knowledge
thereof the agent, any Bank or any of the Noteholders may have or be otherwise
charged with. Each Company by its acceptance hereof shall agree that, so long as
there is Senior Debt outstanding or Revolving Credit Commitments, Term Loan
Commitments or the Swing Loan Commitment in effect under the Credit Agreement,
such Company shall not agree to sell, assign, pledge, encumber or otherwise
dispose of, or to compromise, release, forgive or otherwise discharge the
obligations of the other Companies with respect to their Intercompany
Indebtedness, other than by means of payment of such Intercompany Indebtedness
according to its terms, without the prior written consent of the Collateral
Agent.
Without in any way limiting the generality of the foregoing paragraph, the
Collateral Agent on behalf of the Agent, the Banks and the Noteholders may, at
any time and from time to time, without the consent of or notice to the
Companies except the Borrower to the extent provided in the Credit Agreement or
the Note Purchase Agreements, without incurring responsibility to the Companies
and without impairing or releasing the subordination provided in this Agreement
or the obligations hereunder of the Companies to the Agent, the Banks and the
Noteholders, do any one or more of the following: (i) change the manner, place
or terms of payment, or extend the time payment, renew or alter the Senior Debt
or otherwise amend or supplement the Senior Debt, the Senior Loan Documents or
the Note Purchase Agreement; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing the Senior Debt; (iii)
release any person liable in any manner for the payment or collection of the
Senior Debt; and (iv) exercise or refrain from exercising any rights against any
of the Companies and any other person.
11. Additional Subsidiaries. The Companies covenant and agree that they
-----------------------
shall cause all Subsidiaries created or acquired after the date of this
Agreement to execute an agreement subordinating all Indebtedness owed to any
such Subsidiary by any of the Companies or other Subsidiaries hereafter created
or acquired substantially in the form of this Agreement.
12. Continuing Force and Effect. This Agreement shall continue in force
---------------------------
for so long as any portion of the Senior Debt remains unpaid and any Revolving
Credit Commitments. Term
5
<PAGE>
Loan Commitments or the Swing Loan Commitment under the Credit Agreement remain
outstanding, it being contemplated that this Agreement be of a continuing
nature.
13. Modification. Amendments or Waivers. Any and all agreements amending
-----------------------------------
or changing any provision of this Agreement or the rights of the Agent, the
Banks or the Noteholders hereunder, and any and all waivers or consents to
Events of Default or other departures from the due performance of the Companies
hereunder shall be made only by written agreement, waiver or consent signed by
the Collateral Agent, acting on behalf of the Agent, the Banks and the
Noteholders, with the written consent of the Required Creditors, any such
agreement, waiver or consent made with such written consent being effective to
bind all the Banks.
14. Expenses. The Companies unconditionally and jointly and severally
--------
agree upon demand to pay to the Collateral Agent on behalf of the Agent, the
Banks and the Noteholders the amount of any and all reasonable and necessary
out-of-pocket costs, expenses and disbursements for which reimbursement is
customarily obtained, including fees and expenses of counsel, which the
Collateral Agent, the Agent, any of the Banks or any of the Noteholders may
incur in connection with (a) the administration of this Agreement, (b) the
exercise or enforcement of any of the rights of the Agent, the Banks or the
Noteholders hereunder, or (c) the failure by the Companies to perform or observe
any of the provisions hereof.
15. Severability. The provisions of this Agreement are intended to be
------------
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
16. Governing Law. This Agreement shall be a contract under the internal
-------------
laws of the Commonwealth of Pennsylvania and for all purposes shall be construed
in accordance with the internal laws of the Commonwealth of Pennsylvania without
giving effect to its principles of conflicts of law.
17. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the Agent, the Banks and the Noteholders and their respective successors and
assigns, as permitted in the Credit Agreement or the Note Purchase Agreements,
and the obligations of the Companies shall be binding upon their respective
successors and assigns. The duties and obligations of the Companies may not be
delegated or transferred by the Companies (other than by a transaction permitted
under Section 8.2(j) or Section 10.6. of the Credit Agreement or the Note
Purchase Agreement, respectively, provided that the successor shall agree to be
bound by the terms of this Agreement) without the written consent of the
Required Creditors. Except to the extent otherwise required by the context of
this Agreement, the word "Banks" or "Noteholder" when used herein shall include
without limitation any holder of a Note or an assignment of rights therein
originally issued to a Bank under the Credit Agreement or to a Purchaser under
the Note Purchase Agreements, respectively, and each such holder of a Note or
assignment shall have the
6
<PAGE>
benefits of this Agreement to the same extent as if such holder had originally
been a Bank under the Credit Agreement or a Purchaser under the Note Purchase
Agreements, respectively.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which, when executed and delivered, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
19. Attorneys-in-Fact. Each of the Companies hereby authorizes and
-----------------
empowers the Collateral Agent, at its election and in the name of either itself,
for the benefit of the Agent, the Banks and the Noteholders as their respective
interests may appear, or in the name of each such Company as is owed
Intercompany Indebtedness, to execute and file proofs and documents and take any
other action the Collateral Agent may deem advisable to completely protect the
Agent's, the Banks' and the Noteholders' interests in the Intercompany
Indebtedness and their right of enforcement thereof, and to that end each of the
Companies hereby irrevocably makes, constitutes and appoints the Collateral
Agent, its officers, employees and agents, or any of them, with full power of
substitution, as the true and lawful attorney-in-fact and agent of such Company
and with full power for such Company and in the name, place and stead of such
Company for the purpose of carrying out the provisions of this Agreement and
taking any action and executing, delivering, filing and recording any
instruments which the Collateral Agent may deem necessary or advisable to
accomplish the purposes hereof, which power of attorney, being given for
security, is coupled with an interest and irrevocable. Each Company hereby
ratifies and confirms and agrees to ratify and confirms all action taken by the
Collateral Agent, its officers, employees or agents pursuant to the foregoing
power of attorney.
20. Application of Payments. In the event any payments are received by
-----------------------
the Collateral Agent under the terms of this Agreement for application to the
Senior Debt at any time when the Senior Debt has not been declared due and
payable and prior to the date on which it would otherwise become due and
payable, such payment shall constitute a voluntary prepayment of the Senior Debt
for all purposes under the Credit Agreement and the Note Purchase Agreements.
21. Remedies. In the event of a breach by any of the Companies in the
--------
performance of any of the terms of this Agreement, the Collateral Agent on
behalf of the Agent, the Banks and the Noteholders may demand specific
performance of this Agreement and seek injunctive relief and may exercise any
other remedy available at law or in equity, it being recognized that the
remedies of the Collateral Agent on behalf of the Agent, the Banks and the
Noteholders at law may not fully compensate the Agent, the Banks and the
Noteholders for the damages they may suffer in the event of a breach hereof.
22. Consent to Jurisdiction: Waiver of Jury Trial. Each of the Companies
-----------------------
hereby irrevocably consents to the non-exclusive jurisdiction of the Court of
Common Pleas of Allegheny County and the United States District Court for the
Western District of Pennsylvania, waives personal service of any and all process
upon it and consents that all such service of process be made by certified or
registered mail directed to the Companies at the addresses set forth or referred
to in Section 23 hereof and service so made shall be deemed to be completed upon
actual
7
<PAGE>
receipt thereof. Each of the Companies waives any objection to jurisdiction and
venue of any action instituted against it as provided herein and agrees not to
assert any defense based on lack of jurisdiction or venue, AND EACH OF THE
COMPANIES WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT TO THE FULL EXTENT PERMITTED BY LAW.
23. Notices. All notices, statements, requests and demands and other
-------
communications given to or made upon the Companies, the Agent, the Banks or the
Noteholders in accordance with the provisions of this Agreement shall be given
or made as provided in Section 11.6 of the Credit Agreement or Section 18 of the
Note Purchase Agreements. Notice to any Company other than the Borrower shall be
delivered or sent to such Company at its address set forth on Schedule 2 hereto.
24. Limitation of Liability. The parties to this Agreement and the Agent,
-----------------------
the Banks and the Noteholders are expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of the Borrower and the
declarations of trust of certain of the Companies and agree that, except as set
forth in the following sentence, the obligations assumed by such Companies
pursuant to this Agreement be limited in any case to such Companies and their
respective assets.
The parties to this Agreement and the Agent, the Banks and the Noteholders
shall not seek satisfaction of any obligation of such Companies under this
Agreement from any of the shareholders, trustees, officers, employees or agents
of any of the Companies except as contemplated under the Pledge Agreement, the
Declaration of Trust of the Borrower and the declarations of trust of certain of
the Companies. Notwithstanding the foregoing, nothing in such declarations of
trust or elsewhere shall prohibit the Collateral Agent on behalf of the Agent,
the Banks and the Noteholders from pursuing any remedies against any outside
professionals or consultants employed by the Companies.
25. Amendment and Restatement. This Agreement amends and restates that
-------------------------
certain Intercompany Subordination Agreement dated as of January 31, 1996 by and
among the Borrower and certain of Borrower's Subsidiaries.
8
<PAGE>
WITNESS the due execution hereof as of the day and year first above
written.
ADVANCED INFORMATION SERVICES
By:___________________
Title:________________
EDGEWOOD SERVICES, INC.
By:___________________
Title:________________
EXCHANGE FUND RESEARCH CORP.
By:___________________
Title:________________
FEDERATED ADMINISTRATIVE SERVICES
By:___________________
Title:________________
FEDERATED ADMINISTRATIVE SERVICES, INC.
By:___________________
Title:________________
9
<PAGE>
FEDERATED ADVISORS
By:___________________
Title:________________
FEDERATED BANK & TRUST
By:___________________
Title:________________
FEDERATED FINANCIAL SERVICES, INC.
By:___________________
Title:________________
FEDERATED GLOBAL RESEARCH CORP.
By:___________________
Title:________________
FEDERATED INTERNATIONAL MANAGEMENT LIMITED
By:___________________
Title:________________
FEDERATED INVESTMENT COUNSELING
By:___________________
Title:________________
10
<PAGE>
FEDERATED INVESTORS
By:____________________
Title:_________________
FEDERATED INVESTORS BUILDING CORP.
By:____________________
Title:_________________
FEDERATED INVESTORS, INC.
By:____________________
Title:_________________
FEDERATED INVESTORS INSURANCE, INC.
By:____________________
Title:_________________
FEDERATED INVESTORS MANAGEMENT COMPANY
By:____________________
Title:_________________
FEDERATED MANAGEMENT
By:____________________
Title:_________________
11
<PAGE>
FEDERATED RESEARCH
BY:__________________
Title:_______________
FEDERATED RESEARCH CORP.
By:__________________
Title:_______________
FEDERATED SECURITIES CORP.
By:__________________
Title:_______________
FEDERATED SERVICES COMPANY
By:__________________
Title:_______________
FEDERATED SHAREHOLDER SERVICES
By:__________________
Title:_______________
12
<PAGE>
FEDERATED SHAREHOLDER SERVICES COMPANY
BY:___________________
Title:________________
FFSI INSURANCE AGENCY, INC.
By:___________________
Title:________________
FII HOLDINGS, INC.
By:___________________
Title:________________
FS HOLDINGS, INC.
BY:___________________
Title:________________
PASSPORT RESEARCH, LTD.
By:___________________
Title:________________
RETIREMENT PLAN SERVICE COMPANY OF AMERICA
By:___________________
Title:________________
13
<PAGE>
SCHEDULE 1
TO
INTERCOMPANY SUBORDINATION AGREEMENT
_________________________________________________________
List of Companies
-----------------
1. Advanced Information Services
2. Edgewood Services, Inc.
3. Exchange Fund Research Corp.
4. Federated Administrative Services
5. Federated Administrative Services, Inc.
6. Federated Advisers
7. Federated Bank and Trust
8. Federated Financial Services, Inc.
9. Federated Global Research Corp.
10. Federated International Management Limited
11. Federated Investment Counseling
12. Federated Investors
13. Federated Investors Building Corp.
14. Federated Investors, Inc.
15. Federated Investors Insurance, Inc.
16. Federated Investors Management Company
17. Federated Management
18. Federated Research
14
<PAGE>
19. Federated Research Corp.
20. Federated Securities Corp.
21. Federated Services Company
22. Federated Shareholder Services
23. Federated Shareholder Services Company
24. FFSI Insurance Agency, Inc.
25. FII Holdings, Inc.
26. FS Holdings, Inc.
27. Passport Research, Ltd.
28. Retirement Plan Service Company of America
15
<PAGE>
SCHEDULE 2
TO
INTERCOMPANY SUBORDINATION AGREEMENT
Notice Information
------------------
Advanced Information Services Systems Address: Federated Investors Tower
Edgewood Services, Inc. 1001 Liberty Avenue
Exchange Fund Research Corp. Pittsburgh, PA 15222-3779
Federated Administrative Services Attn: John McGonigle
Federated Administrative Services, Inc. Telephone No.:(412)288-1936
Federated Advisors Telecopier No.:(412)288-7578
Federated Financial Services. Inc.
Federated Global Research Corp.
Federated International Management Limited
Federated Investment Counseling
Federated Investors
Federated Investors Building Corp.
Federated Investors, Inc.
Federated Investors Insurance, Inc.
Federated Investors Management Company
Federated Management
Federated Research
Federated Research Corp.
Federated Securities Corp.
Federated Services Company
Federated Shareholder Services
Federated Shareholder Services Company
FFSI Insurance Agency, Inc.
Passport Research, Ltd.
Retirement Plan Service Company of America
16
<PAGE>
FII Holdings. INC. Address: 103 Springer Building
FS Holdings. Inc 3411 Silverside Road
Wilmington, DE 19810
Attn: George Warren
Telephone No.: (302) 478-6160
Telecopier No.:(302) 478-3667
Federated Bank and Trust Address: P.O. Box 40
Gibbsboro, NJ 08026
Telephone No.: (609) 346-8108
Telecopier No.:(609) 346-8116
17
<PAGE>
EXHIBIT 4.06
================================================================================
SHAREHOLDER RIGHTS AGREEMENT
Between
THE STANDARD FIRE INSURANCE COMPANY
and
FEDERATED INVESTORS
Dated August 1, 1989
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I LEGEND ON CERTIFICATES
FOR RESTRICTED SECURITIES................................. 2
ARTICLE II TRANSFER OF RESTRICTED
SECURITIES................................................ 2
2.1 Compliance with Laws........................................ 2
2.2 No Transfer by Management
Shareholders.............................................. 3
2.3 Parallel Exit............................................... 3
2.3.1 Transfer Notice...................................... 3
2.3.2 Offer to Purchase
Conversion Common.................................. 4
2.3.3 Acceptance of Offer.................................. 4
2.3.4 Notice of Change of
Control; Expenses.................................. 4
2.3.5 Other Transfers Subject
to this Section.................................... 5
2.4 Transfers of Standard Fire
Shares; Right of First Offer.............................. 5
2.4.1 No Transfer Prior to Third
Anniversary of Closing
Date............................................... 5
2.4.2 Right of First Offer................................. 5
2.4.3 Limit on Number of Transfers......................... 7
2.5 Transferees; Non-Complying
Transfers................................................. 7
2.5.1 Transferees Bound by
Agreement.......................................... 7
2.5.2 Transfer in Violation of
Agreement Void..................................... 7
2.6 Effect of Foreclosure Under
Pledge Agreements......................................... 7
ARTICLE III FURTHER AGREEMENTS OF THE COMPANY........................... 8
3.1 Management Compensation..................................... 8
3.2 Transfer of Restricted
Securities and Assets..................................... 8
3.3 Change in Capital Structure................................. 9
3.4 Repurchase of Shares........................................ 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.5 Financial Reports........................................... 10
3.5.1 Annual Financial
Statements......................................... 10
3.5.2 Financial Reports Furnished
to Other Persons................................... 11
3.5.3 Other Information.................................... 11
3.5.4 Compliance Certificate............................... 11
3.5.5 Shareholder List..................................... 11
3.6 Confidentiality; Restriction on
Access.................................................... 12
3.7 Company Treated as Corporation for
Federal Income Tax Purposes............................... 12
3.8 Amendment of Management Subscription
Agreements................................................ 13
ARTICLE IV REGISTRATION RIGHTS......................................... 13
4.1 Registration on Request..................................... 13
4.1.1 Request.............................................. 13
4.1.2 Registration Statement
Form............................................... 14
4.1.3 Expenses............................................. 14
4.1.4 Effective Registration
Statement.......................................... 14
4.1.5 Selection of Underwriters............................ 14
4.1.6 Priority in Requested
Registrations...................................... 15
4.2 Incidental Registration..................................... 16
4.2.1 Notice of Public
Registration....................................... 16
4.2.2 Right to Include Registrable
Securities......................................... 16
4.2.3 No Effect on Registrations
Under Section 4.1.................................. 17
4.2.4 Expenses............................................. 17
4.2.5 Priority in Incidental
Registrations...................................... 17
4.2.6 Selection of Underwriters............................ 18
4.3 Registration Procedures..................................... 18
4.3.1 Actions to be Taken by
the Company........................................ 18
4.3.2 Actions to be Taken by
Sellers of Registrable
Securities......................................... 22
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.3.3 Actions to be Taken by all
Holders of Registrable
Securities......................................... 22
4.4 Underwritten Offerings...................................... 22
4.4.1 Requested Underwritten
Offerings.......................................... 22
4.4.2 Incidental Underwritten
Offerings.......................................... 23
4.4.3 Holdback Agreements.................................. 24
4.5 Preparation; Reasonable
Investigation............................................. 24
4.6 Rights of Standard Fire..................................... 25
4.7 Indemnification............................................. 25
4.7.1 Indemnification by the
Company............................................ 25
4.7.2 Indemnification by the
Sellers............................................ 27
4.7.3 Indemnification Procedures........................... 27
4.7.4 Other Indemnification................................ 29
4.7.5 Indemnification Payments............................. 29
4.8 Participation in Underwritten
Registrations............................................. 30
4.9 Adjustments Affecting Registrable
Securities................................................ 30
4.10 Rule 144.................................................... 30
ARTICLE V DEFINITIONS................................................. 31
ARTICLE VI MISCELLANEOUS............................................... 40
6.1 Other Shareholder Agreements................................ 40
6.2 Payments; Notices........................................... 41
6.3 Assignment.................................................. 42
6.4 Termination of Agreement; No
Preferred Shares Outstanding.............................. 43
6.5 Descriptive Headings........................................ 43
6.6 Specific Performance........................................ 43
6.7 Governing Law............................................... 43
6.8 Counterparts................................................ 43
6.9 Severability................................................ 43
6.10 Entire Agreement............................................ 44
6.11 Amendment and Waiver........................................ 44
6.12 Limitation of Liability..................................... 44
</TABLE>
EXHIBIT A Form of Letter Agreement
iii
<PAGE>
FORM OF SHAREHOLDER RIGHTS AGREEMENT
------------------------------------
SHAREHOLDER RIGHTS AGREEMENT, dated [the Closing Date] (the
"Agreement"), between The Standard Fire Insurance Company, a Connecticut
insurance corporation ("Standard Fire"), and Federated Investors, a Delaware
business trust (the "Company").
RECITALS
--------
A. The Company, pursuant to the Asset Purchase Agreement, dated July
28, 1989, among the Company, AEtna Life and Casualty Company and Standard Fire
(as amended and modified from time to time, the "Asset Purchase Agreement"), has
purchased from Standard Fire the assets of the Federated Research Division of
Standard Fire listed on Schedule 2 to the Asset Purchase Agreement.
B. As part of the consideration for such purchase, the Company has
issued to Standard Fire 1000 shares of Series A Preferred Shares which shares
are convertible into Class B Common Shares and, at the time of such conversion,
all accrued and unpaid dividends with respect to the Series A Preferred Shares
shall be paid in cash or in Series B Preferred Shares, in each case as provided
in the Declaration of Trust of the Company.
C. The parties hereto, including those Persons executing a letter
substantially in the form of Exhibit A, desire to make certain provisions with
respect to the Series A Preferred Shares, the Series B Preferred Shares, the
Series C Preferred Shares, the Class A Common Shares, the Class B Common Shares
and the conduct of the Company's affairs.
AGREEMENT
---------
In consideration of the mutual promises made herein and of the mutual
benefits to be derived therefrom, the parties hereto agree as follows:
<PAGE>
ARTICLE I
LEGEND ON CERTIFICATES FOR RESTRICTED SECURITIES
------------------------------------------------
Unless otherwise expressly provided herein, each certificate for
Restricted Securities and each certificate issued in exchange for any such
certificate shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities law. Such securities may not be sold, assigned, transferred,
exchanged, mortgaged, pledged or otherwise disposed of or encumbered
without compliance with, and are otherwise restricted by, that certain
Shareholder Rights Agreement, dated [the Closing Date] among Federated
Investors (the "Company"), The Standard Fire Insurance Company and the
other persons who have executed a letter substantially in the form of
Exhibit A thereto evidencing their agreement to become party thereto, a
counterpart of which Shareholder Rights Agreement has been placed on file
by the Company at its principal place of business and its registered
office. Any person who acquires such securities agrees, by such
acquisition, that it and the securities it acquires shall be bound by and
entitled to the benefits of such Shareholder Rights Agreement. A copy of
such Shareholder Rights Agreement will be furnished without charge by the
Company to the record holder hereof upon written request to the Company at
its principal place of business."
ARTICLE II
TRANSFER OF RESTRICTED SECURITIES
---------------------------------
2.1 COMPLIANCE WITH LAWS.
--------------------
In addition to the other restrictions contained herein, Restricted
Securities shall not be Transferred except (a) (i) pursuant to an effective
registration statement under the Securities Act, (ii) pursuant to Rule 144 (or
any successor provision) under the Securities Act, or (iii) upon receipt by the
Company of an opinion of in-house counsel of AEtna Life & Casualty or other
counsel
2
Shareholder Rights Agreement
----------------------------
<PAGE>
reasonably satisfactory to the Company, to the effect that such Transfer is
exempt from the registration requirements of such Act, and (b) upon receipt by
-
the Company of an opinion of such counsel to the effect that such Transfer would
not constitute an "Assignment" pursuant to section 2(a)(4) of the Investment
Company Act that would cause a termination of, or require shareholder approval
with respect to, the Investment Advisory Contracts.
2.2 NO TRANSFER BY MANAGEMENT SHAREHOLDERS.
--------------------------------------
So long as any Standard Fire Shareholder holds any Standard Fire
Shares, no Management Shareholder shall Transfer to an Unrelated Third Party (a)
-
any Management Shares until on or after the second anniversary of the Closing
Date, except pursuant to a Public Offering, or (b) until on or after the fourth
-
anniversary of the Closing Date, Options the number of underlying Class A Common
Shares or Class B Common Shares, as the case may be, of which exceed, in the
aggregate, 5% of either of the then outstanding Class A or Class B Common Shares
that have been held at any time by any of the Management Circle.
2.3 PARALLEL EXIT.
-------------
So long as any Standard Fire Shareholder holds any Standard Fire
Shares, any Management Shareholder who wishes to Transfer Management Shares at
any time on or after the second and prior to the fourth anniversary of the
Closing Date, other than pursuant to a Public Offering, to any Unrelated Third
Party (the "Transferee") shall follow the procedures set forth in, and such
Transfer shall be conditioned upon compliance with, this section 2.3.
2.3.1 TRANSFER NOTICE. Such Management Shareholder shall, prior to such
---------------
Transfer to an Unrelated Third Party, give to the Company and Standard Fire a
notice (a "Transfer Notice"), executed by it and such Transferee containing (a)
-
the number and class of Management Shares that such Transferee proposes to
acquire from such Management Shareholder, (b) the name and address of such
-
Transferee, (c) the proposed purchase price, terms of payment and other material
-
terms and conditions of such Transferee's offer, (d) an estimate, in such
-
Management Shareholder's reasonable judgment, of the fair value of any non-cash
consideration offered by such Transferee, (e) the number
-
3
Shareholder Rights Agreement
----------------------------
<PAGE>
and class of Management Shares that have been Transferred to Unrelated Third
Parties from the date of this Agreement through the date of such Transfer
Notice, and (f) if applicable, the offer described in section 2.3.2.
-
2.3.2 OFFER TO PURCHASE CONVERSION COMMON. If such Transfer, when
-----------------------------------
aggregated with all previous Transfers of Management Shares to Unrelated Third
Parties since the date of this Agreement, would result in the Transfer of more
than 50% of either of the then outstanding Class A Common Shares or Class B
Common Shares that have been held at any time by any of the Management Circle
(assuming, for purposes of such calculation, that any Options so Transferred are
the number of Class A Common Shares or Class B Common Shares, as the case may
be, for which such Options are exercisable) (each, a "Change of Control"), such
Transfer Notice shall include an offer by such Transferee or the Management
Shareholders to each Standard Fire Shareholder that is a holder of Conversion
Common to purchase for cash, simultaneously with the purchase by such Transferee
of any such Management Shares, all Conversion Common from each such Standard
Fire Shareholder at a price per share equal to the Exit Price on the date of
such purchase.
2.3.3 ACCEPTANCE OF OFFER. Each such Standard Fire Shareholder shall have
-------------------
the right, for a period of 30 days after such Transfer Notice is given, to
accept such offer in whole or in part, exercisable by giving written notice of
such acceptance to such Transferee or the Management Shareholders, as the case
may be, within such 30-day period, stating therein the number of shares of
Conversion Common to be so sold. For a period of 60 days after such 30-day
period, such Management Shareholder may sell to such Transferee the number of
Management Shares stated in such Transfer Notice as subject to purchase by such
Transferee for the consideration per share and on the same payment and other
material terms and conditions stated in such Transfer Notice, provided that
--------
either such Transferee or the Management Shareholders shall simultaneously with
such Transfer to such Transferee purchase all such shares of Conversion Common
as to which such offer shall have been accepted.
2.3.4 NOTICE OF CHANGE OF CONTROL; EXPENSES. The Company shall notify
-------------------------------------
Standard Fire in writing immediately upon obtaining knowledge of a proposed
Transfer that would result in a Change of Control. Each party shall pay its
4
Shareholder Rights Agreement
----------------------------
<PAGE>
own respective expenses associated with the exercise by the Standard Fire
Shareholders of the rights under this section 2.3 except that the cost of
determining the Exit Price shall be shared equally by the Company and such
exercising Standard Fire Shareholders.
2.3.5 OTHER TRANSFERS SUBJECT TO THIS SECTION. Any sale or series of
---------------------------------------
sales of Management Shares to any of the Management Circle with respect to which
this section 2.3 is not strictly applicable but which was intended to effect a
change in control of the Company in circumvention of the essential intent and
principles of this section 2.3 (for example, by installing an unrelated investor
or investor group as part of management prior to selling Management Shares to
such investor or investor group) shall be deemed a sale to an Unrelated Third
Party for purposes of this section 2.3.
2.4 TRANSFERS OF STANDARD FIRE SHARES; RIGHT OF FIRST OFFER.
-------------------------------------------------------
2.4.1 NO TRANSFER PRIOR TO THIRD ANNIVERSARY OF CLOSING DATE. No Standard
------------------------------------------------------
Fire Shareholder shall Transfer any Standard Fire Shares prior to the third
anniversary of the Closing Date except (a) to an Affiliate of Standard Fire, (b)
- -
pursuant to a Public Offering, or (c) pursuant to section 2.3.
-
2.4.2 RIGHT OF FIRST OFFER. (A) PURCHASE OPTION NOTICE. If any Standard
-------------------- ----------------------
Fire Shareholder wishes to Transfer any of its Standard Fire Shares other than
(i) to an Affiliate of Standard Fire, or (ii) pursuant to section 2.3, it shall
--
first give to the Company a notice (the "Purchase Option Notice") referencing
this Agreement and indicating the number of Standard Fire Shares it wishes to
sell (the "Offered Shares") and the price (the "Offer Price") at or above which
it wishes to sell such Shares.
(B) EXERCISE NOTICE. The Company or, if the Company does not elect,
---------------
the Management Shareholders, may elect to purchase all (but not less than all)
of the Offered Shares at the Offer Price by giving to such Standard Fire
Shareholder a notice (the "Exercise Notice") within 30 days (or, in the case of
any proposed Transfer at any time when there exists a public market for Standard
Fire Shares, 15 days) after the date on which such Purchase Option Notice was
given, indicating that the Company
5
Shareholder Rights Agreement
----------------------------
<PAGE>
or the Management Shareholders shall purchase such Shares and the date within 30
days after the Exercise Notice is given when the Company or the Management
Shareholders will purchase such Shares (the "Purchase Date"), and such Standard
Fire Shareholder shall be obligated to sell such Shares to the Company or the
Management Shareholders identified in the Exercise Notice against tender on the
Purchase Date of the Offer Price in immediately available funds, provided that
--------
such Standard Fire Shareholder shall not be obligated to sell such Shares to the
Company or the Management Shareholders if the Offer Price is not tendered to
such Standard Fire Shareholder on the Purchase Date in immediately available
funds.
(c) FAILURE TO EXERCISE. If neither the Company nor the Management
-------------------
Shareholders give such Standard Fire Shareholder the Exercise Notice by the time
required by section 2.4.2(b) or do not thereafter tender to such Standard Fire
Shareholder the Offer Price of such Shares in immediately available funds on the
Purchase Date, such Standard Fire Shareholder may Transfer (i) in the case of a
-
Transfer pursuant to a Public Offering, all or part of such Shares at any time
pursuant to such Public Offering, and (ii) in the case of any other Transfer,
--
not less than 90% of such Shares at any time within 120 days after the Purchase
Option Notice was given (105 days in the case of any such Transfer at any time
when there exists a public market for such Standard Fire Shares), in each case
on terms and conditions no less favorable to Standard Fire than the terms and
conditions set forth in the Purchase Option Notice and free of the restrictions
contained in this section 2.4.2. Each Standard Fire Shareholder shall notify
the Company of any Transfer referred to in sub-clause (ii) above (and the
identity of the transferee) not less than 5 Business Days prior to entering into
a binding agreement with respect to such Transfer.
(d) RE-OFFER TO THE COMPANY. If, in the case of any Transfer other
-----------------------
than pursuant to a Public Offering, any Standard Fire Shareholder shall have
Transferred at least 90% (but less than 100%) of the Offered Shares within the
time required by subclause (ii) of section 2.4.2(c), such Standard Fire
Shareholder shall deliver to the Company a Purchase Option Notice offering to
sell to the Company or the Management Shareholders at the Offer Price the
Offered Shares not so Transferred. The procedures set forth in section 2.4.2
(other than this
6
Shareholder Rights Agreement
----------------------------
<PAGE>
section 2.4.2(d)) shall apply to such Purchase Option Notice.
(e) ASSIGNMENT OF RIGHTS. The Company and each Management
--------------------
Shareholder may separately Transfer its rights under this section 2.4 to any
Person without Transferring the related Restricted Securities to such Person.
2.4.3 LIMIT ON NUMBER OF TRANSFERS. The Standard Fire Shareholders shall
----------------------------
not Transfer, in the aggregate, (a) Preferred Shares to more than 5 Persons
-
which are not Affiliates of Standard Fire, or (b) except pursuant to a public
-
offering, Class B Common Shares to more than 5 Persons which are not Affiliates
of Standard Fire.
2.5 TRANSFEREES; NON-COMPLYING TRANSFERS.
------------------------------------
2.5.1 TRANSFEREES BOUND BY AGREEMENT. Each Person who acquires Restricted
------------------------------
Securities agrees, by acquisition of such Restricted Securities, that such
Person and the Restricted Securities that it acquires shall be bound by and
entitled to the benefits of this Agreement to the extent applicable to such
Person.
2.5.2 TRANSFER IN VIOLATION OF AGREEMENT VOID. Any purported Transfer of
---------------------------------------
any Restricted Securities in violation of this Agreement shall be void and of no
effect, no dividend of any kind whatsoever nor any distribution pursuant to
liquidation or otherwise shall be paid by the Company to the purported
transferee in respect of such shares (all such dividends and distributions being
deemed waived), the voting rights of such shares, if any, on any matter
whatsoever shall remain vested in the transferor, and the transferor shall not
be relieved of any of its obligations hereunder as the holder of such shares
during the period commencing with such transferor's initial failure of
compliance and ending when compliance shall have occurred. In the event of such
a non-complying Transfer, the Company shall not Transfer any such shares on its
books or recognize the purported transferee as a shareholder, for any purpose,
until all applicable provision of this Agreement have been satisfied.
2.6 EFFECT OF FORECLOSURE UNDER PLEDGE AGREEMENTS.
---------------------------------------------
Sections 2.2, 2.3, 2.4 and 2.5 shall terminate as to any Common Shares
upon a Transfer (a) pursuant to the enforcement by the Agent of rights under the
-
PNB
7
Shareholder Rights Agreement
----------------------------
<PAGE>
Pledge Agreement, or (b) at the request of the Agent at any time when an Event
-
of Default (as defined in the PNB Loan Agreement) has occurred and is continuing
under the PNB Loan Agreement in connection with a bona fide work-out of the
debts of the Company, provided in each case that such sections shall not
--------
terminate (and if previously terminated shall be reinstated) as to any Common
Shares Transferred to any Person who was a member of the Management Circle prior
to such Transfer by or at the request of Agent. If any Management Shareholder
receives any payment or distribution of any character, whether in cash,
securities or other property in respect to its Management Shares as a result of
any such Transfer, such payment or distribution shall be paid over pro-rata to
the holders of the Preferred Shares for application to the payment of all
amounts due to such holders under this Agreement and the Declaration of Trust,
including all accrued dividends and all amounts due from the Management
Shareholders with respect to such Transfer pursuant to section 2.3, to the
extent necessary to pay all such amounts in full.
ARTICLE III
FURTHER AGREEMENTS OF THE COMPANY
---------------------------------
3.1 MANAGEMENT COMPENSATION.
-----------------------
So long as any Preferred Shares are held other than by a Competitor or
Competitors, the aggregate amount paid and accrued by the Federated Group for
salary, bonus and deferred compensation (exclusive of qualified benefit plans,
life insurance policies existing as of March 10, 1989 and other customary
employee fringe benefits such as financial planning, group term life insurance,
disability insurance, health, hospitalization, major medical and dental
insurance, medical reimbursement plans, the use of company automobiles,
reimbursed business expenses and employee fringe benefits in effect for
employees of Federated Investors, Inc. on March 10, 1989) to the Management
Group shall not, in any calendar year, exceed 7% of gross revenues of the
Company and its Subsidiaries (as consolidated under GAAP) from management fees,
administrative fees and other sales and service income during such calendar
year.
8
Shareholder Rights Agreement
----------------------------
<PAGE>
3.2 TRANSFER OF RESTRICTED SECURITIES AND ASSETS.
--------------------------------------------
So long as any Standard Fire Shareholder holds any Standard Fire
Shares, the Company shall not, prior to the second anniversary of the Closing
Date, (a) Transfer, except pursuant to a Public Offering, any Restricted
-
Securities, or (b) Transfer, or permit any of its Subsidiaries to Transfer, all
-
or substantially all of the assets or business of the Company or any of its
Subsidiaries, provided that (x) the Company may effect the Jones Sale, (y) the
-------- -
Company may Transfer Restricted Securities to Eligible Employee Stock Plans, and
(z) any wholly-Owned Subsidiary of the Company may consolidate with or merge
-
into the Company (so long as the Company is the surviving entity and the
Declaration of Trust has not been amended, altered, repealed or superseded) or
another Wholly-Owned Subsidiary of the Company.
3.3 CHANGE IN CAPITAL STRUCTURE.
---------------------------
Until the earlier to occur of (a) the date on which the Standard Fire
-
Shareholders hold no Standard Fire Shares, and (b) the third anniversary of the
-
Conversion Termination Date, the Company shall not issue any shares of
beneficial interest or securities with similar rights in the Company other than
the Common Shares, the Preferred Shares and the Series C Preferred Shares.
3.4 REPURCHASE OF SHARES.
--------------------
The Company shall not, and shall not permit any of its Affiliates to,
directly or indirectly, make any payment on account of, or set apart for
payment, money or other property for a sinking or other similar fund for the
purchase, redemption, retirement or other acquisition for value of, or redeem,
purchase, retire or otherwise acquire for value or incur any other liability in
respect of (each, a "Repurchase") any Common Shares or Series C Preferred Shares
unless, on the date of a proposed Repurchase, (a) all accrued and unpaid
-
dividends on the Series A Preferred Shares shall have been paid in full, (b)
-
there are no Series B Preferred Shares outstanding, and (c) in the case of a
-
Repurchase of Class B Common Shares or Options, the Company shall have made a
pro rata offer to Repurchase (and shall have funds legally available to complete
such Repurchase) on such date all outstanding Series A Preferred Shares and
Conversion Common at the same price and terms of such Repurchase (in the
9
Shareholder Rights Agreement
----------------------------
<PAGE>
case of Series A Preferred Shares, as if each such Share were converted into
Class B Common Shares on such date at the Conversion Rate that would apply were
such date a Conversion Notice Date), provided that (x) prior to the Final
-------- -
Dividend Date, or (y) on and after the Final Dividend Date if the requirements
-
of subclauses (a) and (b) are met, the Company may, free of any obligation
imposed by this section 3.4, upon 15 Business Days written notice thereof to the
holders of any outstanding Series A Preferred Shares, effect a Repurchase of
Common Shares then held by (i) any employee or former employee of the Federated
-
Group who was not at any time a member of the Management Circle (or any relative
within the third degree of such employee or former employee), or (ii) any member
--
of the Management Circle as provided in section 5.2 of the Cash Subscription
Agreement and section 5.2 of the Stock Subscription Agreement, in each case
other than pursuant to a general offer to such Persons to so Repurchase.
3.5 FINANCIAL REPORTS.
-----------------
The Company shall deliver (a) to each holder of Preferred Shares the
-
information specified in sections 3.5.1 and 3.5.4(a), and (b) to each Standard
-
Fire Shareholder so long as it owns Standard Fire Shares, the information
specified in sections 3.5.2, 3.5.3, 3.5.4(b) and 3.5.5.
3.5.1 ANNUAL FINANCIAL STATEMENTS. As soon as practicable and in any
---------------------------
event within 90 days after the end of each fiscal year of the Company, the
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such year and the related consolidated (and, as to
the statement of income only, consolidating) statements of income, retained
earnings and cash flow of the Company and its Subsidiaries for such year, and
setting forth in each case in comparative form corresponding figures as of the
end of and for the preceding fiscal year (in the case of the first year after
the Closing Date, only with respect to the statement of cash flow), and, in the
case of such consolidated financial statements, accompanied by a report thereon
of independent public accountants of recognized national standing selected by
the Company, which report shall state that such consolidated financial
statements present fairly the consolidated financial position of the Company and
its Subsidiaries as at the dates indicated and the results of their consolidated
operations and changes in their con-
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<PAGE>
solidated financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as approved by such
accountants and disclosed in the notes to such statements) and that the audit by
such accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards.
3.5.2 FINANCIAL REPORTS FURNISHED TO OTHER PERSONS.
--------------------------------------------
Promptly upon their becoming available, copies of all (a) financial statements,
-
reports, notices and proxy statements sent or made available generally by the
Company to its security holders or by any Subsidiary of the Company to its
security holders other than the Company or another of its Subsidiaries, (b)
-
regular and periodic reports and all registration statements and prospectuses
(other than registration statements, prospectuses and other filings with respect
to mutual funds managed or advised by the Company or any of its Subsidiaries or
which are routine or administrative in nature), if any, filed by the Company or
any of its Subsidiaries with any securities exchange or with the Commission, (c)
-
financial statements, reports, certificates, notices and other material
required, from time to time, to be delivered by the Company or any of its
Subsidiaries pursuant to any loan or securities purchase agreement in effect on
the Closing Date or entered into in connection with a refinancing of any
indebtedness outstanding on the Closing Date, and (d) press releases and other
-
written statements made available generally by the Company or any of its
Subsidiaries to the public concerning material developments in the business of
the Company and its Subsidiaries.
3.5.3 OTHER INFORMATION. With reasonable promptness, such other
-----------------
information and data with respect to the Company or any of its Subsidiaries
(other than Trade Secrets) as from time to time may be reasonably requested by
any Standard Fire Shareholder.
3.5.4 COMPLIANCE CERTIFICATE. Not later than 90 days after the end of
----------------------
each calendar year, a certificate executed on behalf of the Company by its chief
financial officer (a) stating that the Company has complied with section 3.1 for
-
such calendar year, and, in the case of each such certificate delivered to any
Standard Fire Shareholder, demonstrating such compliance in reasonable detail,
provided that the Company shall not be required to specify individually the
- --------
compensation received by any of
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Shareholder Rights Agreement
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<PAGE>
the Management Group, and (b) setting forth in reasonable detail a calculation
-
of the amounts owed to AETNA pursuant to section 4.3.2 of the Stock Exchange
Agreement.
3.5.5 SHAREHOLDER LIST. Not later than 30 days after the end of each
----------------
fiscal year of the Company, a list indicating the respective number of
Management Shares owned by the Management Circle (in the aggregate) and each
other Shareholder and of all Transfers of Management Shares made during such
year.
3.6 CONFIDENTIALITY; RESTRICTION ON ACCESS.
--------------------------------------
Any information delivered to any holder of Preferred Shares pursuant
to this Agreement that the Company designates in writing as confidential shall
be held in confidence by such holder. Such holder shall restrict access to such
confidential information to those of its employees, agents, servants, counsel
and auditors who have a reasonable need to have access to such confidential
information in connection with the holding of such Preferred Shares and shall
instruct such employees, agents, servants, counsel and auditors to hold such
information in confidence as required by this section 3.6. This section 3.6
shall not apply (a) to any information that has been made public or that may be
-
obtained from sources other than the Company, or (b) to any disclosure by any
-
holder of Preferred Shares to (i) any federal or state regulatory authority
-
having jurisdiction over such holder, including the National Association of
Insurance Commissioners or any similar organizations, (ii) any Person to which
--
such holder offers to sell any Preferred Shares if such Person agrees to keep
such information confidential in the manner set forth in this section 3.6, or
(iii) any Person pursuant to or in compliance with any law, rule, regulation,
---
legal process or order applicable to such holder or in order to protect such
holder's investment in the Preferred Shares. Such holder shall provide
reasonable prior notice to the Company of any request or order for any
information referred to in clause (b) (iii) of this section 3.6.
3.7 COMPANY TREATED AS CORPORATION-ORATION FOR FEDERAL INCOME TAX PURPOSES.
----------------------------------------------------------------------
The Company will, solely for Federal income tax purposes, be treated
as a corporation, the Preferred Shares, the Series C Preferred Shares and the
Common
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Shareholder Rights Agreement
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<PAGE>
Shares will be treated as stock interests in that corporation, and the Company
will file Federal income tax returns in accordance with the foregoing.
3.8 AMENDMENT OF MANAGEMENT SUBSCRIPTION AGREEMENTS.
-----------------------------------------------
The Company shall not, without the written consent of the holder or
holders of more than 50% of the Registrable Securities and more than 50% of each
class of the Preferred Shares, amend or waive any provision of Article V
(including the Employee Rider) of the Cash Subscription Agreement or Article V
(including the Employee Rider) and Article VI of the Stock Subscription
Agreement.
ARTICLE IV
REGISTRATION RIGHTS
-------------------
The holders of Registrable Securities shall have the right to register
and sell such Securities to the public in a public offering in accordance with
the provisions of this Article IV, provided that, at any date, section 4.1 shall
--------
not apply to any holder of Registrable Securities which is a Competitor unless
as of such date the Company shall have publicly sold securities pursuant to a
registration statement under the Securities Act.
4.1 REGISTRATION ON REQUEST.
-----------------------
4.1.1 REQUEST. Subject to section 2.4.2, from time to time after the
-------
earliest to occur of (a) the first date on which any Common Shares shall have
-
been publicly sold pursuant. to a registration statement under the Securities
Act, (b) the fifth anniversary of the Closing Date, and (c) the date on which
- -
more than (i) 50% of the Class A Common Shares, or (ii) 50% of the Class B
- --
Common Shares (excluding Conversion Common) is, in the aggregate, held by
Unrelated Third Parties, upon the written request of the Initiating Holders
requesting that the Company effect the registration under the Securities Act of
Registrable Securities and specifying the intended method of disposition
thereof, accompanied by a letter from an investment banking firm of national
reputation to the effect that the price and other terms of such proposed
offering appear reasonable in light of then prevailing market conditions, the
Company will promptly, but in any event within 20
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----------------------------
<PAGE>
days, give written notice of such requested registration to all holders of
Registrable Securities and thereupon the Company will use its best efforts to
effect the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such request,
and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition of
such Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered, provided the Company shall not be required to effect any
--------
registration pursuant to this section 4.1 (x) after three registrations
-
requested pursuant to this section 4.1 shall have been effected, (y) within the
-
12 month period immediately following a registration in connection with which a
firm commitment public offering of Registrable Securities shall have become
effective under the Securities Act pursuant to a request under this section 4.1,
or (z) after the third anniversary of the Conversion Termination Date.
-
4.1.2 REGISTRATION STATEMENT FORM. Registrations under this section 4.1
---------------------------
shall be on such appropriate registration form of the Commission selected by the
Company and approved by the Requisite Holders and as shall permit the
disposition of the Registrable Securities so to be registered in accordance with
the intended method or methods specified in their request for such registration.
The Company shall include in any such registration statement all information
required by law or which the holders of Registrable Securities being registered
shall reasonably request.
4.1.3 EXPENSES. The Company shall pay all expenses incident to the
--------
registrations requested pursuant to this section 4.1, provided that printing
--------
expenses, the costs
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Shareholder Rights Agreement
----------------------------
<PAGE>
of Commission and blue sky filing fees and underwriting fees and discounts
incurred in connection with any registration effected pursuant to this section
4.1 shall be borne pro rata by the holders (including the Company) of the
securities to be registered in such registration based on the number of shares
registered.
4.1.4 EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant
--------------------------------
to this section 4.1 shall not be deemed to have been effected (a) unless a
-
registration statement with respect thereto has become effective, provided that
--------
a registration which does not become effective after the Company has filed a
registration statement with respect thereto primarily by reason of the refusal
to proceed of the Requisite Holders (other than a refusal to proceed based upon
the advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company unless the holders of the
Registrable Securities that were to have been registered shall have elected to
pay all expenses incident to such registration, (b) if such registration, after
-
it has become effective, is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court for any reason other than primarily by reason of an act or omission by the
holders of the Registrable Securities that were to have been sold under such
registration statement, or (c) if the conditions to closing specified in the
-
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied other than primarily by reason of an act or
omission by the holders of the Registrable Securities that were to have been
sold thereunder.
4.1.5 SELECTION OF UNDERWRITERS. If a requested registration pursuant to
-------------------------
this section 4.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company from a list of three
underwriters of national reputation submitted to the Company by the Requisite
Holders.
4.1.6 PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
-----------------------------------
pursuant to this section 4.1 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the number
of securities requested to be included in such registration exceeds the
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Shareholder Rights Agreement
----------------------------
<PAGE>
number which can be sold in such offering within a price range acceptable to the
Requisite Holders (such writing to state the basis of such opinion and the
approximate number of securities which may be included in such offering), the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (a) first, Registrable
-
Securities requested to be included in such registration by the holders of such
Registrable Securities, pro rata among the holders thereof requesting such
registration on the basis of the number of shares of such securities requested
to be included by such holders, and (b) second, other securities of the Company,
-
including Management Shares, proposed to be included in such registration, in
accordance with the priorities, if any, then existing among the Company and the
holders of such other securities.
4.2 INCIDENTAL REGISTRATION.
-----------------------
4.2.1 NOTICE OF PUBLIC REGISTRATION. If the Company at any time proposes
-----------------------------
to register any of its securities under the Securities Act (other than as
contemplated by section 4.1), whether pursuant to registration rights granted to
other holders of its securities or for sale for its own account, on a form and
in a manner which would permit registration of the Registrable Securities for
sale to the public under the Securities Act, it will each such time give prompt
written notice to all holders of Registrable Securities of its intention to do
so and of such holders' rights under this section 4.2.
4.2.2 RIGHT TO INCLUDE REGISTRABLE SECURITIES.
---------------------------------------
Upon the written request of any such holder made within 30 days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent required to permit the disposition of the
Registrable Securities so to be registered, provided that if, at any time after
--------
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its
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Shareholder Rights Agreement
----------------------------
<PAGE>
election, give written notice of such determination to each holder of
Registrable Securities and, thereupon,
(a) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with
such registration (but shall be required to pay all expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under section 4.1, and
(b) in the case of a determination to delay registration, shall be
permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other securities.
4.2.3 NO EFFECT ON REGISTRATIONS UNDER SECTION 4.1. No registration
--------------------------------------------
effected under this section 4.2 shall be deemed to have been effected pursuant
to section 4.1 or shall relieve the Company of its obligation to effect any
registration upon request under section 4.1.
4.2.4 EXPENSES. The Company shall pay all expenses incident to each
--------
registration of Registrable Securities requested pursuant to this section 4.2,
provided that, if such Registrable Securities are sold pursuant to such
- --------
registration, the costs of Commission and blue sky filing fees and ordinary and
customary underwriting fees and discounts incurred in connection with such
registration shall be borne pro rata by the sellers (including the Company) of
the securities sold pursuant to such registration based on the numbers of shares
sold.
4.2.5 PRIORITY IN INCIDENTAL REGISTRATIONS. IF a Registration pursuant to
------------------------------------
this section 4.2 involves an underwritten offering and the managing underwriter
advises the Company in writing (with a copy to each holder of Registrable
Securities requesting registration) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range reasonably acceptable to
the Company (such writing to state the basis of such opinion and the approximate
number of such securities which may be included in such offering), the Company
will include in such registration, to the extent of the number of securities
which the Company is so advised can
17
Shareholder Rights Agreement
----------------------------
<PAGE>
be sold in such offering, (a) first, all securities to be registered held by the
-
Person initiating such registration (whether initiated by the Company or any
Person having demand registration rights) other than any of the Management
Circle, and (b) second, Registrable Securities requested to be included in such
-
registration and all other securities proposed to be included therein, pro rata
among the holders thereof based on the number of shares of such securities so
proposed to be sold and so requested to be included.
4.2.6 SELECTION OF UNDERWRITERS. If a registration pursuant to this
-------------------------
section 4.2 involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the Company.
4.3 REGISTRATION PROCEDURES.
-----------------------
4.3.1 ACTIONS TO BE TAKEN BY THE COMPANY. If and whenever (a) the Company is
---------------------------------- -
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in sections 4.1 and 4.2, or (b)
-
if Standard Fire requests in connection with any other proposed registration by
the Company under the Securities Act, the Company will as expeditiously as
possible
(i) prepare and file as soon thereafter as possible (using its best
efforts to file within 90 days) with the Commission the requisite
registration statement to effect such registration and thereafter use its
best efforts to cause such registration statement to become effective,
provided that the Company may discontinue any registration of its
--------
securities, other than a registration requested pursuant to section 4.1, at
any time prior to the effective date of the registration statement relating
thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of either (A) not less than 120 days or,
-
if such registration statement relates to an underwritten offering, such
longer period as in the opinion of counsel for the underwriters a
prospectus is required by law to be
18
Shareholder Rights Agreement
----------------------------
<PAGE>
delivered in connection with sales of Registrable Securities by an
underwriter or dealer, or (B) such shorter period which will terminate when
-
all of the securities covered by such registration statement have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement (but in
any event not before the expiration of any longer period required under the
Securities Act), and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and Standard Fire such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus), and any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents in order to facilitate the disposition of the Registrable
Securities owned by such seller, as such seller or Standard Fire may
reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller and Standard Fire shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller,
provided that the Company shall not for any such purpose be required to (A)
-------- -
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for the requirements of this
subdivision (iv), (B) consent to gen-
-
19
Shareholder Rights Agreement
----------------------------
<PAGE>
eral service of process in any such jurisdiction, or (C) subject itself to
-
taxation in such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities in the United States as may
be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and Standard
Fire a signed counterpart, addressed to such seller and Standard Fire (and
the underwriters, if any), of (A) an opinion of counsel for the Company,
-
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably satisfactory in
form and substance to such seller and Standard Fire, and (B) a "comfort"
-
letter, dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), signed by the independent
public accountants who have certified the company's financial statements
included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement
(and the prospectus included therein), and, in the case of the accountants'
letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and
in accountants' letters delivered to the underwriters in underwritten
public offerings of securities, and, in the case of the accountants'
letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such seller or Standard Fire (or the
underwriters, if any) may reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement and Standard Fire, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the discovery
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Shareholder Rights Agreement
----------------------------
<PAGE>
of the happening of any event as a result of which, the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made,
and at the request of any such seller or Standard Fire promptly prepare and
furnish to such seller or Standard Fire a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and furnish to each such
seller and Standard Fire at least five Business Days prior to the filing
thereof a copy of any amendment or supplement to such registration
statement or prospectus and not file any such amendment or supplement to
which any such seller or Standard Fire shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act unless the
Company furnishes such seller and Standard Fire an opinion of counsel
reasonably satisfactory to such seller and Standard Fire concluding that
such amendment or supplement so complies;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
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Shareholder Rights Agreement
----------------------------
<PAGE>
(x) use its best efforts to list (if such Registrable Securities are
not already listed) all Registrable Securities covered by such registration
statement on the New York Stock Exchange, the American Stock Exchange or
NASDAQ or, if such Registrable Securities cannot be so listed because of
their voting rights, any other national securities exchange that shall
permit such Registrable Securities to be listed and on each additional
securities exchange on which any of the securities of the same class as the
Registrable Securities are then listed; and
(xi) enter into such agreements and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
4.3.2 ACTIONS TO BE TAKEN BY SELLERS OF REGISTRABLE SECURITIES. The
--------------------------------------------------------
Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information as the
Company may from time to time reasonably request in writing.
4.3.3 ACTIONS TO BE TAKEN BY ALL HOLDERS OF REGISTRABLE SECURITIES. Each
------------------------------------------------------------
holder of Registrable Securities agrees by acquisition of such Registrable
Securities that upon receipt of any notice from the Company of the happening of
any event of the kind described in subdivision (vii) of section 4.3.1, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (vii) of section 4.3.1 and, if so
directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
holder's possession, of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
4.4 UNDERWRITTEN OFFERING.
---------------------
4.4.1 REQUESTED UNDERWRITTEN OFFERING. If requested by the underwriters
-------------------------------
for any underwritten offering by holders of Registrable Securities pursuant to a
registration requested under section 4.1, the Company
22
Shareholder Rights Agreement
----------------------------
<PAGE>
will enter into an underwriting agreement with such underwriters for such
offering. Such agreement shall be satisfactory in substance and form to each
holder of Registrable Securities being registered and the underwriters and shall
contain such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in section 4.7.
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such holders. Such holders of Registrable Securities shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities, such holder's intended method of
distribution and any other representation required by law.
4.4.2 INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 4.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in section 4.2 and subject to section
4.2.5, use its best efforts to arrange for such underwriters to include all
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Such
holders of
23
Shareholder Rights Agreement
----------------------------
<PAGE>
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities, such holder's intended method of distribution and any
other representation required by law.
4.4.3 HOLDBACK AGREEMENTS. (a) To the extent not inconsistent with
-------------------
applicable law, each holder of securities of the Company agrees not to effect
any public sale or distribution of any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) during the seven days prior to and the 90 days after
any underwritten registration has become effective, except as part of such
underwritten registration.
(b) The Company agrees not to effect any public sale or distribution
of its equity securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days prior to and the 90
days after any underwritten registration pursuant to section 4.1 or 4.2 has
become effective, except as part of such underwritten registration and except
pursuant to registrations on Form S-4 or S-8, or any successor or similar forms
thereto. The Company agrees to cause each holder of its equity securities or any
securities convertible into or exchangeable or exercisable for any of such
securities (other than securities purchased in a public offering) to agree not
to effect any such public sale or distribution of such securities during such
period, except as part of any such registration if permitted, provided that the
--------
provisions of this subsection (b) shall not prevent the conversion or exchange
of any securities pursuant to their terms into or for other securities.
4.5 PREPARATION; REASONABLE INVESTIGATION.
-------------------------------------
Subject to section 3.6, in connection with the preparation and filing
of each registration statement under the Securities Act pursuant to this
Agreement, the Company will give the holders of Registrable Securities to be
registered under such registration statement, their underwriters, if any,
Standard Fire and their respective counsel and accountants, the opportunity to
participate in
24
Shareholder Rights Agreement
----------------------------
<PAGE>
the preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
4.6 RIGHTS OF STANDARD FIRE.
-----------------------
The Company will not file any registration statement under the
Securities Act, unless it shall first have given to Standard Fire at least 30
days' prior written notice thereof. Standard Fire and its advisers shall have
the right to receive prior to filing drafts of any such registration or
comparable statement and, if Standard Fire reasonably believes that the filing
thereof or the statements contained therein could result in liability to
Standard Fire or its Affiliates, to require the insertion therein of material
furnished to the Company in writing, which in Standard Fire's reasonable
judgment should be included. In addition, if any such registration statement
refers to Standard Fire by name or otherwise as the holder of any securities of
the Company, then Standard Fire shall have the right to require (x) the
-
insertion therein of language, in form and substance satisfactory to Standard
Fire, to the effect that the holding by Standard Fire of such securities does
not necessarily make Standard Fire a "controlling person" of the Company within
the meaning of section 15 of the Securities Act (a "Controlling Person") and is
not to be construed as a recommendation by Standard Fire of the investment
quality of the Company's debt or equity securities covered thereby and that such
holding does not imply that Standard Fire will assist in meeting any future
financial requirements of the Company, or (y) in the event that such reference
-
to Standard Fire by name or otherwise is not required by the Securities Act, the
deletion of the reference to Standard Fire.
4.7 INDEMNIFICATION.
---------------
4.7.1 INDEMNIFICATION BY THE COMPANY. In the event of any registration of
------------------------------
any securities of the Company under the Securities Act, the Company will, and
hereby
25
Shareholder Rights Agreement
----------------------------
<PAGE>
does, (a) in the case of any registration statement filed pursuant to section
-
4.1 or 4.2 indemnify and hold harmless the seller of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other Person, if any, who is a Controlling
Person with respect to such seller or any such underwriter, and (b) in the case
-
of any registration statement of the Company, indemnify and hold harmless
Standard Fire, its directors and officers and each other Person, if any, who is
a Controlling Person with respect to Standard Fire, in each case against any
losses, claims, damages or liabilities, joint or several, to which such seller
or Standard Fire or any such director or officer or underwriter or Controlling
Person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
-
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
--
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller, Standard Fire and each such director,
officer, underwriter and Controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
--------
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller or
Standard Fire, as the case may be, specifically stating that it is for use in
the preparation thereof which information contained any untrue statement of
any material fact or omitted to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Such
26
Shareholder Rights Agreement
----------------------------
<PAGE>
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or Standard Fire or any such director,
officer, underwriter or Controlling Person and shall survive the transfer of
such securities by such seller or Standard Fire. The Company shall agree to
provide for such contribution relating to such indemnity as shall be reasonably
requested by any seller of Registrable Securities, the underwriters or Standard
Fire.
4.7.2 INDEMNIFICATION BY THE SELLERS. The Company may require, as a
------------------------------
condition to including any Registrable Securities in any registration statement
filed pursuant to section 4.3, that it shall have received an undertaking
satisfactory to it from the prospective seller of such securities, to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
section 4.7.1) the Company, each director of the Company, each officer of the
Company and each other Person, if any, who is a Controlling Person with respect
to the Company with respect to any statement or alleged statement in or omission
or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement which information contained any untrue
statement of any material fact or omitted to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or Controlling Person and shall survive the transfer of such securities
by such seller.
4.7.3 INDEMNIFICATION PROCEDURES. (a) Whenever any claim, action, cause
--------------------------
of action or liability (a "Claim") shall be asserted against a party entitled to
be indemnified under this section 4.7 (the "Indemnified Party"), the Indemnified
Party shall notify promptly the party or parties from whom indemnification is
sought (the "Indemnifying Party") in writing but in any event within 30 days
27
Shareholder Rights Agreement
----------------------------
<PAGE>
after such Indemnified Party has actual knowledge of the facts constituting
the basis for such Claim (the "Notice of Claim"), provided that the failure to
--------
provide a Notice of Claim shall not relieve the Indemnifying Party of its
indemnification obligations hereunder unless such failure materially prejudices
the ability of such Indemnifying Party to contest such Claim. The Notice of
Claim shall specify all facts known to such Indemnified Party giving rise to
such indemnification claim and an estimate of the amount of the liability
arising therefrom.
(b) The Indemnifying Party shall be entitled (without prejudice to
the right of the Indemnified Party to participate at its expense through counsel
of its own choosing) to contest such Claim (and to control such contest) at its
expense and through counsel of its own choosing if it gives written notice of
its intention to do so to the Indemnified Party within 30 days after receipt of
the Notice of Claim, provided that the Indemnified Party shall have the right to
--------
control such contest (at its own expense) jointly with the Indemnifying Party
if, with respect to such Claim, the interests of the Indemnified Party are not
substantially similar to the interests of the Indemnifying Party, or such
contest, if decided against the Indemnified Party, could reasonably be expected
to result in the imposition of equitable remedies
(c) If the Indemnifying Party elects to contest any Claim pursuant to
this section 4.7.3, the Indemnified Party shall, at the expense of the
Indemnifying Party, (i) permit the Indemnifying Party and its attorneys,
-
accountants and other agents to have access to all properties, records and
documents of the Indemnified Party and to furnish to the Indemnifying Party to
the extent available such financial, commercial, legal, operating and other
information with respect to the business and operations of the Indemnified
Party, as the Indemnifying Party may reasonably request and as may be related to
the Claim being contested, (ii) permit the Indemnifying Party to make any
--
investigation which the Indemnifying Party may reasonably request, (iii) procure
---
the cooperation of the Indemnified Party's counsel and accountants with respect
to the foregoing, and (iv) take such other actions as may be reasonably
--
requested by the Indemnifying Party.
(d) Neither the Indemnified Party nor the Indemnifying Party shall
make any settlement of any Claim
28
Shareholder Rights Agreement
----------------------------
<PAGE>
which would give rise to liability on the part of the Indemnifying Party under
this section 4.7 without the prior written consent of the other, which consent
shall not be unreasonably withheld, provided that an Indemnified Party shall
--------
not be required to consent to any settlement involving the imposition of
equitable remedies or to any settlement of any Claim with respect to which the
interests of the Indemnified Party and the Indemnifying Party are not
substantially similar. Whenever the Indemnified Party or the Indemnifying Party
receives a firm offer to settle a Claim for which indemnification is sought
under this section 4.7, it shall promptly notify the other of such offer. If the
Indemnifying Party refuses to accept such offer within 20 Business Days after
receipt of such offer (or of notice thereof), such Claim shall continue to be
contested and, if such Claim is within the scope of the Indemnifying Party's
indemnity contained in this section 4.7, shall be indemnified pursuant to the
terms hereof. If the Indemnifying Party notifies the Indemnified Party in
writing that the Indemnifying Party desires to accept such offer, but the
Indemnified Party refuses to accept such offer within 20 Business Days after
receipt of such notice, the Indemnified Party may continue the contest of such
Claim and, in such event, the total maximum liability of the Indemnifying Party
to indemnify or otherwise reimburse the Indemnified Party hereunder with respect
to such Claim shall be limited to and shall not exceed the amount of such offer,
plus reasonable out-of-pocket costs and expenses (including reasonable
attorneys' fees and disbursements) to the date of notice that the Indemnifying
Party desires to accept such offer, provided that this sentence shall not apply
--------
to any settlement of any Claim involving the imposition of equitable remedies or
to any settlement of any Claim with respect to which the interests of the
Indemnified Party and the Indemnifying Party are not substantially similar.
4.7.4 OTHER INDEMNIFICATION. Indemnification similar to that specified in
---------------------
this section 4.7 (with appropriate modifications) shall be given by the Company
and each seller of Registrable Securities with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of governmental authority other than the Securities Act.
4.7.5 INDEMNIFICATION PAYMENTS. The indemnification required by this
------------------------
section 4.7 shall be made by periodic payments of the amount thereof during the
course of
29
Shareholder Rights Agreement
----------------------------
<PAGE>
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred. Any indemnities payable under this section 4.7
shall be limited to the amount of actual damages sustained by the Indemnified
Party, net of any insurance proceeds or other recovery actually received by or
on behalf of such Indemnified Party and any reduction in taxes actually realized
on account of such damages.
4.8 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
-------------------------------------------
No Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
-
provided in any underwriting arrangements reasonably approved by the Persons
entitled under section 4.1.5 or section 4.2.6 to select the underwriters, and
(b) except as otherwise expressly provided herein, completes and executes all
-
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements or this Agreement.
4.9 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.
--------------------------------------------
The Company will not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in any
registration of its securities contemplated by this Article IV or the
marketability of such Registrable Securities under any such registration.
4.10 RULE 144.
--------
The Company will file the reports required to be filed by it under the
Securities Act and the Exchange Act if there are outstanding securities of the
Company which have been offered in a registered public offering (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
-
Securities Act, as such Rule
30
Shareholder Rights Agreement
----------------------------
<PAGE>
may be amended from time to time, or (b) any similar rule or regulation
-
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
ARTICLE V
DEFINITIONS
-----------
For the purpose of this Agreement, the following terms shall have the
following meanings:
AFFILIATE: As applied to any Person, (a) which is other than an
--------- -
individual, any Person directly or indirectly controlling or controlled by
or under common control with such Person, including, without limitation,
any Person beneficially owning or holding 5% or more of any class of Voting
Securities (including trust or partnership interests) of such Person or any
other Person of which such Person owns or holds 5% or more of any class of
Voting Securities (including trust or partnership interests), (b) which is
-
other than an individual, any director, officer or employee of such Person
or of any Person described in clause (a), and (c) who is an individual, a
-
spouse of such Person, any relative (by blood, adoption or marriage) of
such Person within the third degree and a trust created solely for the
benefit of any Persons described in this clause (c). For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") as used with respect to
any Person shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such
Person, whether through the ownership of Voting Securities, by contract or
otherwise.
AGENT: As defined in the PNB Loan Agreement or the PNB Pledge
-----
Agreement, as appropriate
ASSET PURCHASE AGREEMENT: As defined in Recital A.
------------------------
BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on
------------
which commercial banks in Hart-
31
Shareholder Rights Agreement
----------------------------
<PAGE>
ford, Connecticut or Pittsburgh, Pennsylvania are required or authorized to
be closed.
CASH SUBSCRIPTION AGREEMENT: The Cash Subscription Agreement, dated
---------------------------
as of July 28, 1989, among the Company and the Persons signatory thereto,
as such agreement shall be amended and modified from time to time in
accordance with this Agreement.
CHANGE OF CONTROL: As defined in section 2.3.2.
-----------------
CLAIM: As defined in section 4.7.3(a).
-----
CLASS A COMMON SHARES: As defined in Article IV, section 4.1 of the
---------------------
Declaration of Trust.
CLASS A TRUST: The trust established on May 31, 1989 to hold the
-------------
Class A Common Shares for the benefit of the Persons party thereto.
CLASS B COMMON SHARES: As defined in Article IV, section 4.1 of the
---------------------
Declaration of Trust.
CLOSING DATE: The date of the Closing under the Asset Purchase
------------
Agreement.
COMMISSION: The Securities and Exchange Commission or any other
----------
Federal agency at the time administering the Securities Act.
COMMON SHARES: The Class A Common Shares and the Class B Common
-------------
Shares and any Options with respect thereto.
COMPANY: As defined in the introductory paragraph of this Agreement.
-------
COMPETITOR: As of any date, (a) any Person primarily engaged in the
---------- -
business of organizing, promoting, sponsoring, administering, advising or
underwriting any open-end management investment company registered as such
under the Investment Company Act, and (b) any Person which is or which
-
controls, is controlled by or is under common control with (i) Morgan
-
Stanley & Co., Reserve Management Company, Inc., Frank Russell Company, The
St. Paul Companies (Nuveen Advisory Corp.), Scudder, Stevens & Clark, Inc.,
Winsbury Company, SEI Financial Manage-
32
Shareholder Rights Agreement
----------------------------
<PAGE>
ment Corp. and Goldman, Sachs & Co., (ii) any of the 25 largest (by total
--
net assets managed) mutual fund complexes as listed by the Wiesenberger
Investment Companies Service in effect on such date or, if such Service is
no longer being published on such date, another comparable publication of
similar public stature (the "Advisory Services Report"), or (iii) if on
---
such date it is one of the 50 largest (by total net assets managed) mutual
fund complexes as listed by the Advisory Services Report in effect on such
date, any of Citibank, N.A., Hong Kong and Shanghai Bank Corporation
(Marine Midland Bank, Inc.), The Mutual Life Insurance Company of New York
(Evaluation Associates), Security Pacific National Bank, The Travelers
Corporation (Keystone Custodian Funds, Inc.) or Xerox Corporation (Furman,
Selz, Mager, Dietz & Birney, Inc.), provided that neither Standard Fire nor
--------
any Affiliate of Standard Fire shall be a Competitor.
CONTROLLING PERSON: As defined in section 4.6.
------------------
CONVERSION COMMON: At any date, (a) the Class B Common Shares into
----------------- -
which the Series A Preferred Shares have been converted, (b) the Class B
-
Common Shares that would be issued to the holders of the Series A Preferred
Shares were such Preferred Shares converted into Class B Common Shares on
such date at the Conversion Rate that would apply were such date a
Conversion Notice Date, and (c) any securities issued or issuable with
-
respect to Conversion Common by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Any holder of Series A
Preferred Shares shall be deemed to be a holder of the Conversion Common
issuable with respect to such Preferred Shares.
CONVERSION NOTICE DATE: As defined in Article IV, section 4.1 of the
----------------------
Declaration of Trust.
CONVERSION RATE: As defined in Article IV, section 4.2.6(a) of the
---------------
Declaration of Trust.
CONVERSION TERMINATION DATE: As defined in Article IV, section 4.1 of
---------------------------
the Declaration of Trust.
33
Shareholder Rights Agreement
----------------------------
<PAGE>
DECLARATION OF TRUST: The Amended and Restated Declaration of Trust
--------------------
of the Company as in effect on the Closing Date.
ELIGIBLE EMPLOYEE STOCK PLAN: AS defined in Article IV, section 4.1
----------------------------
of the Declaration of Trust.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
------------
Federal statute, and the rules and regulations promulgated thereunder, all
as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934 shall include a reference to
the comparable section, if any, of any such similar Federal statute.
EXERCISE NOTICE: As defined in section 2.4.2(b).
---------------
EXIT PRICE: At any date of determination, an amount per share equal
----------
to the quotient determined by dividing: (a) the aggregate amount of cash
-
and the fair value of all non-cash consideration received in respect of all
Transfers of Management Shares by the Management Circle to Unrelated Third
Parties prior to and on such date (including consideration received or to
be received in respect of the Transfer giving rise to such determination of
Exit Price and including, in the case of any such Management Shares that
are Options, the exercise price relating to each thereof) by (b) the
-
aggregate number of Common Shares (including any Options) constituting
Management Shares that shall have been Transferred in all such Transfers to
Unrelated Third Parties (assuming, for purposes of such calculation, that
the Options so Transferred were the number of Class A Common Shares or
Class B Common Shares, as the case may be, for which such Options are
exercisable), as determined by agreement between the Company and the
Standard Fire Shareholders, or if they shall not agree, determined as of
such date by a qualified investment banking or appraisal firm, in each case
of recognized national stature mutually acceptable to the Company and such
Standard Fire Shareholders.
FEDERATED GROUP: Collectively, the Company, the Federated Research
---------------
Division of Standard Fire, Federated Investors, Inc., Passport Research,
Ltd., a
34
Shareholder Rights Agreement
----------------------------
<PAGE>
Pennsylvania limited partnership, and each of their respective
Subsidiaries.
FINAL DIVIDEND DATE: As defined in Article IV, section 4.1 of the
-------------------
Declaration of Trust.
GAAP: Generally accepted accounting principles as set forth in the
----
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements of the Financial Accounting
Standards Board or in such opinions and statements of such other entities
as shall be generally accepted by the accounting profession.
INDEMNIFIED PARTY: As defined in section 4.7.3(a).
-----------------
INDEMNIFYING PARTY: As defined in section 4.7.3(a).
------------------
INITIATING HOLDERS: Any holder or holders of Registrable Securities
------------------
holding at least 25% (by number of shares) of the Registrable Securities
then outstanding and initiating a request pursuant to section 4.1 for the
registration of all or part of such holder's or holders' Registrable
Securities.
INVESTMENT ADVISORY CONTRACT: Any written contract complying with
----------------------------
section 15(a) of the Investment Company Act pursuant to which the Company
or any Subsidiary of the Company agrees to serve or act as an investment
adviser of a registered investment company.
INVESTMENT COMPANY ACT: The Investment Company Act of 1940, or any
----------------------
similar Federal statute, and the rules and regulations thereunder, all as
the same shall be in effect at the time. Reference to a particular section
of the Investment Company Act of 1940 shall include a reference to the
comparable section, if any, of any such similar Federal statute.
JONES SALE: As defined in Article IV, section 4.1 of the Declaration
----------
of Trust.
MANAGEMENT CIRCLE: At any date, (a) the Management Group, (b) any
------------------- - -
relative (by blood, adoption or
35
Shareholder Rights Agreement
----------------------------
<PAGE>
marriage) within the third degree of any of the Management Group, (c) any
-
corporation 90% or more of the stock of which is, any partnership 90% or
more of the interests in which are, or any trust (including a decedent's
estate) 90% or more of the beneficial interests in which are, held by any
of the Persons referred to in clauses (a) and (b), and (d) any qualified
-
employee benefit plan of the Company.
MANAGEMENT GROUP: At any date, (a) the Original Managers, and (b) the
---------------- -- --
Replacement Managers.
MANAGEMENT SHAREHOLDER: At any date, any Person owning beneficially
----------------------
and/or of record any Management Shares on such date.
MANAGEMENT SHARES: At any date, all shares of beneficial interest in
-----------------
the Company (and all Options to acquire such shares) held on such date by
any of the Management Circle other than the Series C Preferred Shares.
NOTICE OF CLAIM: As defined in section 4.7.3(a).
---------------
OFFER PRICE: As defined in section 2.4.2(a).
-----------
OFFERED SHARES: As defined in section 2.4.2(a).
--------------
OPTIONS: Any convertible securities, warrants, rights, puts or other
-------
options (other than the Series A Preferred Shares) exercisable for or
convertible into Preferred Shares or Common Shares or any other rights to
acquire Preferred Shares or Common Shares.
ORIGINAL MANAGERS: The individuals listed in Section A of Schedule 1
-----------------
to the Asset Purchase Agreement and Thomas J. Donnelly.
PERSON: An individual, a partnership, an association, a joint
------
venture, a corporation, a business, a trust, an unincorporated
organization, any other entity or a government or any department, agency or
subdivision thereof.
PNB LOAN AGREEMENT: The Senior Secured Reducing Revolving Credit
------------------
Agreement, dated as of the Closing
36
Shareholder Rights Agreement
----------------------------
<PAGE>
Date, among the Company, Pittsburgh National Bank and the other Persons
signatory thereto, as amended and modified from time to time in a manner
that does not adversely affect the holders of the Preferred Shares or the
Conversion Common.
PNB PLEDGE AGREEMENT: The Pledge Agreement, dated as of the Closing
--------------------
Date, among the Company, Pittsburgh National Bank and the other Persons
signatory thereto, as amended and modified from time to time in a manner
that does not adversely affect the holders of the Preferred Shares or the
Conversion Common.
PREFERRED SHARES: The Series A Preferred Shares and the Series B
----------------
Preferred Shares.
PUBLIC OFFERING: Any offering of Restricted Securities to the public
---------------
pursuant to a registration statement under the Securities Act which has
complied with Article IV.
PURCHASE DATE: As defined in section 2.4.2(b).
-------------
PURCHASE OPTION NOTICE: As defined in section 2.4.2(a).
----------------------
REGISTRABLE SECURITIES: (a) The Conversion Common, and (b) any
---------------------- - -
securities issued or issuable with respect to shares of the Conversion
Common by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities when
(w) a registration statement with respect to the sale of such securities
-
shall have become effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement,
(x) they shall have been distributed to the public pursuant to Rule 144 (or
-
any successor provision) under the Securities Act, (y) they shall have been
-
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law
then in force, or (z) they shall have ceased to be outstanding.
-
REPLACEMENT MANAGER: Any executive employee of the Company performing
-------------------
services for the Company
37
Shareholder Rights Agreement
----------------------------
<PAGE>
substantially similar to those performed by any one or more Original
Managers (other than Thomas J. Donnelly), at any time when such executive
employee is employed by the Company to perform such services.
REPURCHASE: As defined in section 3.4.
----------
REQUISITE HOLDERS: With respect to any registration of Registrable
-----------------
Securities by the Company pursuant to Article IV, any holder or holders of
more than 50% (by number of shares) of the Registrable Securities to be so
registered.
RESTRICTED SECURITIES: The Class A Common Shares, the Class B Common
---------------------
Shares, the Series A Preferred Shares, the Series B Preferred Shares and
the Series C Preferred Shares, if any, and any securities issued with
respect to any thereof by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, except that any
particular Restricted Securities shall cease to be Restricted Securities
when (a) they shall have been effectively registered under the Securities
-
Act and disposed of in accordance with the registration statement covering
them, (b) they shall have been distributed to the public pursuant to Rule
-
144 (or any successor provision) under the Securities Act, or (c) they
-
shall have ceased to be outstanding. Whenever any particular securities
cease to be Restricted Securities pursuant to clause (a) or (b), the holder
thereof shall be entitled to receive from the Company or its transfer
agent, without expense (other than transfer taxes, if any), new securities
of like tenor not bearing a legend of the character set forth in Article I.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
--------------
statute, and the rules and regulations promulgated thereunder, all as shall
be in effect at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar Federal statute.
SERIES A PREFERRED SHARES: As defined in Article III, section 3.2 of
-------------------------
the Declaration of Trust.
38
Shareholder Rights Agreement
----------------------------
<PAGE>
SERIES B PREFERRED SHARES: AS defined in Article III, section 3.2 of
-------------------------
the Declaration of Trust.
SERIES C PREFERRED SHARES: As defined in Article III, section 3.2 of
-------------------------
the Declaration of Trust.
SHAREHOLDER: Any Person holding shares of beneficial interest in the
-----------
Company.
STANDARD FIRE: As defined in the introductory paragraph of this
-------------
Agreement.
STANDARD FIRE SHAREHOLDER: At any date, any Person owning
-------------------------
beneficially and/or of record any Standard Fire Shares on such date.
STANDARD FIRE SHARES: At any date, the Preferred Shares, the
--------------------
Conversion Common and any securities issued with respect to the Preferred
Shares or. the Conversion Common by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, in each case held by
Standard Fire or its Affiliates on such date.
STOCK EXCHANGE AGREEMENT: The Stock Exchange Agreement, dated July
------------------------
28, 1989, between the Company and AEtna Life and Casualty Company, as such
agreement shall be amended and modified from time to time.
STOCK SUBSCRIPTION AGREEMENT: The Subscription Agreement, dated as of
----------------------------
July 25, 1989, among the Company and the Persons signatory thereto, as such
agreement shall be amended and modified from time to time in accordance
with this Agreement.
SUBSIDIARY: As to any Person, any corporation or entity at least a
----------
majority of the total combined voting power of all classes of Voting
Securities of which shall, at the time as of which any determination is
being made, be owned by such Person either directly or indirectly.
TRADE SECRETS: Information, not made available to or known by the
-------------
public or the trade in which the Company operates, which relates to the
business of the Company or its Affiliates and which provides an
39
Shareholder Rights Agreement
----------------------------
<PAGE>
opportunity to obtain an advantage over competitors who do not know or use
such information.
TRANSFER: Any direct or indirect transfer, sale, assignment, pledge,
--------
hypothecation or other disposition of any interest (including an interest
in any entity holding such an interest), and any agreement to effect any of
the foregoing, provided that any pledge of the Management Shares pursuant
--------
to the PNB Pledge Agreement shall be deemed not to constitute a Transfer.
TRANSFEREE: As defined in section 2.3.
----------
TRANSFER NOTICE: As defined in section 2.3.1.
---------------
UNRELATED THIRD PARTY: At any date, any Person who is not a member of
---------------------
the Management Circle on such date.
VOTING SECURITIES: With respect to any corporation or entity, any
-----------------
securities of such corporation or entity whose holders are entitled under
ordinary circumstances to vote for the election of directors (or similar
positions) of such corporation or entity (irrespective of whether at the
time securities of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
WHOLLY OWNED: As applied to any Subsidiary, a Subsidiary all the
------------
outstanding securities every class of which are at the time owned by the
Company and/or one or more of its Wholly-Owned Subsidiaries.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 OTHER SHAREHOLDER AGREEMENTS.
----------------------------
No Management Shareholder shall enter into or suffer to exist any
shareholder agreement or arrangement of any kind, including the Class A Trust
and the Management Subscription Agreements, with respect to which any Management
Shareholder is a party with any Person with respect to the Restricted Securities
inconsistent with the
40
Shareholder Rights Agreement
----------------------------
<PAGE>
provisions of this Agreement. In the event of any conflict between this
Agreement and any provision of any such other shareholder agreement or
arrangement, the provisions of this Agreement shall be controlling.
6.2 PAYMENTS; NOTICES.
-----------------
All dividends and other amounts payable to Standard Fire hereunder and
pursuant to the Declaration of Trust shall be paid by crediting the account of
Standard Fire, acct. number 058-55-172 at Morgan Guaranty Trust Company of New
York, 23 Wall Street, New York, New York 10015, Attn: Money Transfer Department,
in immediately available funds, or as otherwise directed by Standard Fire and
providing sufficient information with such payment to identify the sender of the
funds and the reason for such payment.
Each notice, request, demand and other communication hereunder shall
be in writing and shall be deemed to have been duly given when delivered by hand
or three Business Days after being mailed by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows (or to such
other address or Person as a party may designate by notice to the other
parties):
If to Standard Fire:
CityPlace
185 Asylum Avenue
Hartford, Connecticut 06103
Attention: Vice President-Finance and
Treasurer
With a copy to:
Law Department
AETNA Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: General Counsel
41
Shareholder Rights Agreement
----------------------------
<PAGE>
If to the Company:
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
Attention: Vice President and General Counsel
With a copy to:
Alan H. Finegold, Esq.
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, PA 15222
and, if addressed to any other Shareholder, at the address that such Shareholder
shall have furnished to the Company and Standard Fire in writing, provided that
--------
all communications required to be furnished to any party hereto by any Standard
Fire Shareholder shall be required to be sent only to the Company on behalf of
such party.
6.3 ASSIGNMENT.
----------
Except as expressly provided herein, this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns. The Company may grant, on the Closing
Date, a security interest in its rights under this Agreement as security for the
performance by the Company of its obligations under the financing referred to in
section 2.1.4 of the Asset Purchase Agreement, provided that (a) such grant
-------- -
shall not adversely affect any right or obligation of any holder of Preferred
Shares or Registrable Securities hereunder, including, without limitation, any
right or obligation to reduce any amounts owing by any such holder hereunder by
any amounts due to any such holder hereunder, and (b) prior to the acceleration
-
of such financing, such holder shall communicate (including the giving of
notices, opinions and similar matters) only with Federated Investors with
respect to this Agreement and such holder shall not be required to so
communicate with any secured party.
42
Shareholder Rights Agreement
----------------------------
<PAGE>
6.4 TERMINATION OF AGREEMENT; NO PREFERRED SHARES OUTSTANDING.
---------------------------------------------------------
Except for sections 3.6 and 4.7, this Agreement shall terminate upon
the date upon which (a) all shares of Conversion Common shall have been sold in
-
a Public Offering or pursuant to Rule 144 under the Securities Act, and (b)
-
there are no Series B Preferred Shares outstanding. If no Preferred Shares are
outstanding, sections 2.4.3, 3.1 and 3.5.4(a) shall not apply.
6.5 DESCRIPTIVE HEADINGS.
--------------------
The descriptive headings of the several sections and paragraphs of
this Agreement are inserted for reference only and shall not limit or otherwise
affect the meaning hereof.
6.6 SPECIFIC PERFORMANCE.
--------------------
Without limiting the rights of each party hereto to pursue all other
legal and equitable rights available to such party for the other parties'
failure to perform their obligations under this Agreement, the parties hereto
acknowledge and agree that the remedy at law for any failure to perform their
obligations hereunder would be inadequate and that each of them, respectively,
shall be entitled to specific performance, injunctive relief or other equitable
remedies in the event of any such failure.
6.7 GOVERNING LAW.
-------------
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Delaware.
6.8 COUNTERPARTS.
------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
6.9 SEVERABILITY.
------------
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable
43
Shareholder Rights Agreement
----------------------------
<PAGE>
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
6.10 ENTIRE AGREEMENT.
----------------
This Agreement is intended by the parties hereto as a final expression
of their agreement and understanding in respect to the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings in
respect to the subject matter contained herein, other than those set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
6.11 AMENDMENT AND WAIVER.
--------------------
This Agreement may be amended or waived only by the written consent of
the Company and the holder or holders of more than 50% of the Registrable
Securities and more than 50% of each class of the Preferred Shares, provided
--------
that any amendment or waiver with respect to section 4.7, this section 6.11 or
any provisions as to the number or timing of requests for registration to which
Initiating Holders are entitled under section 4.1 or as to the percentages of
holders of securities required for any action or omission to perform any act
hereunder, shall require the written consent of each holder of Registrable
Securities. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this section 6.11,
whether or not such Registrable Securities shall have been marked to indicate
such consent.
6.12 LIMITATION OF LIABILITY.
-----------------------
The parties hereto are hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust and agree that
the obligations of the Company pursuant to this Agreement shall be limited in
any case to the Company and its assets and the parties hereto shall not seek
satisfaction of any obligation of the
44
Shareholder Rights Agreement
----------------------------
<PAGE>
Company hereunder from the shareholders of the Company, the trustees, officers
or employees of the Company, or any of them.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
THE STANDARD FIRE INSURANCE
COMPANY
By /s/ James T. Lynn
------------------------------
Name: James T. Lynn
Title: Chairman
FEDERATED INVESTORS
By /s/ John F. Donahue
------------------------------
Name: John F. Donahue
Title: Chairman
45
<PAGE>
9075
FIRST AMENDMENT TO
SHAREHOLDER RIGHTS AGREEMENT
----------------------------
THIS AMENDMENT made and entered into as of the 15th day of August, 1995
between THE STANDARD FIRE INSURANCE COMPANY, a Connecticut insurance corporation
("Standard Fire"), and FEDERATED INVESTORS, a Delaware business trust (the
"Company").
RECITALS
--------
A. Standard Fire and the Company have executed and delivered to each
other and entered into the Shareholder Rights Agreement dated August 1, 1989
(the "Shareholder Rights Agreement") between The Standard Fire Insurance Company
and Federated Investors making certain provisions with respect to the capital
stock of the Company and the conduct of the Company's affairs.
B. Section 6.11 of the Shareholder Rights Agreement entitled "Amendment
and Waiver" provides that the Shareholder Rights Agreement may be amended by the
written consent of the Company and by Standard Fire, as the holder of more than
50% of the Registrable Securities and more than 50% of each class of the
Preferred Shares, as referred to therein, in certain respects.
C. Standard Fire and the Company, the parties to the Shareholder Rights
Agreement, wish to amend the Shareholder Rights Agreement in certain respects
under and in accordance with the provisions of Section 6.11 thereof.
AGREEMENT
---------
In consideration of the mutual promises made herein and of the mutual
benefits to be derived therefrom, the parties hereto, each
<PAGE>
intending to be legally bound, agree to amend the Shareholder Rights Agreement
in certain respects as follows:
FIRST: Section 2.4.2 of the Shareholder Rights Agreement entitled "Right
of First Offer" is hereby amended by the deletion therefrom of paragraph (b)
thereof and the substitution therefor of a new paragraph (b), as follows:
"(b) EXERCISE NOTICE. The Company or, if the Company does not
---------------
elect, the Management Shareholders, may elect to purchase all
(but not less than all) of the Offered Shares at the Offer Price
by giving to such Standard Fire Shareholder a notice (the
"Exercise Notice") within the period of time referred to in
section 2.4.2(f), indicating that the Company or the Management
Shareholders shall purchase such Shares and the date within the
period of time referred to in section 2.4.2(g) when the Company
or the Management Shareholders will purchase such Shares (the
"Purchase Date"), and such Standard Fire Shareholder shall be
obligated to sell such Shares to the Company or the Management
Shareholders identified in the Exercise Notice against tender on
the Purchase Date of the Offer Price in immediately available
funds, provided that such Standard Fire Shareholder shall
--------
not be obligated to sell such Shares to
-2-
<PAGE>
the Company or the Management Shareholders if the Offer Price is
not tendered to such Standard Fire Shareholder on the Purchase
Date in immediately available funds."
SECOND: Section 2.4.2 of the Shareholder Rights Agreement entitled "Right
of First Offer" is hereby further amended by the addition, immediately following
the first sentence of paragraph (c) thereof and immediately preceding the last
sentence of such paragraph, of a new sentence as follows:
"For the purposes of this section 2.4.2(c), nevertheless, in the
case of a Transfer pursuant to a Public Offering at any time
after the original Purchase Option Notice was given with respect
to such Transfer pursuant to a Public Offering and a subsequent
Purchase Option Notice is given with respect to the same Public
Offering that gave rise to the original Purchase Option Notice
under this section 2.4.2, the Transfer by such Standard Fire
Shareholder of all or part of such Shares at a price no less than
ninety-five percent (95%) of the Offer Price shall not be deemed
to be less favorable to Standard Fire than the Offer Price."
THIRD: Section 2.4.2 of the Shareholder Rights Agreement entitled "Right
of First Offer" is hereby further amended by the
-3-
<PAGE>
addition, at the conclusion thereof, of a new paragraph (f) and a new paragraph
(g), as follows:
"(f) PERIOD OF TIME FOR EXERCISE NOTICE. The Company or, if
----------------------------------
the Company does not elect, the Management Shareholders, may
elect to purchase the Offered Shares at the Offer Price in
accordance with section 2.4.2(b) by giving the Exercise Notice
within the period of 30 days after the date on which the Purchase
Option Notice was given; provided, however, that (i) in the case
of any proposed Transfer at any time when there exists a public
market for Standard Fire Shares, such period shall be 15 days
after the date on which the Purchase Option Notice was given and
(ii) in the case of any proposed Transfer pursuant to a Public
Offering at any time after the original Purchase Option Notice
was given with respect to such proposed Transfer pursuant to a
Public Offering and a subsequent Purchase Option Notice is given
with respect to the same Public Offering that gave rise to the
original Purchase Option Notice, such period shall be 7 days
after the date on which the subsequent Purchase Option Notice was
given.
"(g) PERIOD OF TIME FOR PURCHASE. The period of time within
---------------------------
which the Company shall purchase, or if the Company does not
elect,
-4-
<PAGE>
the Management Shareholders shall purchase, Offered Shares at the
Offer Price on the Purchase Date in accordance with section
2.4.2(b) shall be 30 days after the Exercise Notice is given;
provided, however, that the Company or, if the Company does not
elect, the Management Shareholders may extend the Purchase Date
for a reasonable period of time to a date not later than 90 days
after the Exercise Notice is given for the purpose of obtaining
financing for the purchase of the Offered Shares."
FOURTH: In all other respects, the Shareholder Rights Agreement,
including but not limited to Section 6.12 thereof entitled "Limitation of
Liability," remains in full force and effect.
FIFTH: The terms used herein shall have the same meaning as those terms
have in the Shareholder Rights Agreement, except as the
- 5 -
<PAGE>
context otherwise requires.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the date first above written.
THE STANDARD FIRE INSURANCE COMPANY
By [SIGNATURE ILLEGIBLE]
---------------------------------------
Title: Investment Manager
---------------------------------
FEDERATED INVESTORS
By [SIGNATURE ILLEGIBLE]
---------------------------------------
Title: Vice President
---------------------------------
-6-
<PAGE>
SECOND AMENDMENT
TO
SHAREHOLDER RIGHTS AGREEMENT
__________________________
THIS AMENDMENT made and entered into as of the 31st day of January,
1996 between THE STANDARD FIRE INSURANCE COMPANY, a Connecticut insurance
corporation ("Standard Fire"), and FEDERATED INVESTORS, a Delaware business
trust (the "Company").
RECITALS
--------
A. Standard Fire and the Company have executed and delivered to each
other and entered into the Shareholder Rights Agreement dated August 1, 1989, as
amended by the First Amendment to Shareholder Rights Agreement dated August 15,
1995 (hereinafter sometimes collectively called the "Agreement") between The
Standard Fire Insurance Company and Federated Investors making certain
provisions with respect to the capital stock of the Company and the conduct of
the Company's affairs.
B. Standard Fire, Aetna Life and Casualty Company, a Connecticut
insurance corporation, the Company and Federated Investors, Inc., a Pennsylvania
corporation ("Buyer"), have executed and delivered to each other and entered
into the Stock Purchase Agreement dated as of December 21, 1995 (the "Stock
Purchase Agreement") pursuant to which the parties have entered into a series of
transactions, including the sale by Standard
<PAGE>
Fire to Buyer of all shares of capital stock issued by the Company to Standard
Fire and Standard Fire and the Company have agreed to terminate all of their
respective rights and obligations to each other under the Agreement and to
release and discharge each other from any and all claims, demands, judgments,
actions, causes of action, damages, expenses, costs, attorney's fees and
liabilities of any kind whatsoever.
C. Section 6.11 of the Agreement entitled "Amendment and Waiver,"
provides that the Agreement may be amended by the written consent of the Company
and by Standard Fire, as the holder of more than 50% of the Registrable
Securities and more than 50% of each class of the Preferred Shares, as referred
to therein, in certain respects.
D. Standard Fire and the Company, the parties to the Agreement, wish
to amend the Agreement in certain respects under and in accordance with the
provisions of Section 6.11 thereof.
AGREEMENT
---------
In consideration of the mutual promises made herein and of the mutual
benefits to be derived therefrom, the parties hereto, each intending to be
legally bound, agree that all rights and obligations of Standard Fire and the
Company to each other arising under the Agreement have been terminated, confirm
that the releases set forth in Article VII of the Stock Purchase Agreement have
become effective upon the closing thereunder and further agree, nevertheless,
that, with respect to any person other than Standard Fire who may be bound by
the terms of the
-2-
<PAGE>
Agreement, the Agreement is hereby amended in certain respects as follows:
FIRST: Section 2.1 of the Agreement entitled "Compliance with Laws"
is hereby amended by the deletion therefrom of the words "in-house counsel of
Aetna Life & Casualty or other" from the seventh line thereof.
SECOND: Section 2.2 of the Agreement entitled "No Transfer by
Management shareholders," Section 2.3 of the Agreement entitled "Parallel Exit,"
Section 2.4 of the Agreement entitled "Transfers of Standard Fire Shares; Right
of First Offer," and Section 2.6 of the Agreement entitled "Effect of
Foreclosure Under Pledge Agreements" are hereby deleted therefrom in their
entirety; and Section 2.5 of the Agreement entitled "Transferees; Non-Complying
Transfers" is hereby renumbered as Section 2.2 thereof.
THIRD: Section 3.1 of the Agreement entitled "Management
Compensation," Section 3.2 of the Agreement entitled "Transfer of Restricted
Securities and Assets," Section 3.3 of the Agreement entitled "Change in Capital
Structure," Section 3.4 of the Agreement entitled "Repurchase of Shares,"
Section 3.5 of the Agreement entitled "Financial Reports," Section 3.6 of the
Agreement entitled "Confidentiality; Restriction on Access Section 3.7 of the
Agreement entitled "Company Treated as Corporation for Federal Income Tax
Purposes," and Section 3.8 of the Agreement entitled "Amendment of Management
Subscription Agreements" are hereby deleted therefrom in their entirety.
-3-
<PAGE>
FOURTH: Article IV of the Agreement entitled "Registration Rights" is
hereby renumbered as Article III thereof, retitled as "Underwritten Offerings"
and amended and restated in its entirety, as follows:
"ARTICLE III
UNDERWRITTEN OFFERINGS
----------------------
If the Company or holders of Securities shall register and
sell such Securities to the public in a public offering
which shall be an underwritten offering pursuant to an
underwritten registration, to the extent not inconsistent
with applicable law, each holder of securities of the
Company agrees not to effect any public sale or distribution
of any equity securities of the Company or any securities
convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the
Securities Act (or any similar provision then in force)
during the seven days prior to and the 90 days after any
underwritten registration has become effective, except as
part of such underwritten registration."
FIFTH: Article V of the Agreement entitled "Definitions" is hereby
renumbered as Article IV thereof and all definitions of terms no longer used in
the Agreement are hereby deleted therefrom.
SIXTH: Article VI of the Agreement entitled "Miscellaneous" is
hereby renumbered as Article V thereof.
SEVENTH: Section 6.1 of the Agreement entitled "Other Shareholder
Agreements" is hereby renumbered as Section 5.1 thereof.
-4-
<PAGE>
EIGHTH: Section 6.2 of the Agreement entitled "Payments; Notices" is
hereby renumbered as Section 5.2 thereof, retitled as "Notices" and amended and
restated in its entirety as follows:
"5.2 Notices.
-------
Each notice, request, demand and other communication
hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or three business
days after being mailed by certified or registered mail,
postage prepaid, return receipt requested, addressed as
follows (or to such other address or Person as a party may
designate by notice to the other parties):
If to the Company:
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
Attention: Vice President and
General Counsel
With a copy to:
Alan H. Finegold, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
and, if addressed to any Shareholder, at the address that
such Shareholder shall have furnished to the Company in
writing."
NINTH: SECTION 6.3 of the Agreement entitled "Assignment" is hereby
renumbered as Section 5.3 thereof and amended and restated in its entirety as
follows:
"5.3 Assignment.
----------
Except as expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of and
be enforceable by the
-5-
<PAGE>
PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS."
TENTH: Section 6.4 of the Agreement entitled "Termination of
Agreement; No Preferred Shares outstanding" is hereby deleted therefrom in its
entirety.
ELEVENTH: Section 6.5 of the Agreement entitled "Descriptive Headings"
is hereby renumbered as Section 5.4 thereof; Section 6.6 of the Agreement
entitled "Specific Performance" is hereby renumbered as Section 5.5 thereof;
Section 6.7 of the Agreement entitled "Governing Law" is hereby renumbered as
Section 5.6 thereof; Section 6.8 of the Agreement entitled "Counterparts" is
hereby renumbered as Section 5.7 thereof; Section 6.9 of the Agreement entitled
"Severability" is hereby renumbered as Section 5.8 thereof; and Section 6.10 of
the Agreement entitled "Entire Agreement" is hereby renumbered as Section 5.9
thereof.
TWELFTH: Section 6.11 of the Agreement entitled "Amendment and
Waiver" is hereby renumbered as Section 5.10 thereof and amended and restated in
its entirety as follows:
"5.10 AMENDMENT AND WAIVER.
--------------------
THIS AGREEMENT MAY BE AMENDED OR WAIVED ONLY BY THE WRITTEN
CONSENT OF THE cOMPANY."
THIRTEENTH: Section 6.12 of the Agreement entitled "Limitation of
LIABILITY" is hereby renumbered as Section 5.11 thereof.
FOURTEENTH: In all other respects, the Agreement remains in full
FORCE and effect.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the day first above written.
THE STANDARD FIRE INSURANCE COMPANY
By [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: Vice President
-------------------------------
FEDERATED INVESTORS
By [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: Vice President
-------------------------------
-7-
<PAGE>
1152
TERMINATION AGREEMENT
---------------------
THIS AGREEMENT made and entered into as of the 31st day of January in
the year 1996 by and between FEDERATED INVESTORS, a Delaware business trust
(hereinafter sometimes called "Federated"), of the one part,
a
n
d
AETNA LIFE AND CASUALTY COMPANY, a Connecticut insurance corporation
(hereinafter sometimes called "Aetna"), of the other part.
WITNESSETH THAT:
WHEREAS, under and in accordance with the provisions of the Asset
Purchase Agreement dated July 28, 1989 among Federated Investors, Standard Fire
Insurance Company and Aetna Life and Casualty Company, as amended, in Section
4.2.1 thereof, Aetna made certain covenants not to compete with Federated in
certain respects, as clarified and extended by the letter agreement dated June
12, 1992 addressed to Aetna Life and Casualty Company and Standard Fire
Insurance Company from Federated Investors (hereinafter sometimes collectively
called the "Non-Competition Covenant"); and
<PAGE>
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Aetna shall pay to Federated the sum of Four Hundred Eighty Thousand,
Four Hundred Ten and 25/100 Dollars ($480,410.25) for and in consideration of
the termination of the Non-Competition Covenant hereunder;
NOW, THEREFORE, for and in consideration of the payment by Federated
to Aetna as indicated hereinabove, Federated and Aetna, the parties to the Non-
Competition Covenant and to this Agreement, each intending to be legally bound,
do hereby terminate the Non-Competition Covenant and release each other, and
their respective affiliates, from any liability or obligation thereunder.
The parties hereto are hereby expressly put on notice of the
limitation of liability as set forth in the Restated Declaration of Federated
and agree that the obligations of Federated pursuant to this Agreement shall be
limited in any case to Federated and its assets and the parties hereto shall not
seek satisfaction of any obligation of Federated hereunder from the shareholders
of Federated, the trustees, officers or employees of Federated, or any of them.
This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Federated and Aetna, the parties hereto, have duly
executed this Agreement as of the day and year
-2-
<PAGE>
first above written.
FEDERATED:
ATTEST: FEDERATED INVESTORS
[SIGNATURE ILLEGIBLE] By [SIGNATURE ILLEGIBLE]
- -------------------------- -------------------------------
Title: Asst. Secretary Title: Vice President
-------------------- -------------------------
[Trust Seal]
AETNA:
ATTEST: AETNA LIFE AND CASUALTY COMPANY
[SIGNATURE ILLEGIBLE] By [SIGNATURE ILLEGIBLE]
- -------------------------- -------------------------------
Title: Asst Corporate Title: Executive Vice President
-------------------- -------------------------
Secretary
--------------------
(CORPORATE SEAL]
<PAGE>
EXHIBIT 4.07
COMPOSITE CONFORMED COPY
------------------------
$150,000,000 Revolving Credit
$150,000,000 Term Loan
SENIOR SECURED CREDIT AGREEMENT
Dated as of January 31, 1996,
as amended by Amendment No. 1 to Credit Agreement, dated as of June 27, 1996,
as amended by Amendment No. 2 to Credit Agreement, dated as of December 13,
1996,
by and among
FEDERATED INVESTORS
and
THE BANKS SET FORTH HEREIN
and
PNC BANK, NATIONAL ASSOCIATION, as Agent
Prepared by Buchanan Ingersoll Professional Corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. CERTAIN DEFINITIONS.................................................................... 1
1.1 Certain Definitions.............................................................. 1
1.2 Construction..................................................................... 20
1.3 Accounting Principles............................................................ 21
2. REVOLVING CREDIT AND SWING LOAN FACILITIES............................................. 21
2.1 The Commitments................................................................. 21
2.2 Nature of the Banks' and the Borrower's Obligations............................. 22
2.3 Commitment Fees................................................................. 22
2.4 Permanent Reductions of Commitments............................................. 22
2.5 Mandatory Prepayments........................................................... 23
2.6 Loan Requests................................................................... 23
2.7 Making Loans.................................................................... 24
2.8 Borrowings to Repay Swing Loans................................................. 25
2.9 Notes........................................................................... 25
2.10 Letter of Credit Subfacility.................................................... 26
2.11 Use of Proceeds................................................................. 29
3. TERM LOANS ............................................................................ 29
3.1 Term Loan Commitments........................................................... 29
3.2 Nature of Banks' Obligations with Respect to Term Loans......................... 29
3.3 Term Loan Notes................................................................. 29
3.4 Mandatory Prepayments........................................................... 30
3.5 Use of Proceeds................................................................. 31
4. INTEREST RATES......................................................................... 31
4.1 Interest Rate Options........................................................... 31
4.2 Euro-Rate Interest Periods...................................................... 33
4.3 Interest After Default.......................................................... 34
4.4 Euro-Rate Unascertainable....................................................... 34
4.5 Selection of Interest Rate Options.............................................. 35
5. PAYMENTS............................................................................... 35
5.1 Payments........................................................................ 35
5.2 Pro Rata Treatment of the Banks................................................. 36
5.3 Interest Payment Dates.......................................................... 36
5.4 Voluntary Prepayments........................................................... 36
5.5 Additional Compensation in Certain Circumstances................................ 38
5.6 Settlement Date Procedures...................................................... 39
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6. REPRESENTATIONS AND WARRANTIES.......................................................... 40
6.1 Representations and Warranties................................................... 40
6.2 Updates to Schedules............................................................. 47
7. CONDITIONS OF LENDING................................................................... 47
7.1 First Loans...................................................................... 48
7.2 Each Additional Loan............................................................. 50
8. COVENANTS............................................................................... 50
8.1 Affirmative Covenants............................................................ 50
8.2 Negative Covenants............................................................... 54
8.3 Reporting Requirements........................................................... 64
9. DEFAULT................................................................................. 67
9.1 Events of Default................................................................ 67
9.2 Consequences of Event of Default................................................. 69
9.3 Notice of Sale................................................................... 71
10. THE AGENT............................................................................... 71
10.1 Appointment...................................................................... 71
10.2 Delegation of Duties............................................................. 71
10.3 Nature of Duties; Independent Credit Investigation............................... 71
10.4 Actions in Discretion of the Agent; Instructions from the Banks.................. 72
10.5 Reimbursement and Indemnification of the Agent by the Borrower................... 72
10.6 Exculpatory Provisions........................................................... 73
10.7 Reimbursement and Indemnification of the Agent by the Banks...................... 73
10.8 Reliance by the Agent............................................................ 74
10.9 Notice of Default................................................................ 74
10.10 Notices.......................................................................... 74
10.11 PNC Bank, National Association and the Banks in Their Individual Capacities...... 74
10.12 Holders of Notes................................................................. 74
10.13 Equalization of the Banks........................................................ 75
10.14 Successor Agent.................................................................. 75
10.15 The Agent's Fee.................................................................. 76
10.16 Calculations..................................................................... 76
10.17 Beneficiaries.................................................................... 76
11. MISCELLANEOUS........................................................................... 76
11.1 Modifications, Amendments or Waivers............................................. 76
11.2 No Implied Waivers; Cumulative Remedies; Writing Required........................ 77
11.3 Reimbursement and Indemnification of the Banks by the Borrower; Taxes............ 77
11.4 Holidays......................................................................... 78
11.5 Funding by Branch, Subsidiary or Affiliate....................................... 78
11.6 Notices.......................................................................... 79
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
11.7 Severability..................................................................... 79
11.8 Governing Law.................................................................... 79
11.9 Prior Understanding.............................................................. 79
11.10 Duration; Survival............................................................... 80
11.11 Successors and Assigns........................................................... 80
11.12 Confidentiality.................................................................. 81
11.13 Counterparts..................................................................... 82
11.14 The Agent's or the Bank's Consent................................................ 82
11.15 Exceptions....................................................................... 82
11.16 Consent to Jurisdiction; Waiver of Jury Trial.................................... 82
11.17 Limitation of Liability.......................................................... 82
11.18 Tax Withholding Clause........................................................... 83
11.19 Co-Agents........................................................................ 84
</TABLE>
-iii-
<PAGE>
SCHEDULES
Schedule 1.1(a) - Commitments of the Banks
Schedule 6.1(b) - Shareholders of the Borrower and Subscription Agreements
Schedule 6.1(c) - Subsidiaries of the Borrower
Schedule 6.1(h) - Owned and Leased Property
Schedule 6.1(m) - Consents and Approvals
Schedule 6.1(o) - Licenses
Schedule 6.1(s) - Insurance
Schedule 6.1(u) - Material Contracts
Schedule 6.1(cc) - Front-End Marketing Fee Funds
Schedule 8.2(e) - Existing Indebtedness and Liens
Schedule 8.2(h) - Loans and Investments
Schedule 11.6 - Notice Information
EXHIBITS
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Security Agreement
Exhibit C - Form of Intercompany Subordination Agreement
Exhibit D - Form of Intercreditor Agreement
Exhibit E - Form of Pledge Agreement
Exhibit F - Form of Revolving Credit Note
Exhibit G - Form of Swing Note
Exhibit H-1 - Form of Revolving Credit Loan or Term Loan Request
Exhibit H-2 - Form of Swing Loan Request
Exhibit I - Form of Term Note
Exhibit J - Form of Opinion of Counsel
Exhibit K - Form of Opinion of Counsel (regarding New Subsidiaries)
Exhibit L - Form of Compliance Certificate
Exhibit M - Form of Confidentiality Agreement
Exhibit N - Form of Irrevocable Proxy
-iv-
<PAGE>
COMPOSITE CONFORMED COPY
DECEMBER 13, 1996
SENIOR SECURED
CREDIT AGREEMENT
THIS AGREEMENT dated as of January 31, 1996 by and among FEDERATED
INVESTORS, a Delaware business trust (the "Borrower"), the BANKS (as hereinafter
--------
defined), and PNC BANK, NATIONAL ASSOCIATION, a national banking association, in
its capacity as agent for the Banks under this Agreement (hereinafter referred
to in such capacity as the "Agent").
-----
WITNESSETH:
WHEREAS, the Borrower has requested the Agent and the Banks to amend
and restate the Senior Secured Reducing Revolving Credit Agreement, (the
"Existing Senior Credit Agreement") dated as of December 2, 1992 among the
--------------------------------
Borrower, the Banks set forth therein and the Agent, as amended, to provide to
the Borrower the following senior secured credit facilities: (i) a $150,000,000
revolving credit facility (the "Revolving Credit Facility") and (ii) a
-------------------------
$150,000,000 term loan facility (the "Term Loan Facility"); and
------------------
WHEREAS, the Revolving Credit Facility shall be used for general
business purposes and the Term Loan Facility shall be used to purchase all of
the outstanding Class B Shares owned by Standard Fire (the "Standard Fire
-------------
Shares") and other general business purposes including without limitation the
- ------
purchase of other Class B Shares (as permitted herein); and
WHEREAS, the Agent and the Banks are willing to amend and restate the
Existing Senior Credit Agreement upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, amend and restate the Existing Senior Credit Agreement as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
-------------------
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Aetna shall mean Aetna Life and Casualty Company.
-----
Affiliate as to any person shall mean any other person (i)
---------
which directly or indirectly controls, is controlled by, or is under common
control with such person, (ii) which beneficially owns or holds five percent
(5%) or more of any class of the voting stock of such person, or (iii) fifty
percent (50%) or more of the voting stock (or in the case of a person
<PAGE>
which is not a corporation, fifty percent (50%) or more of the equity interest)
of which is beneficially owned or held, directly or indirectly, by such person.
Agent shall mean PNC Bank, National Association and its successors.
-----
Agent's Fee shall have the meaning specified in Section 10.15.
-----------
Agreement shall mean this Senior Secured Credit Agreement, as amended
---------
and restated herein and as the same may be further supplemented, amended,
restated or modified from time to time, including all schedules and exhibits.
Assignment and Assumption Agreement shall mean an Assignment and
-----------------------------------
Assumption Agreement by and among a Purchasing Bank, the Transferor Bank and the
Agent in the form of Exhibit A.
---------
Audited Statements shall have the meaning specified in Section 6.1(i).
------------------
Authorized Officer shall mean those persons designated by written
------------------
notice to the Agent from the Borrower, authorized to execute notices, reports
and other documents required hereunder. The Borrower may amend such list of
persons from time to time by giving written notice of such amendment to the
Agent.
Banks shall mean the financial institutions named on Schedule 1.1(a)
----- ---------------
and their respective successors and assigns as permitted hereunder, each of
which is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per annum
---------
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus one-half
percent (0.50%) per annum.
Base Rate Margin shall have the meaning specified in Section 4.1(b).
----------------
Base Rate Option shall mean the Interest Rate Option set forth in
----------------
Section 4.1(a).
Base Rate Portion shall mean the portion of the Loans bearing interest
-----------------
at any time under the Base Rate Option.
Benefit Arrangement shall mean at any time an "employee benefit plan,"
-------------------
within the meaning of Section 3(3) of ERISA, which is neither a Defined Benefit
Pension Plan nor a Multiemployer Plan, but which is maintained, sponsored or
otherwise contributed to, by any member of the ERISA Group. Thus, a Benefit
Arrangement includes, e.g., an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA, a money purchase pension plan, a funded
deferred profit-sharing plan and an ESOP.
-2-
<PAGE>
Borrower shall mean Federated Investors, a Delaware business trust,
--------
and any successor corporation as permitted in Section 8.1(a).
Borrowing Date shall mean with respect to any Loan, the date for the
--------------
making thereof or the renewal or conversion thereof to the same or a different
Interest Rate Option, which shall be a Business Day, as specified in the
relevant Loan Request.
Borrowing Tranche shall mean, with respect to the Euro-Rate Portion,
-----------------
Loans to which a Euro-Rate Option applies by reason of the selection of,
conversion to or renewal of such Interest Rate Option on the same day and having
the same Euro-Rate Interest Period, and, with respect to the Base Rate Portion,
Loans to which the Base Rate Option or PNC Quoted Rate Option applies by reason
of the selection of or conversion to such Interest Rate Options.
Business Day shall mean (i) with respect to matters relating to the
------------
Euro-Rate Option, a day on which banks in the London interbank market are
dealing in U.S. Dollar deposits and on which commercial banks are open for
domestic and international business in Pittsburgh, Pennsylvania and New York,
New York and (ii) with respect to any other matter, a day on which commercial
banks are open for business in Pittsburgh, Pennsylvania and New York, New York.
Capitalized Premiums shall mean the amount of premiums paid by the
--------------------
Borrower or any Pledged Subsidiary for officers' life insurance which increase
the cash surrender value of such policies, provided the Borrower or a Pledged
--------
Subsidiary is named as a beneficiary under such policies to the extent of
premiums paid by the Borrower or such Pledged Subsidiary.
Cash Flow from Operations for each fiscal quarter for the four (4)
-------------------------
fiscal quarters then ended shall mean (i) the sum of net income, depreciation,
amortization, other non-cash charges to net income (excluding any non-cash
charges which require an accrual or reserve for cash charges for any future
period), interest expense and income tax expense minus (ii) non-cash credits to
-----
net income, in each case of the Borrower and its Consolidated Subsidiaries for
such period determined in accordance with GAAP; provided that if the Borrower
--------
and Consolidated Subsidiaries shall make one or more acquisitions of the capital
stock of any Person or all or substantially all of the assets of any Person
permitted by Section 8.2(j) during such period, Cash Flow from Operations for
such period shall be adjusted on a pro forma basis in a manner satisfactory to
---------
the Agent to give effect to all such acquisitions as if they had occurred at the
beginning of such period.
Certain Fixed Charges shall mean (A) for any period of determination
---------------------
through December 31, 1996, the sum of (i) $25,000,000, plus (ii) all dividend
----
payments after the Closing Date on the Common Shares actually paid in cash,
minus (iii) $1,250,000 multiplied by the number of fiscal quarters in 1996
- -----
through the date of determination, and (B) for any period of determination after
fiscal year 1996, the sum of (i) scheduled principal payments on all
Indebtedness of the Borrower (other than the Senior Subordinated Term Notes)
plus (ii) all dividend payments on the Common Shares actually paid in cash.
-3-
<PAGE>
Class A Shares shall mean the Class A Common Shares of the Borrower.
--------------
Class B Shares shall mean the Class B Common Shares of the Borrower.
--------------
Closing Date shall mean the Business Day on which the first Loans are
------------
to be made, which shall be January 31, 1996 or, if all the conditions specified
in Article 7 have not been satisfied or waived by such date, not later than May
8, 1996, as designated by the Borrower by at least five (5) Business Days'
advance notice to the Agent at its Principal Office, or such other date as the
parties agree. The closing shall take place on the Closing Date at the offices
of Buchanan Ingersoll Professional Corporation, 301 Grant Street, Pittsburgh,
Pennsylvania 15219, at such time as the parties shall agree.
Co-Agent shall mean Bank of America Illinois and Morgan Guaranty Trust
--------
Company of New York and their respective successors.
COBRA Violation shall mean a failure by any of the Companies to comply
---------------
with group health plan continuation coverage requirements of Sections 601 et
seq. of ERISA.
Collateral shall mean the Pledged Collateral and the UCC Collateral.
----------
Commitment Fee shall have the meaning specified in Section 2.3.
--------------
Commitment shall mean as to any Bank the aggregate of its Revolving
----------
Credit Commitment and Term Loan Commitment, and Commitments shall mean the
-----------
aggregate of the Revolving Credit Commitments and Term Loan Commitments of all
of the Banks.
Common Shares shall mean the Class A Shares and Class B Shares.
-------------
Companies shall mean the Borrower and its Subsidiaries.
---------
Consolidated Subsidiaries shall mean and include those Subsidiaries
-------------------------
whose accounts are consolidated with the accounts of the Borrower in accordance
with GAAP.
Control or control shall mean the possession, directly or indirectly,
------- -------
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be.
Controlled Group shall mean (i) the controlled group of corporations
----------------
as defined in Section 1563 of the Internal Revenue Code and regulations
thereunder, and (ii) the group of trades or businesses under common control as
defined in Section 414(c) of
-4-
<PAGE>
the Internal Revenue Code and regulations thereunder, in the case of either
clause (i) or (ii), of which the Borrower or any Subsidiary is a part or may
become a part.
Debt Service Coverage Ratio shall mean the ratio of EBDA to Certain
---------------------------
Fixed Charges.
Declaration of Trust shall mean the Restated Declaration of Trust of
--------------------
the Borrower dated as of July 28, 1989, as the same may be supplemented or
amended from time to time in accordance herewith.
Defined Benefit Pension Plan shall mean at any time an employee
----------------------------
pension benefit plan (including a Multiple Employer Plan but not a Multiemployer
Plan) which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code and either (i) is
maintained by any member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five (5) years been
maintained by any entity which was at such time a member of the ERISA Group for
employees of any entity which was at such time a member of the ERISA Group.
Designated Assets shall mean the right to receive deferred sales
-----------------
charges, including 12b-1 and contingent deferred sales charges, and any
comparable fees from a Fund.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money
-----------------------------
of the United States of America.
EBDA shall mean, for any period of determination, (i) the sum of net
----
income, depreciation, amortization, other non-cash charges to net income
(excluding any non-cash charges which require an accrual or reserve for cash
charges for any future period), minus (ii) non-cash credits to net income, in
-----
each case of the Borrower and its Consolidated Subsidiaries for such period
determined in accordance with GAAP.
Environmental Complaint shall mean any written complaint setting forth
-----------------------
a cause of action for personal or property damage or equitable relief arising
under any Environmental Law, an order, notice of violation, citation, request
for information issued pursuant to any Environmental Laws by an Official Body, a
subpoena or other written notice of any type relating to, arising out of, or
issued pursuant to any Environmental Law.
Environmental Laws shall mean all federal, state, local or foreign
------------------
laws and regulations, including permits, orders, judgments, consent decrees
issued, or entered into, pursuant thereto, relating to pollution or protection
of human health or the environment.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
-5-
<PAGE>
ERISA Group shall mean, at any time, the Borrower and all members of a
-----------
Controlled Group.
ESOP shall mean an employee stock ownership plan.
----
Equity Offering shall mean any offering or placement of any equity
---------------
securities of the Borrower excluding Class B Shares issued to employees of the
Borrower or any of its Subsidiaries under the Profit-Sharing Trust, stock
options, an ESOP or other employee stock arrangements or any equity securities
given as consideration in connection with any investment or acquisition
permitted under Sections 8.2 (h)(iii) or 8.2 (j)(iii).
Equity Offering (Subsidiary) shall mean any offering or placement of
----------------------------
any equity securities of any Subsidiary of the Borrower.
Euro-Rate shall mean with respect to the Loans comprising any
---------
Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,
the interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upward to the nearest 1/100 of 1% per annum) (i) the average,
rounded upward to the nearest 1/100 of 1% per annum, of the Euro-Rates set forth
on the "LIBO" page of the Reuters Monitor Money Rate Service (or any successor)
----
at approximately 11:00 a.m. London time two (2) Business Days prior to the first
day of such Euro-Rate Interest Period for delivery on the first day of such
Interest Period in amounts comparable to such Borrowing Tranche and having
maturities comparable to such Interest Period by (ii) a number equal to 1.00
minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by
- -----
the following formula:
Euro-Rate = [average of Euro-Rates set forth on LIBO page of
the Reuters Monitor Money Rate Service]
---------------------------------------
1.00 - Euro-Rate Reserve Percentage
Euro-Rate Interest Periods shall have the meaning specified in Section
--------------------------
4.2.
Euro-Rate Margin shall have the meaning specified in Section 4.1(b).
----------------
Euro-Rate Option shall mean the Interest Rate Option set forth in
----------------
Section 4.1(b).
Euro-Rate Portion shall mean the portion of the Revolving Credit Loans
-----------------
and Term Loans bearing interest at any time under the Euro-Rate Option.
Euro-Rate Reserve Percentage shall mean the maximum percentage
----------------------------
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent (which determination shall be conclusive absent manifest error)
which is in effect during any relevant period (or, if more than one such
percentage shall be applicable, the daily average of such percentages for those
days in such period during which any such percentages shall be so applicable),
as prescribed by the Board of Governors of the Federal Reserve System
-6-
<PAGE>
(or any successor) for determining the reserve requirements (including
supplemental, marginal and emergency reserve requirements) with respect to
eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a
------------------------
member bank in the Federal Reserve System.
Event of Default shall mean any of the Events of Default described in
----------------
Section 9.1.
Excess Cash Flow shall be computed as of the close of each fiscal year
----------------
by taking the positive difference (if any) between Cash Flow from Operations for
such fiscal year and the sum of Fixed Charges and Net Broker Fees for such
fiscal year.
Existing Senior Credit Agreement shall have the meaning given to such
--------------------------------
term in the first recital clause.
Federal Funds Effective Rate for any day shall mean the rate per annum
----------------------------
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
-------------
Effective Rate" as of the date of this Agreement; provided, if such Federal
- -------------- --------
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
----------------------------
Rate for the last day on which such rate was announced.
Federated Bank shall mean Federated Bank and Trust, a state chartered
--------------
bank under the laws of New Jersey.
FII shall mean Federated Investors, Inc., a Pennsylvania corporation.
---
Financial Statements Derived from Assumptions shall have the meaning
---------------------------------------------
specified in Section 6.1(i).
Financing Agreement shall mean the Financing Agreement dated as of
-------------------
August 1, 1989 initially between WCC and the Borrower, as amended through the
date hereof and as further amended from time to time in accordance herewith.
Fixed Charges shall mean for any period of determination the sum of
-------------
(i) interest expense paid or payable by the Borrower and its Consolidated
Subsidiaries, (ii) income taxes (net of any deferred portion) paid or payable by
the Borrower and its Consolidated Subsidiaries, (iii) all scheduled principal
payments and permitted principal prepayments (to the extent such prepayments are
actually paid in cash) on all Indebtedness of the Borrower under the Senior
Subordinated Term Notes, (iv) scheduled principal payments on all Indebtedness
of the Borrower other than under the Senior Subordinated Term Notes, (v) all
dividend payments on the Common Shares and the Preferred Shares, actually paid
in cash, (vi) payments by the Companies under any interest rate protection
agreement, payments under
-7-
<PAGE>
capitalized leases, capital expenditures (but excluding, to the extent
applicable, the Permitted Acquisition Payment), payments against deferred
compensation obligations (exclusive of any Capitalized Premiums), in each case
under this clause (vi) of the Borrower and its Consolidated Subsidiaries for
such period determined and consolidated in accordance with GAAP as actually made
in cash. For purposes of calculating Fixed Charges, (a) scheduled principal
installments of the Loans do not include Mandatory Prepayments of Excess Cash
Flow and (b) scheduled principal installments of the Loans which are due and
payable on the second Business Day of each fiscal quarter shall be deemed to be
paid or payable during the fiscal quarter immediately preceding the quarter in
which such payments are actually due.
Fund Fees shall mean the management, administrative, shareholder
---------
services, 12b-1, back-end and other similar fees contractually due any of the
Companies.
Funds shall mean the mutual funds for which any of the Companies
-----
serves as an advisor, an administrator, a distributor, a transfer agent, a
portfolio or fund accountant, or a clearing servicer.
GAAP shall mean generally accepted accounting principles as are in
----
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis (except for changes in application in which the Borrower's
independent certified public accountants concur) both as to classification of
items and amounts.
Governmental Acts shall have the meaning given to such term in Section
-----------------
2.10(h).
Grantors shall mean the Borrower and certain of its Subsidiaries who
--------
are signatories to the Security Agreement as indicated in Exhibit B.
---------
Guaranty of any person shall mean any obligation of such person
--------
guaranteeing or in effect guaranteeing any liability or obligation of any other
person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
Historical Statements shall have the meaning specified in Section
---------------------
6.1(i).
ICI Contingency shall have the meaning specified in Section 6.1(i).
---------------
Indebtedness shall mean as to any person at any time, any and all
------------
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations under any letter of
credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate protection device, (iv) any other transaction
(including forward sale or purchase agreements,
-8-
<PAGE>
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Insurance Subsidiaries shall mean Federated Reinsurance Limited, an
----------------------
Irish corporation owned by FII and FII Holdings, Inc., and any other
corporation, business trust or other entity which is (i) organized under the
laws of Ireland or any other foreign jurisdiction acceptable to the Agent in its
sole discretion, (ii) formed to engage in the limited activity permitted by
Section 8.2(p)(i), and (iii) wholly owned by one or more Pledging Subsidiaries,
provided, that if the Insurance Subsidiary is organized under the law of a
- --------
foreign jurisdiction which requires that residents of such foreign jurisdiction
maintain a certain level of ownership interest in such Insurance Subsidiary,
then not less than 98% of the outstanding shares of such Insurance Subsidiary
shall be owned by one or more Pledging Subsidiaries.
Intercompany Subordination Agreement shall mean the Intercompany
------------------------------------
Subordination Agreement in the form of Exhibit C executed and delivered by the
---------
Companies to the Agent for the benefit of the Banks.
Intercreditor Agreement shall mean the Amended and Restated
-----------------------
Intercreditor and Subordination Agreement among the Junior Creditors and the
Agent for the benefit of the Banks in the form of Exhibit D.
---------
Intercreditor Agreement (Senior Notes) shall mean the Intercreditor
--------------------------------------
Agreement between the Agent for the benefit of the Banks and the holders of the
Senior Notes to be executed in connection with the Senior Notes which
Intercreditor Agreement (Senior Notes) shall be on terms satisfactory to the
Agent.
Interest Payment Date shall mean each date specified for the payment
---------------------
of interest in Section 5.3.
Interest Rate Option shall mean the Euro-Rate Option, the Base Rate
--------------------
Option or the PNC Quoted Rate Option.
Interim Statements shall have the meaning specified in Section 6.1(i).
------------------
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as
---------------------
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
Investment Company Act shall mean the Investment Company Act of 1940,
----------------------
as the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
-9-
<PAGE>
IPO shall mean an initial public offering of the Class B Shares which
---
results in at least 20% of the outstanding Class B Shares (after giving effect
to such initial public offering) being listed on a national exchange.
IRS shall mean the Internal Revenue Service.
---
Junior Creditors shall mean The Travelers Insurance Company and
----------------
Shamrock Partners, L.P.
Junior Creditors Intercompany Subordination Agreement shall mean the
-----------------------------------------------------
Intercompany Subordination Agreement dated as of August 1, 1989 among the
Companies initially in favor of WCC, as amended in accordance herewith.
Labor Contracts shall have the meaning specified in Section 6.1(u).
---------------
Law shall mean any law (including common law), constitution, statute,
---
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Letter of Credit shall have the meaning assigned to that term in
----------------
Section 2.10(a).
Letter of Credit Fee shall have the meaning assigned to that term in
--------------------
Section 2.10(c).
Letter of Credit Outstandings shall mean at any time the sum of (i)
-----------------------------
the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations.
Leverage Ratio shall mean the ratio of Total Indebtedness to Cash
--------------
Flow from Operations.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
Limited Investments shall mean the following: (i) investments or
-------------------
contributions by a Loan Party directly or indirectly in the capital stock of or
other payments (except in connection with transactions for fair value in the
ordinary course of business, including usual and customary service and occupancy
contracts) to any of the Limited Purpose Subsidiaries, (ii) loans by a Loan
Party directly or indirectly to any of the Limited Purpose Subsidiaries, (iii)
guarantees by a Loan Party directly or indirectly of the obligations of any of
the Limited Purpose Subsidiaries, or (iv) other obligations, contingent or
otherwise, of the Loan Parties to or for the benefit of any of the Limited
Purpose Subsidiaries.
-10-
<PAGE>
Limited Purpose Subsidiaries shall mean, collectively, the Insurance
----------------------------
Subsidiaries and the Special Purpose Subsidiaries.
Loan Parties shall mean the Pledgors and the Companies.
------------
Loan Request shall mean a Revolving Credit or Swing Loan Request made
------------
in accordance with Section 2.6(a) or 2.6(b) respectively, or, with respect to a
Revolving Credit Loan or Term Loan, a request to select, convert to or renew a
Euro-Rate Option in accordance with Section 4.2.
Loans shall mean collectively and Loan shall mean separately all
----- ----
Revolving Credit Loans, Swing Loans and Term Loans or any Revolving Credit Loan,
Swing Loan or Term Loan.
Management-Related Shareholders shall mean the persons or entities
-------------------------------
identified as such on Schedule 6.1(b).
---------------
Management Shareholders shall mean the eleven (11) individuals
-----------------------
identified as such on Schedule 6.1(b).
---------------
Mandatory Prepayment Date shall have the meaning specified in Section
-------------------------
3.4(a).
Mandatory Prepayment of Excess Cash Flow shall have the meaning
----------------------------------------
specified in Section 3.4(a).
Material Adverse Change shall mean any set of circumstances or events
-----------------------
which (i) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Senior Loan Document, (ii) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Companies, (iii) impairs materially or
could reasonably be expected to impair materially the ability of any of the
Companies to pay punctually its Indebtedness or perform any other obligations in
connection with its Indebtedness, or (iv) impairs materially or could reasonably
be expected to impair materially the ability of the Agent or any of the Banks,
to the extent permitted, to enforce their legal remedies pursuant to this
Agreement or any other Senior Loan Document.
Month, with respect to a Euro-Rate Interest Period, shall mean the
-----
interval between the days in consecutive calendar months numerically
corresponding to the first day of such Euro-Rate Interest Period. Any Euro-Rate
Interest Period which begins on the last Business Day of a calendar month for
which there is no numerically corresponding Business Day in the subsequent
calendar month shall end on the last Business Day of such subsequent month.
Multiemployer Plan shall mean any employee benefit plan which is a
------------------
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower, any Subsidiary of the Borrower or any member of the ERISA
Group is then making or
-11-
<PAGE>
accruing an obligation to make contributions or, within the preceding five (5)
plan years, has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Defined Benefit Pension Plan which
----------------------
has two (2) or more contributing sponsors (including the Borrower or any member
of the ERISA Group) at least two (2) of whom are not under common control, as
such a plan is described in Sections 4063 and 4064 of ERISA.
Net Broker Fees shall mean the difference between front-end marketing
---------------
fees paid to broker-dealers by the Companies and back-end fees paid to the
Companies on any redemption occurring within a period requiring payments of such
back-end fees.
Notes shall mean the Revolving Credit Notes, the Swing Note and the
-----
Term Notes.
Official Body shall mean any national, federal, state, local or other
-------------
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Passport shall mean Passport Research Ltd., an indirect Subsidiary of
--------
the Borrower.
PBGC shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisition Payment shall have the meaning given to such
-----------------------------
term in Section 8.2(j)(iii).
Permitted Investments shall mean:
---------------------
(i) investments made under usual and customary terms in the
ordinary course of business in or relating to the establishment or maintenance
of the Funds;
(ii) direct obligations of the United States of America or any
agency or instrumentality thereof or obligations backed by the full faith and
credit of the United States of America, maturing in twelve (12) months or less
from the date of acquisition;
(iii) commercial paper maturing in one hundred eighty (180) days or
less rated not lower than A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service on the date of acquisition;
(iv) demand deposits, time deposits or certificates of deposit
maturing within one (1) year in commercial banks whose obligations are rated A-
1, P-1 or the equivalent or better by Standard & Poor's Corporation or Moody's
Investors Service on the date of acquisition;
-12-
<PAGE>
(v) corporate obligations rated A or better by Standard & Poor's
Corporation or Moody's Investors Service on the date of acquisition, provided
--------
such obligations shall not be held by any of the Companies for more than one (1)
year;
(vi) repurchase agreements and reverse repurchase agreements
maturing within one (1) year and entered into with commercial banks or
investment banking firms of recognized standing with respect to any investment
permitted under clauses (i) through (v) above; and
(vii) the interest rate protection agreement described in Section
8.1(o) and any other interest rate protection instrument reasonably acceptable
to the Agent.
Permitted Liens shall mean:
---------------
(i) Liens for taxes, assessments, or similar charges, incurred in
the ordinary course of business and which are not yet due and payable;
(ii) pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pensions
or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or
other like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable and Liens of landlords securing
obligations to pay lease payments that are not yet due and payable or in
default;
(iv) (A) good-faith pledges or deposits made in the ordinary course
of business to secure performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business and (B) Liens granted to surety companies or to financial institutions
to secure standby letters of credit issued by such institutions to surety
companies as an inducement for such surety companies to issue or maintain
existing surety, appeal, indemnity, performance or other similar bonds required
in the ordinary course of business;
(v) encumbrances consisting of zoning restrictions, easements or
other restrictions on the use of real property, none of which materially impairs
the use of such property or the value thereof, and none of which is violated in
any material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of (A) the
Agent for the benefit of the Banks and (B) the holders of the Senior Notes
provided, any liens, security interests or mortgages in favor of the holders or
- --------
the Senior Notes shall relate only to the Collateral or any portion thereof and
not to any other assets or property of any nature not included in the
Collateral;
-13-
<PAGE>
(vii) any Lien existing on the date of this Agreement and described
on Schedule 8.2(e), provided that the principal amount secured thereby as of the
--------------- --------
Closing Date is not hereafter increased and no additional assets become subject
to such Lien;
(viii) capital and operating leases as and to the extent permitted in
Sections 8.2(n) and (o);
(ix) the following, (A) if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and in either case they do not affect the
Collateral or result in a Material Adverse Change:
(1) claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that each of the
--------
Companies maintains such reserves or other appropriate provisions as
shall be required by GAAP and pays all such taxes, assessments or
charges forthwith upon the commencement of proceedings to foreclose
any such Lien;
(2) claims, Liens or encumbrances upon, and defects of title
to, real or personal property other than the Collateral, including any
attachment of personal or real property or other legal process prior
to adjudication of a dispute on the merits;
(3) claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens; or
(4) Liens of governmental entities arising under federal or
state environmental laws.
Person or person shall mean any individual, corporation, partnership,
------ ------
association, joint-stock company, trust, unincorporated organization, joint
venture, government or political subdivision or agency thereof, or any other
entity.
Pledge Agreement shall mean the Pledge Agreement in the form of
----------------
Exhibit E executed and delivered by the Pledgors to the Agent for the benefit of
- ---------
the Banks as security for the Loans.
Pledged Collateral shall mean that portion of the Collateral which
------------------
consists of the issued and outstanding shares of capital stock, beneficial
interests or partnership interests of the Companies and related items which are
pledged under the Pledge Agreement.
Pledged Shares shall mean that portion of the Pledged Collateral which
--------------
consists of all of the issued and outstanding Class A Shares.
-14-
<PAGE>
Pledged Subsidiary shall mean a Subsidiary (other than Passport) of
------------------
the Borrower whose outstanding capital stock or shares of beneficial interest or
partnership interests are pledged to the Agent for the benefit of the Banks
under the Pledge Agreement.
Pledging Subsidiaries shall mean FII, FII Holdings, Inc., Federated
---------------------
Services Company, FS Holdings, Inc. and Federated Shareholder Services Company.
Pledgors shall mean the Borrower, the Pledging Subsidiaries and the
--------
holders of the Class A Shares.
PNC shall mean PNC Bank, National Association and its successors and
---
assigns.
PNC Quoted Rate Option shall mean the Interest Rate Option set forth
----------------------
in Section 4.1(b-1).
Potential Default shall mean any event or condition which with notice,
-----------------
passage of time or a determination by the Agent, all the Banks or the Required
Banks, or any combination of the foregoing, as the case may be, would constitute
an Event of Default.
Preferred Shares shall mean the Series A Preferred Shares, the Series
----------------
B Preferred Shares and the Series C Preferred Shares.
Principal Office shall mean the main banking office of the Agent in
----------------
Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable perfected
-----------------------
first priority security interest under the Uniform Commercial Code in the UCC
Collateral and the Pledged Collateral which is subject only to Liens for taxes
not yet due and payable to the extent such prospective tax payments are given
priority by statute as permitted hereunder.
Profit-Sharing Trust shall mean the Federated Investors, Inc.
--------------------
Employees Profit-Sharing Trust.
Prohibited Transaction shall mean any prohibited transaction as
----------------------
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Proxies shall mean those certain Irrevocable Proxies executed and
-------
delivered to the Agent on behalf of the Banks in connection with the closing of
the Existing Senior Credit Agreement by certain holders of the Class B Shares
and the replacement Irrevocable Proxies in the form of Exhibit N which are to be
---------
executed and delivered, in connection with the merger of the Borrower into FII,
to the Agent on behalf of the Banks by the holders of the Class B Shares
pursuant to Section 8.1(a).
Purchasing Bank shall mean a Bank which becomes a party to this
---------------
Agreement by executing an Assignment and Assumption Agreement.
-15-
<PAGE>
Ratable Share shall mean the proportion that a Bank's Commitment bears
-------------
to the Commitments of all the Banks.
Regulation U shall mean Regulation U, T, G or X as promulgated by the
------------
Board of Governors of the Federal Reserve System, as amended from time to time.
Reimbursement Obligations shall have the meaning given to such term in
-------------------------
Section 2.10(d)(i).
Reportable Event shall mean (i) a reportable event described in
----------------
Section 4043 of ERISA and regulations thereunder with respect to a Defined
Benefit Pension Plan, (ii) a withdrawal by a substantial employer from a Defined
Benefit Pension Plan to which more than one employer contributes, as referred to
in Section 4063(b) of ERISA, or (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of plan participants to be separated from
employment, as referred to in Section 4062(f) of ERISA.
Required Banks shall mean (i) if there are no Loans outstanding, Banks
--------------
whose Commitments aggregate at least 66 2/3% of the total Commitments of all
Banks, or (ii) if there are Loans outstanding, Banks, the total principal amount
of whose Loans outstanding aggregate at least 66 2/3% of the total principal
amount of the Loans outstanding hereunder as of the immediately preceding
Settlement Date; provided in both clause (i) and (ii), the percentage shall be
--------
60% at any time that PNC's Ratable Share is greater than 33 1/3%.
Restricted Stock shall mean the Class B Shares issued under and in
----------------
accordance with the Federated Investors Employee Restricted Stock Plan.
Revolving Credit Commitment shall mean, as to any Bank at any time,
---------------------------
the amount initially set forth opposite its name on Schedule 1.1(a) in the
---------------
column labeled "Amount of Commitment for Revolving Credit Loans" and thereafter
on Schedule I to the most recent Assignment and Assumption Agreement, and
Revolving Credit Commitments shall mean the aggregate Revolving Credit
- ----------------------------
Commitments of all of the Banks.
Revolving Credit Expiration Date shall mean January 31, 2001.
--------------------------------
Revolving Credit Facility shall have the meaning given to such term in
-------------------------
the first recital clause.
Revolving Credit Loan Request shall mean a request for Revolving
-----------------------------
Credit Loans made in accordance with Section 2.6(a).
Revolving Credit Loans shall mean collectively all, and Revolving
----------------------
Credit Loan shall mean separately any, of the revolving credit loans made by the
Banks or one of the Banks to the Borrower pursuant to Section 2.1(a).
Revolving Credit Notes shall mean collectively all, and Revolving
---------------------- ---------
Credit Note shall mean separately any, of the Revolving Credit Notes of the
- -----------
Borrower in the form of Exhibit F, evidencing the Revolving Credit Loans
---------
together with all amendments,
-16-
<PAGE>
restatements, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of the
------------------------
Revolving Credit Loans and Swing Loans outstanding and the Letter of Credit
Outstandings.
Section 12b-1 Plan shall mean a plan of distribution adopted by a
------------------
mutual fund pursuant to Rule 12b-1 of the Investment Company Act.
Security Agreement shall mean the Security Agreement in the form of
------------------
Exhibit B executed and delivered by the Grantors to the Agent for the benefit of
- ---------
the Banks as security for the Loans.
Senior Loan Documents shall mean this Agreement, the Notes, the
---------------------
Intercompany Subordination Agreement, the Security Agreement, the Pledge
Agreement, the Intercreditor Agreement, the Proxies, the Intercreditor Agreement
(Senior Notes) and any other instruments, certificates, powers of attorney or
documents delivered or contemplated to be delivered thereunder or in connection
herewith, as the same may be supplemented or amended from time to time in
accordance herewith, and Senior Loan Document shall mean any of the Senior Loan
--------------------
Documents.
Senior Notes shall have the meaning given such term in Section 8.2(e)
------------
(ii).
Senior Subordinated Term Notes shall mean the Third Amended and
------------------------------
Restated Senior Subordinated Term Notes of the Borrower dated June 16, 1994
payable to the Junior Creditors in the aggregate amount of $25,000,000.
Series A Preferred Shares shall mean the Series A Cumulative
-------------------------
Convertible Preferred Shares of the Borrower.
Series B Preferred Shares shall mean the Series B Cumulative Preferred
-------------------------
Shares of the Borrower.
Series C Preferred Shares shall mean the Series C Preferred Shares of
-------------------------
the Borrower.
Settlement Date shall mean the second Business Day of each month and
---------------
the third Wednesday of each month (if such day is a Business Day and if not, the
next succeeding Business Day) and any other Business Day on which the Agent
elects to effect settlement pursuant to Section 5.6.
Shareholder Rights Agreement shall mean the Shareholder Rights
----------------------------
Agreement dated August 1, 1989 among Standard Fire, the Borrower and the persons
executing a letter substantially in the form of Exhibit A thereto, as amended
---------
through the Closing Date and as the same may be further amended from time to
time in accordance herewith.
-17-
<PAGE>
Solvent shall mean, with respect to any person on a particular date,
-------
that on such date (i) the fair value of the property of such person is greater
than the total amount of liabilities, including contingent liabilities, of such
person, (ii) the present fair salable value of the assets of such person is not
less than the amount that will be required to pay the probable liability of such
person on its debts as they become absolute and matured, (iii) such person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course
of business, (iv) such person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such person's ability to pay as such
debts and liabilities mature, and (v) such person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such person is engaged. In computing the amount of contingent liabilities at
any time, it is intended that such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
Special Purpose Subsidiary shall mean any corporation, business trust
--------------------------
or other entity formed by the Borrower to engage in the limited activities
permitted by Section 8.2(p)(ii) and shall be an indirect wholly owned subsidiary
of the Borrower, provided, that if the Special Purpose Subsidiary is organized
--------
under the law of a foreign jurisdiction which requires that residents of such
foreign jurisdiction maintain a certain level of ownership interest in such
Special Purpose Subsidiary, then not less than 98% of the outstanding shares of
such Special Purpose Subsidiary shall be owned by a wholly owned Subsidiary of
the Borrower.
Standard Fire shall mean The Standard Fire Insurance Company, an
-------------
indirect wholly owned subsidiary of Aetna.
Standard Fire Shares shall have the meaning set forth in the second
--------------------
recital clause.
Stock Purchase Agreement shall mean the Federated Investors Stock
------------------------
Purchase Agreement dated December 21, 1995 by and among the Borrower, FII,
Standard Fire and Aetna.
Subordinated Loan Documents shall mean the Financing Agreement, the
---------------------------
Senior Subordinated Term Notes, the Junior Creditors Intercompany Subordination
Agreement, the Subordinated Pledge Agreement, the Intercreditor Agreement, and
all other instruments, certificates or documents delivered thereunder or in
connection therewith, as the same may be supplemented or amended from time to
time in accordance herewith.
Subordinated Pledge Agreement shall mean the Stock Pledge Agreement
-----------------------------
dated as of August 1, 1989 among the Borrower, the Pledging Subsidiaries and,
initially, WCC, as amended in accordance herewith.
Subsidiary of any person at any time shall mean (i) any corporation or
----------
trust of which fifty percent (50%) or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election
-18-
<PAGE>
of one or more directors or trustees (regardless of any contingency which does
or may suspend or dilute the voting rights) is at such time owned directly or
indirectly by such person or one or more of such person's Subsidiaries, or any
partnership of which such person is a general partner or of which fifty percent
(50%) or more of the partnership interests is at the time directly or indirectly
owned by such person or one or more of such person's Subsidiaries, and (ii) any
corporation, trust, partnership or other entity which is controlled or capable
of being controlled by such person or one or more of such person's Subsidiaries.
For the purposes of this Agreement, none of the Special Purpose Subsidiaries or
the Funds shall be considered a "Subsidiary" of the Borrower. For the purposes
of this Agreement, the term "wholly owned Subsidiaries" shall include (i) all
Subsidiaries of which all of the outstanding shares of capital stock or
beneficial interest of such Subsidiary are owned by the Borrower or another
wholly owned Subsidiary of the Borrower, or (ii) foreign Subsidiaries where the
law of the applicable foreign jurisdiction requires that residents of such
foreign jurisdiction maintain a certain level of ownership interest in such
Subsidiary and not less than 98% of the outstanding shares of capital stock or
beneficial interests of such Subsidiary are owned by the Borrower or another
wholly owned Subsidiary of the Borrower.
Subsidiary Shares shall have the meaning specified in Section 6.1(c).
-----------------
Swing Loan Commitment shall mean PNC's commitment to make Swing Loans
---------------------
to the Borrower pursuant to Section 2.1(b) in an aggregate principal amount up
to $15,000,000.
Swing Loan Request shall mean a request for Swing Loans made in
------------------
accordance with Section 2.6(b).
Swing Loans shall mean collectively and Swing Loan shall mean
----------- ----------
separately all swing loans or any swing loan made by PNC to the Borrower
pursuant to Section 2.1(b).
Swing Note shall mean the Swing Note of the Borrower in the form of
----------
Exhibit G, evidencing the Swing Loans, together with all amendments, extensions,
- ---------
renewals, restatements, refinancings or refundings thereof in whole or in part.
Term Loan Commitment shall mean, as to any Bank at any time, the
--------------------
amount initially set forth opposite its name on Schedule 1.1(a) in the column
---------------
labeled "Amount of Commitment for Term Loans," and thereafter on Schedule I to
the most recent Assignment and Assumption Agreement, and Term Loan Commitments
shall mean the aggregate Term Loan Commitments of all of the Banks.
Term Loan Facility shall have the meaning given to such term in the
------------------
first recital clause.
Term Loan Maturity Date shall mean January 31, 2001.
-----------------------
-19-
<PAGE>
Term Loans shall mean collectively and Term Loan shall mean
---------- ---------
separately all term loans or any term loan made by the Banks or one of the Banks
to the Borrower pursuant to Section 3.1.
Term Notes shall mean collectively and Term Note shall mean
---------- ---------
separately all of the Term Notes of the Borrower in the form of Exhibit I
---------
evidencing the Term Loans together with all amendments, extensions, renewals,
restatements, replacements, refinancings or refunds thereof in whole or in part.
Termination Dividend shall mean the dividend paid to Aetna or
--------------------
Standard Fire on the Closing Date in connection with the conversion of Standard
Fire's Series A Preferred Shares into Class B Shares.
Total Indebtedness shall mean, for any fiscal quarter for the
------------------
fiscal quarter then ended, all Indebtedness of the Borrower and its Consolidated
Subsidiaries.
Transferor Bank shall mean the selling Bank pursuant to an
---------------
Assignment and Assumption Agreement.
UCC Collateral shall mean that portion of the Collateral which
--------------
consists of the property of the Companies in which security interests are
granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to that
-----------------------
term in Section 6.1(p).
Unpledged Shares shall mean all of the issued and outstanding
----------------
shares of capital stock of the Borrower other than the Class A Shares.
WCC shall mean Westinghouse Credit Corporation.
---
1.2 Construction.
------------
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole, "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation." References in this Agreement to "determination" of or by
the Agent or the Banks shall be deemed to include good-faith estimates by the
Agent or the Banks (in the case of quantitative determinations) and good-faith
beliefs by the Agent or the Banks (in the case of qualitative determinations).
Whenever the Agent or the Banks are granted the right herein to act in its or
their sole discretion or to grant or withhold consent, such right shall be
exercised in good faith. The words "hereof," "herein," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The section headings and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the construction
of this Agreement or the interpretation thereof in any respect. Section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
-20-
<PAGE>
1.3 Accounting Principles.
---------------------
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP. If one or more changes in GAAP after the date of
this Agreement are required to be applied to then existing transactions, and
either a violation of one or more provisions hereof shall have occurred which
would not have occurred if no change in accounting principles had taken place or
a violation of one or more of the provisions hereof shall not occur which would
have occurred if no change in accounting principles had taken place:
(a) the parties agree that any such violation shall not be
considered to constitute an Event of Default for a period of thirty (30) days;
(b) the parties agree in such event to negotiate in good faith
to attempt to draft an amendment of this Agreement satisfactory to the Required
Banks which shall approximate to the extent possible the economic effect of the
original provisions hereof after taking into account such change or changes in
GAAP; and
(c) if the parties are unable to negotiate such an amendment
satisfactory to the Required Banks within thirty (30) days, then as used in this
Agreement "GAAP" shall mean generally accepted accounting principles as in
effect prior to such change.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
------------------------------------------
2.1 The Commitments.
---------------
(a) Revolving Credit Commitments. Subject to the terms and
----------------------------
conditions hereof and relying upon the representations and warranties herein set
forth, each Bank severally agrees to make Revolving Credit Loans to the Borrower
at any time or from time to time on or after the date hereof to, but not
including, the Revolving Credit Expiration Date in an aggregate principal amount
not to exceed, at any one time such Bank's Revolving Credit Commitment minus
-----
such Bank's Ratable Share of the Letter of Credit Outstandings. Within such
limits of time and amount and subject to the other provisions of this Agreement,
the Borrower may borrow, repay and reborrow pursuant to this Section 2.1(a).
(b) Swing Loan Commitment. Subject to the terms and conditions
---------------------
hereof and relying upon the representations and warranties herein set forth, and
in order to facilitate loans and repayments between Settlement Dates, PNC may
make, at its option, cancelable at any time for any reason whatsoever, swing
loans (the "Swing Loans") to the Borrower at any time or from time to time after
-----------
the date hereof to, but not including, the Revolving Credit Expiration Date in
an aggregate principal amount up to $20,000,000 (the "Swing Loan Commitment"),
---------------------
provided that the aggregate principal amount of PNC's Swing Loans and the
- --------
Revolving Credit Loans of all the Banks at any one time outstanding shall not
-21-
<PAGE>
exceed the Revolving Credit Commitments of all the Banks. Within such limits of
time and amount and subject to the other provisions of this Agreement, the
Borrower may borrow, repay and reborrow pursuant to this Section 2.1(b).
2.2 Nature of the Banks' and the Borrower's Obligations.
---------------------------------------------------
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.6 in accordance with its Ratable
Share. The aggregate of each Bank's Revolving Credit Loans outstanding
hereunder to the Borrower at any time shall never exceed its Revolving Credit
Commitment minus its Ratable Share of the Letter of Credit Outstandings at such
-----
time. The obligations of each Bank hereunder are several. The failure of any
Bank to perform its obligations hereunder shall not affect the obligations of
the Borrower to any other party nor shall any other party be liable for the
failure of such Bank to perform its obligations hereunder. The Banks shall have
no obligation to make Revolving Credit Loans hereunder on or after the Revolving
Credit Expiration Date.
2.3 Commitment Fees.
---------------
Accruing from the Closing Date until the Revolving Credit Expiration
Date, the Borrower agrees to pay to the Agent for the account of each Bank, as
consideration for such Bank's Revolving Credit Commitment hereunder, a
commitment fee (the "Commitment Fee") equal to a percentage per annum (computed
--------------
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) which shall be based upon the Leverage Ratio for the immediately
preceding fiscal quarter, as shown on the Borrower's most recently delivered
financial statements pursuant to Section 8.3(b) (except as otherwise set forth
in Section 4.1(c)), as follows, on the average daily unborrowed amount of such
Bank's Revolving Credit Commitment as the same may be constituted from time to
time (for purposes of this computation, PNC's Swing Loans shall be deemed to be
borrowed amounts under its Revolving Credit Commitment, Letter of Credit
Outstandings shall be deemed to be borrowed amounts under each Bank's Revolving
Credit Commitments in accordance with its Ratable Share, and the amount of any
Revolving Credit Loans that any Bank wrongfully fails to fund shall not be
deemed to be an unborrowed amount under such Bank's Revolving Credit
Commitment):
Leverage Ratio Commitment Fee (%)
-------------- ------------------
greater than or equal to 3.0 .375%
less than 3.0 .25%
All Commitment Fees shall be payable in arrears on the second Business Day of
each April, July, October and January after the date hereof and on the Revolving
Credit Expiration Date or upon acceleration of the Notes.
2.4 Permanent Reductions of Commitments.
-----------------------------------
(a) Voluntary Reductions. The Borrower shall be permitted,
--------------------
without premium or penalty, at any time upon five (5) Business Day's notice to
the Agent, to reduce
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<PAGE>
permanently the Revolving Credit Commitments in an aggregate amount of not less
than $5,000,000 and in integral multiples of $1,000,000 for amounts in excess of
$5,000,000, and each Bank's Revolving Credit Commitments shall be reduced in
accordance with its Ratable Share; provided, however, the principal amount of
-------- -------
all Revolving Credit Loans outstanding at any time shall not be permitted to
exceed the Revolving Credit Commitments of all the Banks at such time.
(b) Effect of Reductions. After each such reduction, the
--------------------
Commitment Fee shall be calculated upon the Revolving Credit Commitments of the
Banks as so reduced, and the amount of the reduction of the Revolving Credit
Commitments may not be reinstated.
2.5 Mandatory Prepayments.
---------------------
Within five (5) Business Days of any sale or assignment of Designated
Assets permitted under Section 8.2(k)(i), the Borrower shall make a mandatory
prepayment of principal equal to the after-tax proceeds of such sale or
assignment (as estimated in good faith by the Borrower), together with accrued
interest on such principal amount. All prepayments required pursuant to this
Section 2.5 shall first be applied among the Interest Rate Options to the
principal amount of the Revolving Credit Loans subject to a Base Rate Option,
then to the Revolving Credit Loans subject to the Euro-Rate Option. In
accordance with Section 5.5(b), the Borrower shall indemnify the Banks for any
loss or expense, including loss of margin, incurred with respect to any such
prepayments applied against the Euro-Rate Portion on any day other than the last
day of the applicable Euro-Rate Interest Period. Notwithstanding the foregoing,
so long as no Event of Default or Potential Default has occurred and is
continuing, if any mandatory prepayment required under this Section 2.5 would be
applied to Loans subject to the Euro-Rate Option, and would result in prepayment
on a day other than the last day of the applicable Euro-Rate Interest Period,
then unless the Banks agree to waive any resulting loss or expense, such portion
of the mandatory prepayment that would be due on a day other than the last day
of the applicable Euro-Rate Interest Period shall be due and payable on the
earlier of (i) the last day of the applicable Euro-Rate Interest Period or (ii)
the occurrence of an Event of Default or Potential Default. To the extent the
Borrower fails to make any accrued interest or related fee payment under Section
2.5 or 5.4 at the time of any prepayment, then any amounts received shall be
applied first, to pay any related fees, second, to pay any accrued interest and
third, to pay principal, provided, the Borrower shall remain liable for the
--------
balance due.
2.6 Loan Requests.
-------------
(a) Revolving Credit Loan Requests. Except as otherwise provided
------------------------------
herein, the Borrower may from time to time prior to the Revolving Credit
Expiration Date request the Banks to make Revolving Credit Loans, or renew or
convert the Interest Rate Option applicable to existing Revolving Credit Loans,
by the delivery to the Agent, not later than 2:00 p.m. Pittsburgh time (i) three
(3) Business Days prior to the proposed Borrowing Date with respect to the
making of Revolving Credit Loans to which the Euro-Rate Option applies or the
conversion to or the renewal of the Euro-Rate Option for any Revolving Credit
Loans; and (ii) not later than 11:00 a.m. Pittsburgh time on the proposed
Borrowing Date with respect to the making of a Revolving Credit Loan to which
the Base Rate Option applies or the last day of the
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<PAGE>
preceding Euro-Rate Interest Period with respect to the conversion to the Base
Rate Option for any Revolving Credit Loan, of a duly completed request therefor
substantially in the form of Exhibit H-1 or a request by telephone immediately
-----------
confirmed in writing by letter, facsimile or telex (each, a "Revolving Credit
----------------
Loan Request"), it being understood that the Agent may rely on the authority of
- ------------
any person making such a telephonic request without the necessity of receipt of
such written confirmation. Each Revolving Credit Loan Request shall be
irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the
aggregate principal amount of the proposed Revolving Credit Loans comprising the
Borrowing Tranche, which shall be in integral multiples of $50,000 and not less
than $5,000,000 for Revolving Credit Loans to which the Euro-Rate Option applies
and not less than the lesser of $1,000,000 or the maximum amount available under
the Revolving Credit Commitments for Revolving Credit Loans to which the Base
Rate Option applies; (iii) whether the Euro-Rate Option or the Base Rate Option
shall apply to the proposed Revolving Credit Loans comprising the Borrowing
Tranche; and (iv) in the case of Revolving Credit Loans to which the Euro-Rate
Option applies, an appropriate Euro-Rate Interest Period for the proposed
Revolving Credit Loans comprising the Borrowing Tranche. If no such notice is
given at least three (3) Business Days prior to the expiration of any Euro-Rate
Interest Period for any Revolving Credit Loan or portion thereof, the Borrower
shall be deemed to have converted such Revolving Credit Loan or portion thereof
to the Base Rate Option commencing upon the last day of that Euro-Rate Interest
Period.
(b) Swing Loan Requests. Except as otherwise provided herein,
-------------------
the Borrower may from time to time prior to the Revolving Credit Expiration Date
request PNC to make Swing Loans by delivery to PNC not later than 3:00 p.m.
Pittsburgh time on the proposed Borrowing Date of a duly completed request
therefor substantially in the form of Exhibit H-2 or a request by telephone
-----------
immediately confirmed in writing by letter, facsimile or telex (each, a "Swing
-----
Loan Request"), it being understood that the Agent may rely on the authority of
- ------------
any person making such a telephonic request without the necessity of receipt of
such written confirmation. Each Swing Loan Request shall be irrevocable and
shall specify (i) the proposed Borrowing Date (ii) whether the Base Rate Option
or the PNC Quoted Rate Option shall apply and (iii) the principal amount of such
Swing Loan, which shall not be less than $100,000. PNC shall use reasonable
efforts to inform the Borrower by 12:00 noon (Pittsburgh time) on each Business
Day as to what the PNC Quoted Rate Option is on such Business Day. If PNC has
not informed the Borrower as to the PNC Quoted Rate Option available on any
Business Day, the Borrower may also telephone PNC on any Business Day to request
PNC to provide the Borrower with the PNC Quoted Rate Option available on such
Business Day, and PNC shall promptly respond to such request. If the Borrower
elects the PNC Quoted Rate Option to apply with respect to any Swing Loan, such
PNC Quoted Rate Option will be in effect until 3:00 p.m. (Pittsburgh time) on
the following Business Day.
2.7 Making Loans.
------------
(a) Revolving Credit Loans. The Agent shall, promptly after
----------------------
receipt by it of a Revolving Credit Loan Request pursuant to Section 2.6(a),
notify the Banks of its receipt of such Revolving Credit Loan Request
specifying: (i) the proposed Borrowing Date and the time and method of
disbursement of such Revolving Credit Loan; (ii) the amount and type of such
Revolving Credit Loan and the applicable Euro-Rate Interest Period (if any); and
(iii) the
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<PAGE>
apportionment among the Banks of the Revolving Credit Loans as determined by the
Agent in accordance with Section 2.2. Each Bank shall remit the principal amount
of each Revolving Credit Loan to the Agent such that the Agent is able to, and
the Agent shall, to the extent the Banks have made funds available to it for
such purpose, fund such Revolving Credit Loan to the Borrower in U.S. Dollars
and immediately available funds at the Principal Office prior to 3:00 p.m.
Pittsburgh time on the Borrowing Date; provided that if any Bank fails to remit
--------
such funds to the Agent in a timely manner the Agent may elect in its sole
discretion to fund with its own funds the Revolving Credit Loan of such Bank on
the Borrowing Date; provided, further, that such funding by the Agent shall not
-------- -------
be deemed to increase the Revolving Credit Commitment of the Agent or to reduce
the Revolving Credit Commitment of such Bank.
(b) Swing Loans. So long as PNC elects to make Swing Loans, PNC
-----------
shall, after receipt by it of a Swing Loan Request pursuant to Section 2.6(b),
fund such Swing Loan to the Borrower in U.S. Dollars and immediately available
funds at the Principal Office prior to 5:00 p.m. Pittsburgh time on the
Borrowing Date; provided that after PNC receives notice of default as set forth
--------
in Section 10.9, PNC shall not make any Swing Loans.
2.8 Borrowings to Repay Swing Loans.
-------------------------------
PNC may at its option, exercisable at any time for any reason
whatsoever, demand repayment of the Swing Loans, and each Bank shall make a
Revolving Credit Loan in an amount equal to such Bank's Ratable Share of the
aggregate principal amount of the outstanding Swing Loans plus, if PNC so
requests, accrued interest thereon, provided that no Bank shall be obligated in
--------
any event to make Revolving Credit Loans in excess of its Revolving Credit
Commitment minus its Ratable Share of the Letter of Credit Outstandings.
-----
Revolving Credit Loans made pursuant to the preceding sentence shall bear
interest at the Base Rate Option and shall be deemed to have been properly
requested in accordance with Section 2.6(a) without regard to any of the
requirements of that provision. PNC shall provide notice to the Banks (which may
be telephonic or written notice by letter, facsimile or telex) that such
Revolving Credit Loans are to be made under this Section 2.8 and of the
apportionment among the Banks, and the Banks shall be unconditionally obligated
to fund such Revolving Credit Loans (whether or not the conditions specified in
Section 7.2 are then satisfied) by the time PNC so requests, which shall not be
earlier than 3:00 p.m. Pittsburgh time on the Business Day next succeeding the
date the Banks receive such notice from PNC.
2.9 Notes.
-----
(a) Revolving Credit Notes. The obligation of the Borrower
----------------------
to repay the aggregate unpaid principal amount of the Revolving Credit Loans
made to it by each Bank together with interest thereon shall be evidenced by a
promissory note of the Borrower dated the Closing Date in the form of Exhibit F
---------
payable to the order of each Bank in a face amount equal to the Revolving Credit
Commitment of such Bank. The Revolving Credit Notes shall be payable in full on
the Revolving Credit Expiration Date or earlier acceleration of the Notes.
(b) Swing Note. The obligation of the Borrower to repay the
----------
unpaid principal amount of the Swing Loans made to it by PNC together with
interest thereon shall be
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<PAGE>
evidenced by a demand promissory note of the Borrower dated the Closing Date in
the form of Exhibit G payable to the order of PNC in a face amount equal to the
---------
Swing Loan Commitment.
2.10 Letter of Credit Subfacility.
----------------------------
(a) Issuance of Letters of Credit. The Borrower may
-----------------------------
request the issuance of a letter of credit (each a "Letter of Credit") on behalf
----------------
of itself or another Company by delivering to the Agent a completed application
and agreement for letters of credit in such form as the Agent may specify from
time to time by no later than 10:00 a.m. Pittsburgh time at least three (3)
Business Days, or such shorter period as may be agreed to by the Agent, in
advance of the proposed date of issuance. Subject to the terms and conditions
hereof and in reliance on the agreements of the other Banks set forth in this
Section 2.10, the Agent will issue a Letter of Credit provided that each Letter
--------
of Credit shall (A) have a maximum maturity of three hundred ninety-seven (397)
days from the date of issuance, (B) in no event expire later than five (5)
Business Days prior to the Revolving Credit Expiration Date, provided, further,
-------- -------
that in no event shall (i) the Letter of Credit Outstandings exceed, at any one
time, $25,000,000, or (ii) the Revolving Facility Usage exceed, at any one time,
the Revolving Credit Commitments.
(b) Participations. Immediately upon issuance of each Letter of
--------------
Credit, and without further action, each Bank shall be deemed to, and hereby
agrees that it shall, have irrevocably purchased for such Bank's own account and
risk from the Agent an individual participation interest in such Letter of
Credit and drawings thereunder in an amount equal to such Bank's Ratable Share
of the maximum amount which is or at any time may become available to be drawn
thereunder and each such Bank shall be responsible to reimburse the Agent
immediately for its Ratable Share of any disbursement under any Letter of Credit
which has not been reimbursed by the Borrower in accordance with Section
2.10(d).
(c) Letter of Credit Fees. The Borrower shall pay to the Agent
---------------------
for the ratable account of the Banks a fee (the "Letter of Credit Fee") equal to
--------------------
the then-applicable Euro-Rate Margin per annum, which fee shall be computed on
the daily average Letter of Credit Outstandings and shall be payable quarterly
in arrears commencing with the second Business Day of each April, July, October
and January following issuance of each Letter of Credit and on the Revolving
Credit Expiration Date. The Borrower shall also pay to the Agent for the Agent's
sole account the Agent's then in effect customary fees and administrative
expenses payable with respect to the Letters of Credit as the Agent may
generally charge or incur from time to time in connection with the issuance,
maintenance, modification (if any), assignment or transfer (if any),
negotiation, and administration of Letters of Credit.
(d) Disbursements, Reimbursement.
----------------------------
(i) The Borrower shall be obligated immediately to
reimburse the Agent for all amounts which the Agent is required to advance
pursuant to the Letters of Credit (collectively, the "Reimbursement
-------------
Obligations"). Such amounts advanced shall become, at the time the amounts are
- -----------
advanced, Revolving Credit Loans from the Banks. Such Revolving Credit Loans
shall bear interest at the rate applicable under the Base Rate Option unless the
Borrower elects to have a different Interest Rate Option apply to such Revolving
Credit Loans pursuant to and in accordance with the provisions contained in
Section 4.1.
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<PAGE>
(ii) The Agent will notify (A) the Borrower of each demand
or presentment for payment or other drawing under each Letter of Credit, and (B)
the Banks of the amount required to be advanced pursuant to the Letters of
Credit. Before 10:00 a.m. (Pittsburgh time) on the date of any advance the Agent
is required to make pursuant to the Letters of Credit, each Bank shall make
available such Bank's Ratable Share of such advance in immediately available
funds to the Agent.
(e) Documentation. The Borrower agrees to be bound by the terms
-------------
of the Agent's application and agreement for Letters of Credit and the Agent's
written regulations and customary practices relating to Letters of Credit,
though such interpretation may be different from the Borrower's own. In the
event of a conflict between such application or agreement and this Agreement,
this Agreement shall govern. It is understood and agreed that, except in the
case of gross negligence or willful misconduct, the Agent shall not be liable
for any error, negligence and/or mistakes, whether of omission or commission, in
following any Company's instructions or those contained in the Letters of Credit
or any modifications, amendments or supplements thereto.
(f) Determinations to Honor Drawing Requests. In determining
----------------------------------------
whether to honor any request for drawing under any Letter of Credit by the
beneficiary thereof, the Agent shall be responsible only to determine that the
documents and certificates required to be delivered under such Letter of Credit
have been delivered and that they comply on their face with the requirements of
such Letter of Credit.
(g) Nature of Participation and Reimbursement Obligations. The
-----------------------------------------------------
obligation of the Banks to participate in Letters of Credit pursuant to Section
2.10(b) and the obligation of the Banks pursuant to Section 2.10(d) to fund
Revolving Credit Loans upon a draw under a Letter of Credit and the obligations
of the Borrower to reimburse the Agent upon a draw under a Letter of Credit
pursuant to Section 2.10 shall be absolute, unconditional and irrevocable and
shall be performed strictly in accordance with the terms of such Sections under
all circumstances, including the following circumstances:
(i) the failure of any Company or any other Person to
comply with the conditions set forth in Sections 2.1, 2.6, 2.7 or 7.2 or as
otherwise set forth in this Agreement for the making of a Revolving Credit Loan,
it being acknowledged that such conditions are not required for the making of a
Revolving Credit Loan under Section 2.10(d);
(ii) any lack of validity or enforceability of any Letter
of Credit;
(iii) the existence of any claim, set-off, defense or other
right which any Company or any Bank may have at any time against a beneficiary
or any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Agent or other bank or any other Person or,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between any
Company or Subsidiaries of a Company and the beneficiary for which any Letter of
Credit was procured);
-27-
<PAGE>
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by the Agent under any Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(vi) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of any
Company or Subsidiaries of any Company;
(vii) any breach of this Agreement or any other Senior Loan
Document by any party thereto;
(viii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing;
(ix) the fact that an Event of Default or a Potential
Default shall have occurred and be continuing; or
(x) the Revolving Credit Expiration Date shall have
passed or this Agreement or the Revolving Credit Commitments hereunder shall
have been terminated (in which case the Borrower shall be required to
immediately reimburse the Agent and the Banks for the amount of any drawing
funded by the Banks).
(h) Indemnity. In addition to amounts payable as provided in
---------
Section 10.5, the Borrower hereby agrees to protect, indemnify, pay and save
harmless the Agent from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable fees,
expenses and disbursements of counsel and allocated costs of internal counsel)
which the Agent may incur or be subject to as a consequence, direct or indirect,
of (i) the issuance of any Letter of Credit, other than as a result of (A) the
gross negligence or willful misconduct of the Agent as determined by a final
judgment of a court of competent jurisdiction or (B) subject to the following
clause (ii), the wrongful dishonor by the Agent of a proper demand for payment
made under any Letter of Credit or (ii) the failure of the Agent to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
-----------------
(i) Liability for Acts and Omissions. As between the Borrower
--------------------------------
and the Agent, the Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the foregoing, the Agent
shall not be responsible for : (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for an issuance of any such Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
-28-
<PAGE>
assign any such Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (iii) failure of the beneficiary of any such Letter
of Credit to comply fully with any conditions required in order to draw upon
such Letter of Credit; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in interpretation of
technical terms; (vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) the misapplication by the beneficiary of any such
Letter of Credit; or (viii) any consequences arising from causes beyond the
control of the Agent, including any Governmental Acts, and none of the above
shall affect or impair, or prevent the vesting of, any of the Agent's rights or
powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth above, any action taken or omitted by the Agent
under or in connection with the Letters of Credit issued by it or any documents
and certificates delivered thereunder, if taken or omitted in good-faith, shall
not put the Agent under any resulting liability to the Borrower.
2.11 Use of Proceeds.
---------------
The proceeds of the Revolving Credit Loans shall be used for lawful
purposes in accordance with the second recital clause above.
3. TERM LOANS
3.1 Term Loan Commitments.
---------------------
Subject to the terms and conditions hereof, and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make a term loan (the "Term Loan") to the Borrower on the Closing Date in such
---------
principal amount as the Borrower shall request up to but not exceeding such
Bank's Term Loan Commitment.
3.2 Nature of Banks' Obligations with Respect to Term Loans.
-------------------------------------------------------
The obligations of each Bank to make Term Loans to the Borrower shall
be in the proportion that such Bank's Term Loan Commitment bears to the Term
Loan Commitments of all Banks to the Borrower, but each Bank's Term Loan to the
Borrower shall never exceed its Term Loan Commitment. The failure of any Bank to
make a Term Loan shall not relieve any other Bank of its obligations to make a
Term Loan nor shall it impose any additional liability to any other Bank
hereunder. The Banks shall have no obligation to make Term Loans hereunder after
the Closing Date. The Term Loan Commitments are not revolving credit commitments
and the Borrower shall not have the right to borrow, repay or reborrow under
Section 3.1.
3.3 Term Loan Notes.
---------------
The obligation of the Borrower to repay the unpaid principal amount of
the Term Loans made to it by each Bank, together with interest thereon, shall be
evidenced by a Term
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<PAGE>
Note dated the Closing Date in the form of Exhibit I payable to the order of
each Bank in a face amount equal to the Term Loan Commitment of such Bank.
Subject to any adjustment required as a result of the application of Section 3.4
(Mandatory Prepayments), the principal amount as provided therein of the Term
Notes shall be payable (i) quarterly in arrears on the second Business Day of
each July, October, January and April after the date hereof in eighteen (18)
equal quarterly installments of $7,500,000 beginning on July 2, 1996, with a
final installment of $15,000,000 on the Term Loan Maturity Date. (ii) or upon
the earlier acceleration of the Notes.
3.4 Mandatory Prepayments.
---------------------
(a) Excess Cash Flow. Within five (5) Business Days of delivery
----------------
of the Borrower's annual financial statements pursuant to Section 8.3(c), but in
any event no later than March 31 of each year beginning in 1997 for the
preceding fiscal year if the Leverage Ratio (as reflected on such annual
financial statements) is greater than 3.0 to 1.0 (each, a "Mandatory Prepayment
--------- ----------
Date"), the Borrower shall make a mandatory prepayment of principal equal to 50%
- ----
of Excess Cash Flow for the immediately preceding fiscal year, together with
accrued interest on such principal amount (each, a "Mandatory Prepayment of
-----------------------
Excess Cash Flow).
- ----------------
(b) Sale of Assets. Within five (5) Business Days of any
--------------
disposition of assets pursuant to Section 8.2(k)(iv), the Borrower shall make a
mandatory prepayment of principal, together with accrued interest on such
principal amount, equal to the product of (i) 66 2/3% of the after-tax proceeds
of such disposition (as estimated in good faith by the Borrower), and (ii) the
fraction obtained by dividing (A) the outstanding principal of the Term Loans by
(B) the outstanding principal of the Term Loans and the Senior Notes.
(c) Equity Offering. Simultaneously with the closing of any
---------------
Equity Offering or Equity Offering (Subsidiary), the Borrower shall make a
mandatory prepayment of principal equal to (i) 66-2/3% of the proceeds received
by the Borrower from any Equity Offering and (ii) 100% of the proceeds or any
other amount received by the Borrower from or in connection with any Equity
Offering (Subsidiary), in either case, net of reasonable and customary expenses
and together with accrued interest on such principal amount.
(d) Senior Notes. Simultaneously with any issuance of the Senior
------------
Notes, the Borrower shall make a mandatory prepayment of principal equal to 100%
of the proceeds of such Senior Notes (net of reasonable and customary expenses
and, net of the proceeds of the Senior Notes used to repay the Senior
Subordinated Term Notes, if any), together with accrued interest on such
principal amount.
(e) Application. All prepayments required pursuant to Section
-----------
3.4(a) shall be applied to the unpaid installments of principal of the Term
Loans in the inverse order of scheduled maturities. All prepayments required
pursuant to Section 3.4(b), (c) and (d) shall be applied to the unpaid
installments of principal of the Term Loans on a pro rata basis. All prepayments
required pursuant to this Section 3.4 shall first be applied among the Interest
Rate Options to the principal amount of the Term Loans subject to the Base Rate
Option, then to the Term Loans subject to the Euro-Rate Option. In accordance
with Section 5.5(b), the Borrower shall indemnify the Banks for any loss or
expense, including loss of margin, incurred with respect to any such prepayments
applied against the Euro-Rate Portion on any day other than the
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<PAGE>
last day of the applicable Euro-Rate Interest Period. Notwithstanding the
foregoing, so long as no Event of Default or Potential Default has occurred and
is continuing, if any mandatory prepayment required under this Section 3.4 would
be applied to Loans subject to the Euro-Rate Option, and would result in
prepayment on a day other than the last day of the applicable Euro-Rate Interest
Period, then unless the Banks agree to waive any resulting loss or expense, such
portion of the mandatory prepayment that would be due on a day other than the
last day of the applicable Euro-Rate Interest Period shall be due and payable on
the earlier of (i) the last day of the applicable Euro-Rate Interest Period or
(ii) the occurrence of an Event of Default or Potential Default. To the extent
the Borrower fails to make any accrued interest or related fee payment under
Sections 3.4 or 5.4 at the time of any prepayment, then any amounts received
shall be applied first, to pay any related fees, second, to pay any accrued
interest and third, to pay principal, provided, the Borrower shall remain liable
--------
for the balance due.
3.5 Use of Proceeds.
---------------
The proceeds of the Term Loans shall be used for lawful purposes in
accordance with the second recital clause above.
4. INTEREST RATES
--------------
4.1 Interest Rate Options.
---------------------
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected from one (1) of the three (3) Interest
Rate Options set forth below, it being understood that subject to the provisions
of this Agreement, the Borrower may select different Interest Rate Options and
different Euro-Rate Interest Periods to apply simultaneously to the Loans
comprising different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loans comprising
any Borrowing Tranche; provided that there shall not be at any one time
--------
outstanding more than seven (7) Borrowing Tranches in the aggregate among all
the Loans accruing interest at the Euro-Rate Option, provided, further, that
-------- -------
only the Base Rate Option or the PNC Quoted Rate Option shall be applicable with
respect to Swing Loans, and provided, further, that the PNC Quoted Rate Option
-------- -------
shall not be applicable with respect to any Loans other than the Swing Loans.
The Agent's determination of a rate of interest and any change therein shall in
the absence of manifest error be conclusive and binding upon all parties hereto.
If at any time the designated rate applicable to any Loan made by the Bank
exceeds such Bank's highest lawful rate, the rate of interest on such Bank's
Loan shall be limited to such Bank's highest lawful rate; provided, that the
--------
portion of interest which exceeds the amount such Bank can lawfully receive and,
thus, is not paid to such Bank shall be due and payable upon the following
Interest Payment Date(s) to the extent lawfully permissible.
(a) Base Rate Option: A fluctuating rate per annum (computed on
----------------
the basis of a year of (i) 365 or 366 days, as the case may be, and actual days
elapsed, for Loans based on the Agent's prime rate or (ii) 360 days and actual
days elapsed for Loans based on the Federal Funds Effective Rate) equal to the
Base Rate plus the Base Rate Margin (as set forth in
----
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<PAGE>
Section 4.1(b)), such interest rate to change automatically from time to time
effective as of the effective date of each change in the Base Rate or the Base
Rate Margin.
(b) Euro-Rate Option: A rate per annum (computed on a basis of a
----------------
year of 360 days and actual days elapsed) equal to the Euro-Rate plus the Euro-
----
Rate Margin (as set forth in Section 4.1(b)). The Euro-Rate shall be adjusted
automatically with respect to any Euro-Rate Portion outstanding on the effective
date of any change in the Euro-Rate Reserve Percentage notwithstanding that such
effective date occurs during a Euro-Rate Interest Period. The Agent shall give
prompt notice to the Borrower of the Euro-Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive.
(b-1) PNC Quoted Rate Option: A fixed rate per annum computed on
----------------------
the basis of a year of 365 or 366 days, as the case may be, equal to such
interest rate as offered by PNC pursuant to Section 2.6(b) hereof, such interest
rate to remain in effect from the time the PNC Quoted Rate Option is elected
until 3:00 p.m. (Pittsburgh time) on the following Business Day.
(c) Interest Rate Margins. The base rate margin (the "Base Rate
--------------------- ---------
Margin") on the Closing Date shall equal zero percent (0%). The Euro-Rate
- ------
margin (the "Euro-Rate Margin") on the Closing Date shall equal one and one-half
----------------
percent (1.5%). After the Closing Date, the Base Rate Margin and the Euro-Rate
Margin shall be based upon the Leverage Ratio for the immediately preceding
fiscal quarter, as shown on the Borrower's most recently delivered financial
statements pursuant to Section 8.3(b) as follows:
<TABLE>
<CAPTION>
Euro-Rate Base Rate
Leverage Ratio Margin Margin
-------------- --------- ---------
<S> <C> <C>
greater than or equal to 3.0 1.375% 0%
less than 3.0 and greater 1.125% 0%
than or equal to 2.5
less than 2.5 .875% 0%
</TABLE>
Notwithstanding the foregoing, the first adjustment to the Base Rate Margin and
Euro-Rate Margin hereunder and to the Commitment Fee under Section 2.3 will
occur on the earlier of (i) the date of the closing of the syndication hereunder
or (ii) June 30, 1996 and, for the purpose of calculating the Total Indebtedness
component of the Leverage Ratio for the initial adjustment hereunder only, Total
Indebtedness shall be calculated as of the foregoing date rather than for the
previous quarter then ended.
Except as noted above, in the event the Leverage Ratio has changed such that a
different rate is applicable, the rate shall be effective as of the first
Settlement Date following receipt by the Agent of the financial statements,
notwithstanding that such effective date occurs during a Euro-Rate Interest
Period. In the event the financial statements of the Borrower with respect to
any fiscal quarter are not delivered within forty-five (45) days of the end of
such quarter as required under Section 8.3(b), any rate reduction then in effect
shall continue until the first
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<PAGE>
Settlement Date following receipt by the Agent of financial statements
reflecting that a different Base Rate Margin or Euro-Rate Margin is applicable
as a result of a change in the Leverage Ratio; provided, that if such financial
--------
statements indicate that the Euro-Rate Margin or Base Rate Margin should have
been higher than the margins which were in effect, as a result of the Borrower's
failure to deliver such financial statements in a timely manner, the Euro-Rate
Margin and the Base Rate Margin shall be retroactively adjusted and the Borrower
shall immediately upon written notice from the Agent pay to the Agent, for the
ratable benefit of the Banks, the additional interest to which the Banks are
entitled.
(d) Rate Quotations. The Borrower may call the Agent on or
---------------
before the date on which a Loan Request is to be delivered to receive an
indication of the rates then in effect, but it is acknowledged that such
indication shall not be binding on the Agent or the Banks nor affect the rate of
interest which thereafter is actually in effect when the election is made.
4.2 Euro-Rate Interest Periods.
--------------------------
At any time when the Borrower shall select, convert to or renew the
Euro-Rate Option to apply to any Revolving Credit Loan or Term Loan, the
Borrower shall notify the Agent thereof at least three (3) Business Days prior
to the effective date of such Euro-Rate Option by delivering a Loan Request.
The notice shall select a Euro-Rate interest period during which such Interest
Rate Option shall apply, such periods to be one (1), two (2), three (3) or six
(6) months (the "Euro-Rate Interest Periods"); provided that:
-------------------------- --------
(a) any Euro-Rate Interest Period which would otherwise end on a
date which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in the next calendar month, in which
case such Euro-Rate Interest Period shall end on the next preceding Business
Day;
(b) any Euro-Rate Interest Period which begins on the last
Business Day of a calendar month for which there is no numerically corresponding
Business Day in the subsequent calendar month during which such Interest Period
is to end shall end on the last Business Day of such subsequent month;
(c) the Euro-Rate Portion for each Euro-Rate Interest Period
shall be in integral multiples of $50,000 and not less than $5,000,000;
(d) the Borrower shall not select, convert to or renew a Euro-
Rate Interest Period for any portion of the Revolving Credit Loans that would
end after the Revolving Credit Expiration Date or any portion of the Term Loans
that would end after the Term Loan Maturity Date; and
(e) in the case of the renewal of the Euro-Rate Option at the
end of a Euro-Rate Interest Period, the first day of the new Euro-Rate Interest
Period shall be the last day of the preceding Euro-Rate Interest Period, without
duplication in payment of interest for such day.
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<PAGE>
4.3 Interest After Default.
----------------------
To the extent permitted by Law, upon the occurrence and during the
continuance of an Event of Default, after any principal of or interest on any
Loan or any fee or other amounts hereunder shall have become due and payable by
its terms or by acceleration, declaration or otherwise, and after expiration of
any applicable grace period, such principal, interest, fee or other amount shall
bear interest for each day thereafter until paid in full (before and after
judgment) at a rate per annum which shall be equal to two percent (2%) above the
rate of interest otherwise applicable with respect to such amount or two percent
(2%) above the Base Rate Option if no rate of interest is otherwise applicable,
payable on demand. The Borrower acknowledges that such increased interest rate
reflects, among other things, the fact that such Loans or other amounts have
become a substantially greater risk given their default status and that the
Banks are entitled to additional compensation for such risk.
4.4 Euro-Rate Unascertainable.
-------------------------
If
(a) on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and
adversely affects the London interbank market,
(b) at any time any Bank shall have determined (which
determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of any Loan to
which the Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law),
(ii) the Euro-Rate Option will not adequately and fairly
reflect the cost to such Bank of the establishment or maintenance of any Loan,
or if any Bank determines after making all reasonable efforts that deposits of
the relevant amount in Dollars for the relevant Euro-Rate Interest Period for a
Loan to which the Euro-Rate Option applies are not available to such Bank in the
London interbank market, then, in the case of any event specified in subsection
(a) above, the Agent shall promptly so notify the Banks and the Borrower
thereof, and in the case of an event specified in subsection (b) above, such
Bank shall promptly so notify the Agent and attach a certificate to such notice
as to the specific circumstances of such notice and the Agent shall promptly
send copies of such notice and certificate to the other Banks and the Borrower.
Upon such date as shall be specified in such notice (which shall not be earlier
than the
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<PAGE>
date such notice is given) the obligation of (A) the Banks in the case of such
notice given by the Agent, or (B) such Bank in the case of such notice given by
such Bank, to allow the Borrower to select, convert to or renew the Euro-Rate
Option shall be suspended until the Agent shall have later notified the
Borrower, or such Bank shall have later notified the Agent, of the Agent's or
such Bank's, as the case may be, determination (which determination shall be
conclusive absent manifest error) that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent makes a
determination under subsection (a) of this Section 4.4 or any Bank notifies the
Agent of a determination under subsection (b) of this Section 4.4 and, in either
case, the Borrower has previously notified the Agent of its selection of,
conversion to or renewal of the Euro-Rate Option and such Euro-Rate Option has
not yet gone into effect, such notification shall be deemed to provide for
selection of, conversion to or renewal of the Base Rate Option otherwise
available with respect to such Loans. If any Bank notifies the Agent of a
determination under subsection (b) of this Section 4.4, the Borrower shall,
subject to the Borrower's indemnification obligations under Section 5.5(b), as
to any Loan of the Bank to which the Euro-Rate Option applies, on the date
specified in such notice either convert such Loan to the Base Rate Option
otherwise available with respect to such Loan or prepay such Loan in accordance
with Section 5.4. Absent due notice from the Borrower of conversion or
prepayment, such Loan shall automatically be converted to the Base Rate Option
otherwise available with respect to such Loan upon such specified date.
4.5 Selection of Interest Rate Options.
----------------------------------
(a) If the Borrower fails to select a Euro-Rate Interest Period
in accordance with the provisions of Section 4.2 in the case of renewal of the
Euro-Rate Portion, the Borrower shall be deemed to have converted such Loan or
option thereof to the Base Rate Option otherwise available with respect to such
Loans, commencing upon the last day of that Euro-Rate Interest Period. If an
Event of Default shall occur and be continuing, the Agent shall limit the
Borrower to the Base Rate Option hereunder; provided, however, that, unless the
-------- -------
Loans have been accelerated hereunder, such limitation with respect to the Euro-
Rate Portion shall not be effective until the expiration of any applicable Euro-
Rate Interest Period.
(b) If the Borrower fails to select an Interest Rate Option in
accordance with the provisions of Section 4.1 for any Swing Loan to which the
PNC Quoted Rate applies before the PNC Quoted Rate Option expires, the Borrower
shall be deemed to have converted such loan to the Base Rate Option otherwise
available with respect to such Swing Loan, commencing immediately upon the
expiration of the PNC Quoted Rate Option.
5. PAYMENTS
--------
5.1 Payments.
--------
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Letter of Credit Fees, Agent's Fees or other amounts
due from the Borrower hereunder shall be payable prior to 11:00 a.m. Pittsburgh
time (or 3:00 p.m. Pittsburgh time, in the event payments are to be made using
the proceeds of Loans to be made on such date), on the date when due without
presentment, demand, protest or notice of any kind, all of which are
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<PAGE>
hereby expressly waived by the Borrower, and without set-off, counterclaim or
other deduction of any nature, and an action therefor shall immediately accrue.
Such payments shall be made to the Agent at the Principal Office for the account
of PNC with respect to the Swing Loans and the ratable accounts of the Banks
with respect to the Revolving Credit Loans and Term Loans in U.S. Dollars and in
immediately available funds, and the Agent shall promptly distribute such
amounts to the Banks in immediately available funds, subject to the provisions
of Section 5.6; provided that in the event payments are received by 11:00 a.m.
--------
Pittsburgh time by the Agent with respect to the Revolving Credit Loans on the
Settlement Date and such payments are not distributed to the Banks on the same
day received by the Agent, the Agent shall pay the Banks the Federal Funds
Effective Rate with respect to the amount of such payments for each day held by
the Agent and not distributed to the Banks. The Agent's and each Bank's
statement of account, ledger or other relevant record shall, in the absence of
manifest error, be conclusive as the statement of the amount of principal of and
interest on the Loans and other amounts owing under this Agreement and shall be
deemed an "account stated."
5.2 Pro Rata Treatment of the Banks.
-------------------------------
Each borrowing, and each selection of, conversion to or renewal of any
Interest Rate Option and each payment or prepayment by the Borrower with respect
to principal, interest, Commitment Fees, Letter of Credit Fees or other fees
(except for the Agent's Fees and the fees set forth in the second sentence of
Section 2.10(c)) or amounts due from the Borrower hereunder to the Banks with
respect to the Revolving Credit Loans and Term Loans, shall (except as provided
in Section 4.4(b), 5.4 or 5.5) be made in proportion to the Revolving Credit
Loans and Term Loans outstanding from each Bank and, if no Revolving Credit
Loans or Term Loans are then outstanding, in proportion to the Ratable Share of
each Bank.
5.3 Interest Payment Dates.
----------------------
Interest on Loans to which the Base Rate Option or the PNC Quoted Rate
Option applies shall be due and payable in arrears on the second Business Day of
each April, July, October and January after the date hereof and on the Revolving
Credit Expiration Date (with respect to Revolving Credit Loans) and the Term
Loan Maturity Date (with respect to Term Loans) and upon any earlier
acceleration of the Notes. Interest on the Euro-Rate Portion shall be due and
payable on the last day of each Euro-Rate Interest Period and, if any such Euro-
Rate Interest Period is longer than three (3) months, also on the second
Business Day after the end of the third month during such period and on the
Revolving Credit Expiration Date (with respect to Revolving Credit Loans) and
the Term Loan Maturity Date (with respect to Term Loans) and upon any earlier
acceleration of the Notes. Interest on mandatory prepayments of principal under
Sections 2.5 and 3.4 (Mandatory Prepayments) shall be due on the date such
mandatory prepayment is due.
5.4 Voluntary Prepayments.
---------------------
(a) The Borrower shall have the right at its option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in sub-section (b) below or in Section 5.5):
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<PAGE>
(i) at any time with respect to any Swing Loan or any
other Loan to which the Base Rate Option applies;
(ii) on the last day of the applicable Euro-Rate Interest
Period with respect to Revolving Credit Loans or Term Loans to which the Euro-
Rate Option applies; and
(iii) on the date specified in a notice by any Bank pursuant
to Section 4.4(b) with respect to any Revolving Credit Loan or Term Loan to
which the Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans, it
shall provide a prepayment notice to the Agent at least one (1) Business Day
prior to the date of prepayment of Revolving Credit Loans or Term Loans or no
later than 3:00 p.m. Pittsburgh time on the date of prepayment of Swing Loans
setting forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made; and
(y) the total principal amount of such prepayment, which
shall not be less than $100,000 for any Swing Loan or
$1,000,000 for any Revolving Credit Loan or Term Loan.
All prepayment notices shall be irrevocable. The principal amount of
the Loans to which the Euro-Rate Option applies for which a prepayment notice is
given, together with interest on such principal amount and any related fees
shall be due and payable on the date specified in such prepayment notice as the
date on which the proposed prepayment is to be made. The principal amount of the
Loans to which the Base Rate Option applies for which a prepayment notice is
given shall be due and payable on the date specified in such prepayment notice
as the date on which the proposed prepayment is made; but interest on such
principal amount and any related fees shall be due and payable on the next
scheduled Interest Payment Date. All prepayments permitted pursuant to this
Section 5.4(a) shall be applied to the unpaid installments of principal of the
Loans in the inverse order of scheduled maturities. Unless otherwise specified
by the Borrower with respect to prepayments of the Euro-Rate Portion permitted
under this Section 5.4(a)(ii) or (iii) above, all prepayments shall be applied
first to the Base Rate Portion and then to the Euro-Rate Portion, subject to
Section 5.5(b).
(b) In the event any Bank (i) gives notice under Section 4.4(b) or
Section 5.5(a), (ii) does not fund Loans because the making of such Loans would
contravene any Law applicable to such Bank pursuant to Section 7.2, (iii) does
not approve any action as to which consent of the Required Banks is requested by
the Borrower and obtained hereunder, or (iv) becomes subject to the control of
an Official Body (other than normal and customary supervision), then the
Borrower shall have the right at its option, with the consent of the Agent,
which shall not be unreasonably withheld, to prepay the Loans of such Bank in
whole together with all interest accrued thereon, within ninety (90) days after
(w) receipt of such Bank's notice under Section 4.4(b) or 5.5(a), (x) the date
such Bank has failed to fund Loans pursuant to Section 7.2 because the making of
such Loans would contravene Law applicable to such Bank,
-37-
<PAGE>
(y) the date of obtaining the consent which such Bank has not approved, or (z)
the date such Bank became subject to the control of an Official Body, as
applicable; provided that the Borrower shall also pay to such Bank at the time
--------
of such prepayment any amounts required under Section 5.4(a) and Section 5.5 and
any accrued interest due on such amount and any related fees; provided, however,
-------- -------
that the Revolving Credit Commitment of such Bank shall be provided by one or
more of the remaining Banks or a replacement bank acceptable to the Agent and
the Borrower in the exercise of their reasonable discretion; provided, further,
-------- -------
the remaining Banks shall have no obligation hereunder to increase their
Revolving Credit Commitments. Notwithstanding the foregoing, the Agent may only
be replaced in accordance with Section 10.14 and the Agent must at all times be
a Bank hereunder.
5.5 Additional Compensation in Certain Circumstances.
------------------------------------------------
(a) Increased Costs or Reduced Return Resulting from Taxes,
------------------------------------------------------
Reserves, Capital Adequacy Requirements, Expenses, etc. If any Law, guideline or
- ------------------------------------------------------
interpretation or any change in any Law, guideline or interpretation or
application thereof by any Official Body charged with the interpretation or
administration thereof or compliance with any request or directive (whether or
not having the force of Law) of any central bank or other Official Body:
(i) subjects any Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Notes, the Loans or payments by the
Borrower of principal, interest, Commitment Fees, Letter of Credit Fees, Agent's
Fees or other amounts due from the Borrower hereunder or under the Notes (except
for taxes on the overall net income of such Bank),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments to extend
credit extended by, or assets (funded or contingent) of, deposits with or for
the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or contingent) of, or
credits or commitments to extend credit extended by, any Bank, or (B) otherwise
applicable to the obligations of any Bank under this Agreement, and the result
of any of the foregoing is to increase the cost to, reduce the income receivable
by, or impose any expense (including loss of margin) upon any Bank with respect
to this Agreement, the Notes or the making, maintenance or funding of any part
of the Loans (or, in the case of any capital adequacy or similar requirement, to
have the effect of reducing the rate of return on the capital of any Bank or any
Bank's parent, taking into consideration the customary policies of any Bank or
any Bank's parent with respect to capital adequacy) by an amount which such Bank
in its sole discretion deems to be material, such Bank shall from time to time
notify in writing the Borrower and the Agent of the amount determined in good
faith (using any averaging and attribution methods employed in good faith) by
such Bank (which determination shall be conclusive, absent manifest error) to be
necessary to compensate such Bank for such increase in cost, reduction of income
or additional expense. Such notice shall set forth in reasonable detail the
basis for such determination. Such amount
-38-
<PAGE>
shall be due and payable by the Borrower to such Bank ten (10) Business Days
after such notice is given.
(b) Indemnity. In addition to the compensation required by
---------
subsection (a) of this Section 5.5, the Borrower shall indemnify each Bank
against all liabilities, losses or expenses (including loss of margin and any
loss or expense incurred in liquidating or employing deposits from third
parties, including any loss or expense incurred in connection with funds
acquired by a Bank to fund or maintain Loans subject to the Euro-Rate Option)
which such Bank sustains or incurs hereunder, including:
(i) payment, prepayment, conversion or renewal of any Loan
to which the Euro-Rate Option applies on a day other than the last day of the
corresponding Euro-Rate Interest Period (whether or not such payment,
prepayment, conversion or renewal is mandatory, voluntary or automatic and
whether or not such payment or prepayment is then due);
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice relating to Loan
Requests under Section 2.6 or voluntary prepayments under Section 5.4; or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Senior Loan Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fees, Letter of
Credit Fees, Agent's Fees or any other amount due hereunder.
Notwithstanding the foregoing, nothing in the foregoing Section
5.5(b)(i), (ii) or (iii) shall be construed to permit the Borrower to engage in
any action otherwise prohibited hereunder. If any Bank sustains or incurs any
such loss or expense, it shall from time to time notify the Borrower of the
amount determined in good faith by such Bank (which determination shall be
conclusive absent manifest error and may include such assumptions, allocations
of costs and expenses and averaging or attribution methods as such Bank shall
deem reasonable) to be necessary to indemnify such Bank for such loss or
expense. Such notice shall set forth in writing in reasonable detail the basis
for such determination. Such amount shall be due and payable by the Borrower to
such Bank ten (10) Business Days after such notice is given.
5.6 Settlement Date Procedures.
--------------------------
In order to minimize the transfer of funds between the Banks and the
Agent, the Borrower may borrow, repay and reborrow Swing Loans and PNC may make
Swing Loans as provided in Section 2.1(b) during the period between Settlement
Dates. Not later than 12:00 p.m. Pittsburgh time on each Settlement Date, the
Agent shall notify each Bank of its Ratable Share of the Loans (including both
the Swing Loans made by the Agent and the Revolving Credit Loans made by the
Banks). Prior to 3:00 p.m. Pittsburgh time on such Settlement Date, each Bank
shall pay to the Agent the amount equal to the positive difference, if any,
between its Ratable Share of the Revolving Credit Loans and Swing Loans and its
Revolving Credit Loans, and the Agent shall pay to each Bank its Ratable Share
of all payments made by the Borrower to the Agent with respect to the Revolving
Credit Loans. The Agent shall also effect settlement in
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<PAGE>
accordance with the foregoing sentence on the proposed Borrowing Dates for
Revolving Credit Loans and on Mandatory Prepayment Dates and may at its option
effect settlement on any other Business Day. These settlement procedures are
established solely as a matter of administrative convenience, and nothing
contained in this Section 5.6 shall relieve the Banks of their obligations to
fund Revolving Credit Loans on dates other than a Settlement Date pursuant to
Section 2.8. The Agent may at any time at its option for any reason whatsoever
require each Bank to pay immediately to the Agent such Bank's Ratable Share of
the outstanding Revolving Credit Loans and Swing Loan (provided the principal
--------
amount of such Bank's Revolving Credit Loans shall not exceed its Revolving
Credit Commitment minus its Ratable Share of the Letter of Credit Outstanding).
-----
6. REPRESENTATIONS AND WARRANTIES
------------------------------
6.1 Representations and Warranties.
------------------------------
The Borrower represents and warrants to the Agent and each of the
Banks that:
(a) Organization and Qualification. The Borrower is a business
------------------------------
trust, duly organized, validly existing and in good standing under the laws of
Delaware; each Subsidiary of the Borrower is duly organized in the form of
organization stated on Schedule 6.1(c) and is validly existing and in good
---------------
standing under the laws of its jurisdiction of organization; each Company has
the lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct; and each Company is duly licensed or
qualified and in good standing in each jurisdiction wherein the property owned
or leased by it or the nature of the business transacted by it or both makes
such licensing or qualification necessary.
(b) Capitalization and Ownership. After giving affect to the
----------------------------
purchase by FII of the Standard Fire Shares on the Closing Date, the authorized
shares of beneficial interest in Borrower consist of 1,000 Series A Preferred
Shares, none of which is issued and outstanding, 125,000 Series B Preferred
Shares, none of which is outstanding, 75,000 Series C Preferred Shares, none of
which is issued and outstanding, 99,000 Class A Common Shares of which 1,000
Shares are issued and outstanding and 149,700,000 Class B Common Shares, of
which 20,496,758 shares are issued, 15,189,000 shares are outstanding and 5,000
shares are held as treasury stock and 5,302,758 are held by FII. The ownership
of the Common Shares is as indicated on Schedule 6.1(b). All issued and
---------------
outstanding shares have been validly issued and are fully paid and
nonassessable. There are no options, warrants or other rights outstanding to
purchase any shares except as indicated on Schedule 6.1(b).
---------------
(c) Subsidiaries. Schedule 6.1(c) sets forth the name of each of
------------ ---------------
the Borrower's Subsidiaries, the form and jurisdiction of organization of each,
the owner(s) of its authorized capital stock, and the percentage of issued and
the outstanding shares or interests (referred to herein as the "Subsidiary
----------
Shares") of each. Each Company has good and marketable title to all of the
- ------
Subsidiary Shares it purports to own, free and clear in each case of any Lien
except the pledge of the Subsidiary Shares pursuant to the Pledge Agreement. All
Subsidiary Shares have been validly issued and are fully paid and nonassessable.
There are no options,
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<PAGE>
warrants or other rights outstanding to purchase any such shares except as
indicated on Schedule 6.1(b).
---------------
(d) Power and Authority. The Borrower has full power to enter into,
-------------------
execute, deliver and carry out this Agreement and the other Senior Loan
Documents to which it is a party, to incur the Indebtedness contemplated by the
Senior Loan Documents and to perform its obligations under the Senior Loan
Documents to which it is a party and all such actions have been duly authorized
by all necessary proceedings on its part. The Grantors, the Pledgors and the
Companies have full power to enter into, execute, deliver and carry out the
Security Agreement, the Pledge Agreement and the Intercompany Subordination
Agreement, respectively, and to perform their respective obligations thereunder
and all such actions have been duly authorized by all necessary proceedings on
their respective parts.
(e) Validity and Binding Effect. This Agreement has been and each
---------------------------
other Senior Loan Document, when duly executed and delivered by the Loan Parties
which are parties thereto, will have been duly and validly executed and
delivered by the Loan Parties. This Agreement constitutes, and the Security
Agreement, the Pledge Agreement, the Intercompany Subordination Agreement, the
Proxies and each other Senior Loan Document when duly executed and delivered by
the Loan Parties pursuant to the provisions hereof or thereof will constitute,
legal, valid and binding obligations of the Loan Parties, enforceable against
them in accordance with their respective terms, except to the extent that
enforceability of any of the foregoing Senior Loan Documents may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
(f) No Conflict. Neither the execution and delivery of this Agreement
-----------
or the other Senior Loan Documents by the Loan Parties nor the consummation of
the transactions herein or therein contemplated or compliance with the terms and
provisions hereof or thereof by them will conflict with, constitute a default
under or result in any breach of the terms and conditions of the declaration of
trust, articles of incorporation, bylaws, partnership agreement or equivalent
documents of any Loan Party or of any Law or of any material agreement,
instrument, order, writ, judgment, injunction or decree to which any Loan Party
is a party or by which it is bound or to which it is subject, or will result in
the creation or enforcement of any Lien whatsoever upon any property (now or
hereafter acquired) of any Loan Party (other than Liens granted under the Senior
Loan Documents); provided that foreclosure on the Pledged Collateral or other
--------
transfer of the Pledged Collateral under the Pledge Agreement without obtaining
the approvals described in Section 9(b) of the Pledge Agreement may result in
the termination of contracts under the Investment Company Act.
(g) Litigation. There are no actions, suits, proceedings or
----------
investigations pending or, to the knowledge of the Borrower, threatened against
any of the Companies at law or in equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change.
None of the Companies is in violation of any order, writ, injunction or any
decree of any Official Body which may result in any Material Adverse Change.
-41-
<PAGE>
(h) Title to Properties. The real property owned or leased by the
-------------------
Companies is described on Schedule 6.1(h). Each of the Companies has good and
---------------
marketable title to or valid leasehold interest in all properties, assets and
other rights which it purports to own or lease or which are reflected as owned
or leased on its books and records, free and clear of all liens and encumbrances
except Permitted Liens, and subject to the terms and conditions of the
applicable leases. The tangible and intangible personal property relating to
facilities and computers of the Companies (including the leases, computer
software and aircraft) are held by Federated Investors Building Corporation or
another wholly owned Pledged Subsidiary. All leases of property are in full
force and effect and, except as set forth on Schedule 6.1(m), such leases do not
---------------
require any consent to consummate the transactions contemplated hereby or to
foreclose on the Pledged Shares.
(i) Financial Statements.
--------------------
(i) Historical Statements. The Borrower has delivered to the
---------------------
Agent copies of the audited consolidated financial statements for the Borrower
and its Consolidated Subsidiaries for fiscal years 1992 through 1994 (the
"Audited Statements"). In addition, the Borrower has delivered to the Agent
------------------
copies of the unaudited interim financial statements for the Borrower and its
Consolidated Subsidiaries for and as of the end of November 1995 and the fiscal
quarter ended September 30, 1995 (the "Interim Statements") (the Audited and
------------------
Interim Statements being collectively referred to as the "Historical
----------
Statements"). The Historical Statements are correct and complete and fairly
- ----------
represent the consolidated financial condition of the Borrower and its
Consolidated Subsidiaries as of their dates and the consolidated results of
operations for the fiscal periods then ended and have been prepared in
accordance with GAAP consistently applied, subject (in the case of the Interim
Statements) to normal year-end audit adjustments. None of the Companies has any
significant liabilities, contingent or otherwise, or material forward or long-
term commitments that are not disclosed in the Historical Statements or in the
notes thereto, except for the existing potential contingent liability of
approximately $1,400,000 as of the Closing Date to ICI Mutual Insurance Company
relating to the fidelity bond and directors and officers and errors and
omissions insurance coverage provided by ICI Mutual Insurance Company for the
Funds and certain Subsidiaries of the Borrower (the "ICI Contingency"), and
---------------
except as disclosed therein there are no unrealized or anticipated losses from
any commitments of any of the Companies which may cause a Material Adverse
Change. Since December 31, 1994, there has been no Material Adverse Change.
(ii) Financial Statements Derived from Assumptions. Within sixty
---------------------------------------------
(60) days after the Closing Date, the Borrower will deliver to the Agent
financial statements of the Borrower and its Consolidated Subsidiaries for the
fiscal years 1996-2001 derived from various assumptions of the Borrower's
management (the "Financial Statements Derived from Assumptions"). The Financial
---------------------------------------------
Statements Derived from Assumptions, upon delivery, will represent a reasonable
range of possible results in light of the history of the businesses, present and
foreseeable conditions and the intentions of the Borrower's management.
(j) Margin Stock. None of the Companies engages or intends to engage
------------
principally, or as one of its important activities, in the business of extending
credit for the purpose, immediately, incidentally or ultimately, of purchasing
or carrying margin stock (within
-42-
<PAGE>
the meaning of Regulation U). No part of the proceeds of any Loan has been or
will be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock (except investments in Funds in accordance with ordinary business
operations), or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of the regulations of the Board of Governors of
the Federal Reserve System. None of the Companies holds or intends to hold
margin stock (including shares in the Funds) such that the aggregate current
market value (as defined in Regulation U) of all such margin stock does not
exceed twenty-five percent (25%) of the value (as determined by any reasonable
method) of the consolidated assets of the Companies.
(k) Full Disclosure. Neither this Agreement nor any Senior Loan
---------------
Document, nor any certificate, statement, agreement or other documents furnished
to the Agent or any Bank in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is no fact
known to any of the Companies which materially adversely affects the business,
property, assets, financial condition or results of operations of the Companies
taken as a whole, which has not been set forth in this Agreement or in the other
agreements, documents, certificates and statements furnished in writing to the
Agent and the Banks prior to or at the date hereof in connection with the
transactions contemplated hereby.
(l) Taxes. All federal, state, local and other tax returns required
-----
to have been filed with respect to the Companies have been filed, and payment or
adequate provision has been made for the payment of all taxes, fees, assessments
and other governmental charges which have or may become due pursuant to said
returns or to assessments received except to the extent that such taxes, fees,
assessments and other charges are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made. There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of the Companies for any
period except with respect to the federal income tax return of the Companies for
1991 for which the associated statutory period of limitations was extended until
September 30, 1996.
(m) Consents and Approvals. No consent, approval, exemption, order or
----------------------
authorization of, or a registration or filing with, any Official Body or any
other person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Senior Loan
Documents by the Loan Parties, except for the filing of financing statements in
the state and county filing offices as listed on Schedule 6.1(m) attached
---------------
hereto, all of which shall have been obtained or made on or prior to the Closing
Date unless otherwise indicated on Schedule 6.1(m), provided that foreclosure on
--------------- --------
the Pledged Collateral or other transfer of the Pledged Collateral under the
Pledge Agreement may necessitate obtaining the approvals described in Section
9(b) of the Pledge Agreement.
(n) No Event of Default; Compliance with Interests. No event has
----------------------------------------------
occurred and is continuing and no condition exists or will exist after giving
effect to the
-43-
<PAGE>
borrowings to be made on the Closing Date under the Senior Loan Documents which
constitutes an Event of Default or Potential Default. None of the Companies is
in violation of (i) any term of any declaration of trust, charter, instrument,
bylaw, similar or other organizational or governing document or (ii) any
agreement or instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would constitute a
Material Adverse Change.
(o) Patents, Licenses, Franchises, etc. The Companies own or possess
-----------------------------------
all the material patents, trademarks, service marks, tradenames, copyrights,
licenses, registrations, franchises, permits and rights necessary to own and
operate their respective properties and to carry on their respective businesses
as presently conducted and planned to be conducted by the Companies, without
known conflict with the rights of others. All material patents, trademarks,
service marks, tradenames, copyrights, licenses, registrations, franchises and
permits of the Companies and the Funds (including all licenses required under
the Investment Company Act and other federal and state securities laws) are
listed and described on Schedule 6.1(o).
---------------
(p) Security Interests. The Liens granted or to be granted to the
------------------
Agent for the benefit of the Banks pursuant to the Security Agreement and the
Pledge Agreement in the Collateral constitute and will continue to constitute
first-priority perfected security interests under the Uniform Commercial Code as
enacted in each applicable jurisdiction (the "Uniform Commercial Code") or other
-----------------------
applicable Law entitled to all the rights, benefits and priorities provided by
the Uniform Commercial Code or such Law. The grant of such Liens does not and
will not impair or cause the termination of any investment advisory or other
contracts of any of the Companies under any Law (including the Investment
Company Act). Upon the filing of financing statements relating to said security
interests in each office and in each jurisdiction where required in order to
perfect the security interests described above, taking possession of any stock
certificates evidencing the Pledged Collateral and recordation of the Security
Agreement in the United States Patent and Trademark Office, all such action as
is necessary or advisable to establish such rights of the Agent will have been
taken. There will be upon execution and delivery of the Security Agreement and
the Pledge Agreement and such filings and such taking of possession referred to
in the preceding sentence, no necessity for any further action in order to
preserve, protect and continue such rights, except the filing of continuation
statements with respect to such financing statements within six (6) months prior
to each five (5) year anniversary of the filing of such financing statements,
provided that foreclosure on the Pledged Collateral or other transfer of the
- --------
Pledged Collateral under the Pledge Agreement may necessitate obtaining the
approvals described in Section 9(b) of the Pledge Agreement. All filing fees
and other expenses in connection with each such action have been or will be paid
by the Borrower.
(q) Proceeds. The Borrower will use the proceeds of the Loans only
--------
for lawful purposes in accordance with the second recital clause and Section
6.1(j), and not in contravention of any applicable Law, including the Investment
Company Act, or any other provision hereof.
(r) Status of the Pledged Collateral. All of the Pledged Collateral
--------------------------------
consisting of capital stock pledged or to be pledged by the Pledgors pursuant to
the Pledge
-44-
<PAGE>
Agreement is duly authorized, validly issued, fully paid, nonassessable and
owned beneficially and of record by the Pledgor pledging the same free and clear
of any Lien or restriction on transfer, except as otherwise provided by the
Pledge Agreement and except as the right of the Banks to dispose of the Pledged
Shares may be limited by the Securities Act of 1933, as amended, and the
regulations promulgated by the Securities and Exchange Commission thereunder and
by applicable state securities laws, provided that foreclosure on the Pledged
--------
Shares or other transfer of the Pledged Shares under the Pledge Agreement may
necessitate obtaining the approvals described in Section 9(b) of the Pledge
Agreement. Other than the Subordinated Pledge Agreement, there are no agreements
or understandings with respect to the Pledged Shares of capital stock included
in the Pledged Collateral except the Shareholder Rights Agreement, the
Declaration of Trust and the Bylaws of the Borrower. The restrictions on
transfer contained in the Shareholder Rights Agreement do not and shall not
restrict the pledge of the Pledged Shares under the Pledge Agreement or the
transfer of the Pledged Shares by the Agent. There are no agreements or
understandings with respect to the Pledged Collateral consisting of capital
stock of any Subsidiaries of the Borrower. The Pledged Collateral, together with
the Proxies, are sufficient to give to the Agent on behalf of the Banks, after
the occurrence of an Event of Default, full voting control of each of the
Companies.
(s) Insurance. Schedule 6.1(s) lists all insurance policies and other
--------- ---------------
bonds to which any of the Companies is a party, all of which are valid and in
full force and effect. No notice has been given or material claim made and no
ground exists to cancel or avoid any of such policies or bonds or to reduce the
coverage provided thereby. Such policies and bonds provide adequate coverage
from reputable and financially sound insurers in amounts sufficient to insure
the assets and risks of the Companies in accordance with prudent business
practice in the industry of the Companies.
(t) Compliance with Laws. The Companies have complied in all respects
--------------------
with all applicable Laws, including federal and state securities laws and
Section 17(a) of the Investment Company Act, in all jurisdictions in which any
of the Companies is presently or will be doing business except where the failure
to do so would not constitute a Material Adverse Change.
(u) Material Contracts. Schedule 6.1(u) lists all material contracts
------------------ ---------------
relating to the business operations of the Companies, including all employee
benefit plans, employment agreements, collective bargaining agreements and labor
contracts (the "Labor Contracts"), all investment advisory contracts, investment
---------------
counseling contracts, Section 12b-1 Plans, distribution agreements, and
administrative service agreements. All material contracts of each of the
Companies are valid, binding and enforceable upon each of the parties thereto in
accordance with their respective terms, and there is no default thereunder with
respect to any of the Companies and, to the Borrower's knowledge, with respect
to parties other than the Companies.
(v) Investment Companies. None of the Companies is an "investment
--------------------
company" registered or required to be registered under the Investment Company
Act or under the "control" of an "investment company" as such terms are defined
in the Investment Company Act and none of them shall become such an "investment
company" or under such "control." Each
-45-
<PAGE>
Fund that constitutes an "investment company" is in compliance in all material
respects with all requirements applicable to an "investment company" under the
Investment Company Act.
(w) Solvency. Each of the Companies is, and after consummation of
--------
this Agreement and the other Senior Loan Documents and giving effect to all
Indebtedness incurred hereby and thereby and the Liens granted by the Companies
in connection herewith will be, Solvent, as determined as of the Closing Date.
(x) Benefit Arrangements.
--------------------
(i) Neither the Borrower nor any member of the ERISA Group
sponsors, maintains or otherwise contributes to, or has within the preceding
five (5) year period sponsored, maintained or otherwise contributed to, a
Defined Benefit Pension Plan or a Multiemployer Plan.
(ii) The Borrower and each member of the ERISA Group are in
compliance in all material respects with any applicable provisions of ERISA with
respect to all Benefit Arrangements. There has been no Prohibited Transaction
with respect to any Benefit Arrangement, or COBRA Violation, which could result
in any material liability of the Borrower or any other member of the ERISA
Group. With respect to each Benefit Arrangement that is a defined contribution
plan, the Borrower and each member of the ERISA Group (A) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, if applicable, or contractual obligations to contribute to such plans,
and (B) have not had asserted against them any penalty for failure to fulfill
the minimum funding requirements of ERISA.
(iii) To the extent that any Benefit Arrangement is insured,
the Borrower and all members of the ERISA Group have paid when due all premiums
required to be paid for all periods through and including the Closing Date. To
the extent that any Benefit Arrangement is funded other than with insurance, the
Borrower and all members of the ERISA Group have made when due all contributions
required to be paid for all periods through and including the Closing Date.
(y) Employment Matters. Each of the Companies is in compliance with
------------------
the Labor Contracts and all applicable federal, state and local labor and
employment Laws, including those related to equal employment opportunity and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Change. There are no outstanding
grievances, arbitration awards or appeals therefrom arising out of the Labor
Contracts or current or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at facilities of the Companies which in any case would
constitute a Material Adverse Change.
(z) Environmental Matters. The Companies are in material compliance
---------------------
with all applicable Environmental Laws and have not received any Environmental
Complaint from any Official Body or private person alleging that any of the
Companies is a potentially responsible party, and the Borrower has no reason to
believe that such an Environmental Complaint might be received.
-46-
<PAGE>
(aa) Existing Business. The Companies are currently engaged in
-----------------
the mutual fund, investment advisory, insurance, retirement plan servicing and
financial services business, but with respect to the insurance business, the
Companies' activities are limited to the transfer of risk between buyer and
underwriter and do not include any participation in underwriting exposure,
except as specifically provided in Section 8.2(p)(i) with respect to the
Insurance Subsidiaries.
(bb) Management. There has been no material change in the
----------
management personnel of the Companies, taken as a whole, since December 31,
1994.
(cc) Broker Fees. The Companies do not pay any front-end
-----------
marketing fees to broker-dealers with respect to a Fund unless the following
three (3) conditions are met: (i) any front-end marketing fee does not exceed
the back-end fee at the time of the investment in the Fund, (ii) at any time
subsequent to the investment in the Fund, the Companies are entitled to receive
cumulative Fund Fees which are not less than the front-end marketing fee, and
(iii) within a period not to exceed seven (7) years from the investment in the
Fund, the cumulative Fund Fees for such period (excluding any back-end fee)
equal or exceed the front-end marketing fee. For purposes of the foregoing
sentence, front-end marketing fees and Fund Fees shall be expressed as a
percentage of the investment in the Fund. Schedule 6.1(cc) lists (i) all the
----------------
Funds of the Companies under which front-end marketing fees are paid to broker-
dealers, (ii) the amount of front-end marketing fees paid to broker-dealers both
on a Dollar basis for the most recent fiscal quarter then ended and as a
percentage of the investment in the Fund, (iii) the amount of back-end fees
collected by the Companies on a Dollar basis for the most recent fiscal quarter
then ended, and (iv) the amount of Fund Fees due the Companies both on a Dollar
basis for the most recent fiscal quarter then ended and as a percentage of the
investment in the Fund.
6.2 Updates to Schedules.
--------------------
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Borrower shall promptly provide the Agent in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
the same; provided, unless any such Schedules have become outdated or incorrect
--------
in any material and adverse respect, the Borrower may provide such revisions or
updates on a quarterly basis at the same time as the Borrower delivers its
quarterly compliance certificate in accordance with Section 8.3(d); provided,
--------
further, that no Schedule that has become outdated or incorrect in any material
- -------
and adverse respect shall be deemed to have been amended, modified or superseded
by any such correction or update, nor shall any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule be deemed to have been cured thereby.
7. CONDITIONS OF LENDING
---------------------
The obligation of each Bank to make Loans hereunder is subject to the
performance by the Borrower of its obligations to be performed hereunder at or
prior to making of any such Loans and to the satisfaction of the following
further conditions:
-47-
<PAGE>
7.1 First Loans.
-----------
On the Closing Date:
(a) The representations and warranties of the Borrower contained
in Article 6 shall be true and accurate on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date (except representations and warranties which relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein), and the
Borrower shall have performed and complied with all covenants and conditions
hereof; no Event of Default or Potential Default under this Agreement shall have
occurred and be continuing or shall exist; and there shall be delivered to the
Agent for the benefit of each Bank a certificate of the Borrower, dated the
Closing Date and signed by the Chief Executive Officer, President, Chief
Financial Officer, Treasurer or Controller of the Borrower, to both such
effects.
(b) There shall be delivered to the Agent for the benefit of
each Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each of the Companies, certifying as appropriate as to:
(i) all action taken by such Company in connection with
this Agreement and the other Senior Loan Documents to which it is a party, as
applicable;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Senior Loan Documents to which such Company is
a party and the true signatures of such officer or officers and, in the case of
the Borrower, specifying the Authorized Officers who are authorized to act on
behalf of the Borrower for purposes of this Agreement and the true signatures of
such officers, on which the Agent and each Bank may conclusively rely; and
(iii) copies of its organizational documents, including its
declaration of trust or articles of incorporation and bylaws or partnership
agreement, as applicable, as in effect on the Closing Date certified by the
appropriate state official where such documents are filed in a state office
together with certificates from the appropriate state officials as to the
continued existence and good standing of each of the Companies in each state
where organized or qualified to do business, provided such certifications of
--------
state officials shall not be required for Federated International Services, Ltd.
and Federated International Management, Ltd.
(c) The Notes, the Intercompany Subordination Agreement, the
Pledge Agreement, the Security Agreement, the Intercreditor Agreement and the
Proxies shall have been duly executed and delivered to the Agent for the benefit
of the Banks, together with all appropriate financing statements, appropriate
stock powers and certificates evidencing the Pledged Collateral. With respect to
shareholders of the Borrower who are Pledgors, there shall be delivered to the
Agent, for the benefit of the Banks, certification of authority and proof of
incumbency or identity reasonably satisfactory to the Agent and its counsel of
the officer, trustee, custodian or other person executing the Pledge Agreement
on behalf of such Pledgor, including signature guarantees in the case of
shareholders who are individuals.
-48-
<PAGE>
(d) There shall be delivered to the Agent, for the benefit of
each Bank, a legal opinion of outside counsel reasonably acceptable to the Agent
and its counsel (who may rely on the opinions of such other counsel as may be
acceptable to the Agent), dated the Closing Date and in form and substance
satisfactory to the Agent and its counsel in substantially the form of Exhibit
-------
J.
- -
(e) All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Senior Loan Documents
shall be in form and substance satisfactory to the Banks and counsel for the
Banks, and the Banks shall have received all such other counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the Banks and said
counsel, as the Banks or said counsel may reasonably request.
(f) The Borrower shall pay or cause to be paid, to the extent
not previously paid, to the Agent for its own account, all fees payable on or
before the Closing Date as set forth in that certain letter dated January 31,
1996 and the costs and expenses for which the Agent is entitled to be
reimbursed.
(g) All material consents required to effectuate the
transactions contemplated by the Senior Loan Documents shall have been obtained.
(h) There shall be no Material Adverse Change in the Historical
Statements previously delivered to the Agent since the date of their
preparation; since September 30, 1995, there shall be no Material Adverse
Change; and there shall be delivered to the Agent, for the benefit of each Bank,
a certificate dated the Closing Date and signed by the Chief Executive Officer,
President, Chief Financial Officer, Treasurer or Controller of the Borrower to
each such effect.
(i) The making of the Loans shall not contravene any Law
applicable to the Borrower or any of the Banks, and the Banks and the Agent
shall have received all such certificates and documents in relation thereto as
the Banks and the Agent and their respective counsel shall have reasonably
requested.
(j) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of this Agreement or the consummation of the
transactions contemplated hereby or which, in the Agent's sole discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Senior Loan Documents.
(k) The Borrower shall deliver evidence acceptable to the Agent
that adequate insurance in compliance with Section 8.1(c) is in full force and
effect and that all premiums then due thereon have been paid, together with a
certified copy of the Borrower's casualty insurance policy or policies
evidencing coverage satisfactory to the Agent, with additional insured and
lender loss payable endorsements in form and substance satisfactory to the Agent
and its counsel naming the Agent as additional insured and lender loss payee for
the benefit of the Banks.
-49-
<PAGE>
(l) The Agent shall have received copies of all lien search
results and copies of all filing receipts and acknowledgments issued by any
governmental authority to evidence any recordation or filing necessary to
perfect the Lien of the Agent for the benefit of the Banks on the Collateral or
other satisfactory evidence of such recordation and filing and to evidence that
such Lien constitutes a Prior Security Interest in favor of the Agent for the
benefit of the Banks.
(m) The Agent shall have received evidence satisfactory to the
Agent and the Banks that on the Closing Date, from the proceeds of the Loans,
the Borrower shall have paid to Aetna or Standard Fire the Termination Dividend,
FII shall have repurchased the Standard Fire Shares, the closing under the Stock
Purchase Agreement shall have occurred simultaneously with the closing
hereunder, and, after FII shall have repurchased the Standard Fire Shares,
neither Standard Fire nor Aetna shall own legally or beneficially any of the
Common Shares or the Preferred Shares or have any options, warrants or other
rights outstanding to purchase any Common Shares or Preferred Shares at any
time.
7.2 Each Additional Loan.
--------------------
At the time of making any Loans (including conversions or renewals of
existing Loans) or issuing any Letters of Credit other than Loans made or
Letters of Credit issued on the Closing Date hereunder and after giving effect
to the proposed borrowings: the representations and warranties contained in
Article 6 and any certificates delivered by any of the Companies after the
Closing Date shall be true on and as of the date of such additional Loan or
Letter of Credit with the same effect as though such representations, warranties
and certifications had been made on and as of such date (except representations,
warranties and certifications which expressly relate solely to an earlier date
or time, which representations, warranties and certifications shall be true and
correct on and as of the specific dates or times referred to therein or made),
and the Borrower shall have performed and complied with all covenants and
conditions hereof; no Event of Default or Potential Default shall have occurred
and be continuing or shall exist; the making of the Loans shall not contravene
any Law applicable to the Borrower or any of the Banks; and the Borrower shall
have delivered to the Agent a duly executed and completed Loan Request or
application for a Letter of Credit as the case may be.
8. COVENANTS
---------
8.1 Affirmative Covenants.
---------------------
The Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, satisfaction of all of the Borrower's other
obligations hereunder and termination of the Revolving Credit Commitments and
the Swing Loan Commitment, it shall, unless otherwise consented to in writing by
the Required Banks, comply at all times with the following affirmative
covenants:
(a) Preservation of Existence, etc. The Borrower shall maintain,
------------------------------
and shall cause each of its Subsidiaries to maintain, its existence and its
license or qualification and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its
-50-
<PAGE>
business makes such license or qualification necessary, except as otherwise
permitted in Section 8.2(j). Notwithstanding the foregoing, the Borrower may be
merged with and into FII with FII as the survivor, so long as FII shall
expressly assume in writing all of the Borrower's obligations under this
Agreement and the other Loan Documents and such transaction would not result in
any Material Adverse Change, result in the termination of investment advisory
contracts with investment advisory Subsidiaries of the Borrower, or, after the
occurrence of an Event of Default, result in the Pledged Collateral, together
with the Proxies, being insufficient to give to the Agent on behalf of the Banks
or other successors or nominees full voting control of the Borrower and its
Subsidiaries in all circumstances; provided the Borrower shall give not less
--------
than thirty (30) days' prior notice to the Banks and deliver to the Agent any
documents, including acknowledgments, replacement notes, organizational
documents of FII after giving effect to the merger and legal opinions, that the
Banks may reasonably request to confirm the foregoing and the continued Prior
Security Interest granted under the Senior Loan Documents and the Borrower shall
use its best effort to deliver replacement Proxies from holders of at least
50.1% of the issued and outstanding Class B Shares, all of the foregoing in form
and substance satisfactory to the Agent and its counsel.
(b) Payment of Liabilities, Including Taxes, etc. The Borrower
--------------------------------------------
shall pay and discharge, and shall cause each of its Subsidiaries to pay and
discharge, all liabilities to which it is subject or which are asserted against
it, promptly as and when the same shall become due and payable, including all
taxes, assessments and governmental charges upon it or any of its properties,
assets, income or profits, prior to the date on which penalties attach thereto,
except to the extent that such liabilities, including taxes, assessments or
charges, are being contested in good faith and by appropriate and lawful
proceedings diligently conducted and for which such reserve or other appropriate
provisions, if any, as shall be required by GAAP shall have been made, but only
to the extent that failure to discharge any such liabilities would not result in
a Material Adverse Change; provided that the Borrower and each of its
--------
Subsidiaries will pay all such liabilities forthwith upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor.
(c) Maintenance of Insurance. The Borrower shall insure, and
------------------------
shall cause each of its Subsidiaries to insure, its properties and assets
against loss or damage by fire and such other insurable hazards as such assets
are commonly insured (including fire, extended coverage, property damage,
workers' compensation, public liability and business interruption insurance) and
in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the extent
customary, and against public liability for damages and against other risks
(including errors and omissions) in amounts normally carried by prudent
companies carrying on similar businesses and satisfactory to the Agent, subject
to availability of such insurance coverage. The Borrower shall deliver to the
Agent (x) on the Closing Date, an original certificate of insurance signed by
the Borrower's independent insurance broker describing and certifying as to the
existence of the insurance on the Collateral required to be maintained by this
Agreement and the other Senior Loan Documents and (y) on an annual basis, a
summary schedule indicating all insurance then in force with respect to the
Companies. Such policies of insurance shall contain endorsements, in form and
substance acceptable to the Agent, which shall (i) specify the Agent as an
additional insured or lender loss payee as its
-51-
<PAGE>
interests may appear, as appropriate (other than with respect to fidelity bond,
directors and officers and errors and omissions coverage) with the understanding
that any obligation imposed upon the insured (including the liability to pay
premiums) shall be the sole obligation of the Companies and not that of the
Agent, (ii) provide that the interest of the Agent and the Banks shall be
insured regardless of any breach or violation by the Companies of any
warranties, declarations or conditions contained in such policies or any action
or inaction of the Companies or others insured under such policies, (iii)
provide a waiver of any right of the insurers to set-off or counterclaim or any
other deduction, whether by attachment or otherwise, (iv) provide that any and
all rights of subrogation which the insurers may have or acquire shall be, at
all times and in all respects, junior and subordinate to the prior payment in
full of the Indebtedness hereunder and that no insurer shall exercise or assert
any right of subrogation until such time as the Indebtedness hereunder has been
paid in full and the Revolving Credit Commitments and the Swing Loan Commitment
have terminated, (v) provide, except in the case of public liability insurance
and workmen's compensation insurance, that all insurance proceeds for losses of
less than $500,000 shall be adjusted with and payable to the applicable
Companies for the repair, restoration and/or replacement of the property in
respect of which such proceeds were received and that all insurance proceeds for
losses of $500,000 or more shall be adjusted with and payable to the Agent for
the benefit of the Banks, (vi) include effective waivers by the insurer of all
claims for insurance premiums against the Agent, (vii) provide that no
cancellation of such policies for non-payment of premium shall be effective
until at least ten (10) days after receipt by the Agent of written notice of
such cancellation and no cancellation of such policies for any other reason nor
any change therein (other than changes in the ordinary course of the insurer's
business which will not reduce the monetary amount of such insurance or
materially and adversely affect the type of coverage provided by such insurance)
shall be effective until at least thirty (30) days after receipt by the Agent of
written notice of such cancellation or change, (viii) be primary without right
of contribution of any other insurance carried by or on behalf of any additional
insureds with respect to their respective interests in the Collateral, and (ix)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
Borrower shall notify the Agent promptly of any occurrence causing a material
loss or decline in value of the Collateral and the estimated (or actual, if
available) amount of such loss or decline. Any monies received by the Agent
constituting insurance proceeds may, at the option of the Agent, (i) be applied
by the Agent to the payment of the Term Loans in the inverse order of scheduled
maturities and then to the Revolving Credit Loans, or (ii) be disbursed to the
applicable Company on such terms as are deemed appropriate by the Agent for the
repair, restoration and/or replacement of property in respect of which such
proceeds were received.
(d) Maintenance of Properties and Leases. The Borrower shall
------------------------------------
maintain, and shall cause each of its Subsidiaries to maintain, in good repair,
working order and condition (ordinary wear and tear excepted) in accordance with
the general practice of other businesses of similar character and size, all of
those properties useful or necessary to its business, and from time to time the
Borrower shall make, and shall cause each Subsidiary to make, all appropriate
repairs, renewals or replacements thereof.
-52-
<PAGE>
(e) Visitation Rights. The Borrower shall permit, and shall
-----------------
cause each of its Subsidiaries to permit, any of the officers or authorized
employees or representatives of any of the Banks to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such reasonable detail and at such reasonable times and as often as any of the
Banks may reasonably request, subject to the provisions of Section 11.12,
provided that each Bank shall provide the Borrower and the Agent with reasonable
- --------
notice prior to any visit or inspection. In the event any Bank desires to visit
or inspect any of the Companies as permitted in the preceding sentence, such
Bank shall make a reasonable effort to conduct such visit or inspection
contemporaneously with any visit or inspection to be performed by the Agent.
(f) Keeping of Records and Books of Account. The Borrower shall
---------------------------------------
maintain and keep, and shall cause each of its Subsidiaries to maintain and
keep, proper books of record and account which enable the Borrower and its
Subsidiaries to issue financial statements in accordance with GAAP and as
otherwise required by applicable Laws of any Official Body having jurisdiction
over the Borrower or any Subsidiary, and in which full, true and correct entries
shall be made in all material respects of all its dealings and business and
financial affairs.
(g) Maintenance of Patents, Trademarks, etc. The Borrower shall
---------------------------------------
maintain, and shall cause each of its Subsidiaries to maintain, in full force
and effect, all patents, trademarks, tradenames, copyrights, licenses,
franchises, permits and other authorizations necessary for the ownership and
operation of its properties and business if the failure so to maintain the same
would constitute a Material Adverse Change.
(h) Benefit Arrangements. The Borrower shall, and shall cause
--------------------
each member of the ERISA Group to, comply with ERISA, the Internal Revenue Code
and other applicable Laws applicable to Benefit Arrangements except where such
failure, alone or in conjunction with any other failure, would not result in a
Material Adverse Change. Without limiting the generality of the foregoing, the
Borrower shall cause Benefit Arrangements which are defined contribution plans
maintained by the Borrower or any member of the ERISA Group to be funded in
accordance with the minimum funding requirements of ERISA and shall make, and
cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Benefit Arrangements.
(i) Compliance with Laws. The Borrower shall comply, and shall
--------------------
cause each of its Subsidiaries to comply, with all applicable Laws, including
all Environmental Laws, in all respects, including the Investment Company Act,
provided that it shall not be deemed to be a violation of this Section 8.1(i) as
- --------
the result of any failure to comply with any Law if such failure to comply would
not result in fines, penalties, other similar liabilities or injunctive relief
which in the aggregate would constitute a Material Adverse Change.
(j) Ownership of Subsidiaries. The Borrower shall keep and
-------------------------
maintain 100% ownership and control of each of its Subsidiaries, except (i)
Passport (in which event control shall be maintained and the percentage of
ownership of at least 50.1% shall be maintained), (ii) Subsidiaries which are
less than wholly owned and which may be created or
-53-
<PAGE>
acquired in the future pursuant to Section 8.2(h)(iii), and (iii) as otherwise
permitted in Section 8.2(j).
(k) Use of Proceeds. The Borrower will use the proceeds of the
---------------
Loans only for lawful purposes in accordance with the second recital clause and
Section 6.1(j) and such uses shall not contravene any applicable Law, including
the Investment Company Act, or any other provision hereof.
(l) New Subsidiaries. The Borrower shall pledge, and shall
----------------
cause each of its Subsidiaries as applicable to pledge, to the Agent for the
benefit of the Banks, the shares of any Subsidiaries hereafter created or
acquired by any of the Companies, and shall cause each such Subsidiary to enter
into the Intercompany Subordination Agreement and (other than registered
investment adviser or broker-dealer Subsidiaries) the Security Agreement and
shall cause to be delivered a legal opinion of such outside counsel reasonably
acceptable to the Agent and its counsel in form and substance satisfactory to
the Agent and its counsel as to the matters set forth on Exhibit K.
---------
(m) Further Assurances. The Borrower shall faithfully
------------------
preserve and protect, and shall cause each of its Subsidiaries to faithfully
preserve and protect, from time to time, at its expense, the Agent's Lien on and
Prior Security Interest in the Collateral as a continuing first priority
perfected Lien under the Uniform Commercial Code, subject only to Permitted
Liens, and shall do, and shall cause each of its Subsidiaries as applicable to
do, such other acts as the Agent in its sole discretion may deem necessary or
advisable from time to time in order to preserve, perfect and protect the Liens
granted under the Senior Loan Documents and to exercise and enforce its rights
and remedies thereunder with respect to the Collateral.
(n) Travel Policy. The Borrower shall maintain a policy
-------------
limiting group travel by airplane by the Management Shareholders.
(o) Interest Rate Protection Agreement. Within the earlier of
----------------------------------
(i) June 30, 1996, and (ii) thirty (30) days after the issuance of the Senior
Notes, the Borrower shall purchase an interest rate protection agreement
reasonably acceptable to the Agent, on a principal amount of not less than the
amount of the Term Loans outstanding at the date of the execution of the
interest rate protection agreement.
8.2 Negative Covenants.
------------------
The Borrower covenants and agrees that until payment in full of the
Loans and interest thereon, satisfaction of all of the Borrower's other
obligations hereunder and termination of the Revolving Credit Commitments and
the Swing Loan Commitment, it shall, unless otherwise consented to in writing by
the Required Banks, comply with the following negative covenants:
(a) Minimum Debt Service Coverage Ratio. The Borrower shall
-----------------------------------
permit the Debt Service Coverage Ratio as of the end of each fiscal quarter for
the four (4) fiscal quarters then ended to be less than 1.25 to 1.0.
-54-
<PAGE>
(b) Minimum Interest Coverage Ratio. The Borrower shall not
-------------------------------
permit the ratio of Cash Flow from Operations to consolidated interest expense
of the Borrower and its Consolidated Subsidiaries as of the end of each fiscal
quarter for the four (4) fiscal quarters then ended to be less than the ratio
set forth below for the periods specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fiscal Years 1996 and 1997 3.5 to 1.0
Thereafter 4.0 to 1.0
</TABLE>
(c) Maximum Leverage Ratio. The Borrower shall not permit the
----------------------
Leverage Ratio as of the end of each fiscal quarter beginning with the fiscal
quarter ended June 30, 1996 to exceed the ratio set forth below for the periods
specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fiscal Year 1996 4.0 to 1.0
Fiscal Year 1997 3.5 to 1.0
Fiscal Year 1998 3.0 to 1.0
Thereafter 2.5 to 1.0
</TABLE>
(d) Broker Fees. The Borrower shall not, and shall not permit
-----------
any of its Subsidiaries to, pay front-end marketing fees to broker-dealers with
respect to a Fund unless the following three (3) conditions are met: (i) any
front-end marketing fee shall not exceed the back-end fee at the time of the
investment in the Fund, (ii) at any time subsequent to the investment in the
Fund, the Companies shall have been entitled to receive cumulative Fund Fees
which are not less than the front-end marketing fee, and (iii) within a period
not to exceed seven (7) years from the investment in the Fund, the cumulative
Fund Fees for such period (excluding any back-end fee) shall equal or exceed the
front-end marketing fee. For purposes of this Section 8.2(d), front-end
marketing fees and Fund Fees shall be expressed as a percentage of the
investment in the Fund.
(e) Indebtedness. The Borrower shall not, and shall not
------------
permit any of its Subsidiaries to, at any time create, incur, assume or suffer
to exist any Indebtedness, except:
(i) Indebtedness under the Senior Loan Documents;
(ii) (A) Indebtedness under the Subordinated Loan Documents
and (B) any senior secured Indebtedness in an amount not to exceed (1)
$75,000,000 or (2) if all of the Indebtedness under the Subordinated Loan
Documents is repaid with proceeds of such financing, $100,000,000 (the "Senior
------
Notes"); provided that the terms of such Senior Notes shall be no more
- ----- --------
restrictive to the Borrower than the terms of this Agreement as determined by
the Agent, the amortization and final maturity of the Senior Notes shall be
acceptable to the Agent and the Intercreditor Agreement (Senior Notes) shall be
executed and delivered to the Agent on behalf of the Banks prior to the closing
of the Senior Notes.
-55-
<PAGE>
(iii) capitalized leases as and to the extent permitted
under Section 8.2(o);
(iv) existing Indebtedness as set forth on Schedule 8.2(e)
---------------
(including any extensions or renewals thereof, provided there is no increase in
--------
the principal amount thereof as of the Closing Date unless otherwise specified
on Schedule 8.2(e));
---------------
(v) intercompany Indebtedness which is subordinated to the
Loans pursuant to the Intercompany Subordination Agreement, provided that
--------
regardless of whether the intercompany Indebtedness would be subordinated to the
Loans pursuant to the Intercompany Subordination Agreement, no intercompany
loans (other than Limited Investments to the extent permitted by Section
8.2(h)(ii)) may be made to the Insurance Subsidiaries;
(vi) any short-term Indebtedness under securities clearing
arrangements, secured by marketable securities and related cash balances with
customary loan-to-value ratios; or
(vii) Indebtedness representing all or a portion of the
Permitted Acquisition Payment.
(f) Liens. The Borrower shall not, and shall not permit any
-----
of its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree to become liable to do so, except Permitted Liens.
(g) Guaranties. The Borrower shall not, and shall not permit
----------
any of its Subsidiaries to, at any time directly or indirectly, become or be
liable in respect of any Guaranty, or assume, guaranty, become surety for,
endorse or otherwise agree, become or remain directly or contingently liable
upon or with respect to any obligation or liability of any other person, except
for the Liens granted under the Senior Loan Documents, the ICI Contingency
subject to increase up to the amount specified in Schedule 8.2(e) and the
---------------
guarantee by the Companies of obligations of the Subsidiaries of the Borrower
(other than Passport or any other Subsidiary which is not wholly owned) to third
parties, which obligations are incurred in the ordinary course of such
Subsidiaries' business consistent with industry practice and not otherwise
forbidden by this Agreement; provided that, except for Limited Investments, in
--------
no event shall the Borrower or its Subsidiaries become or be liable in respect
of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise
agree, become or remain directly or contingently liable upon or with respect to
any obligation or liability of the Limited Purpose Subsidiaries.
(h) Loans and Investments. The Borrower shall not, and shall
---------------------
not permit any of its Subsidiaries to, at any time make or suffer to remain
outstanding any loan or advance to, or purchase, acquire or own any stock,
bonds, notes or securities of, or any partnership interest (whether general or
limited) in, or any other investment or interest in, or make any capital
contribution to, any other person, or agree, become or remain liable to do any
of the foregoing, except:
-56-
<PAGE>
(i) loans and investments as set forth on Schedule 8.2(h)
---------------
(including any extensions or renewals thereof, provided there is no increase in
-------
the principal amount thereof as of the Closing Date unless otherwise specified
on Schedule 8.2(h));
----------------
(ii) investments in wholly owned Subsidiaries existing on
the date hereof and wholly owned Subsidiaries hereafter created or acquired,
provided all the shares of such Subsidiaries shall be pledged to the Agent for
- --------
the benefit of the Banks under the Pledge Agreement and each such Subsidiary
shall comply with the requirements of Section 8.1(l), provided, further, that
-------- -------
notwithstanding the foregoing, only Limited Investments not greater than
$1,000,000 in the aggregate shall be permitted to be made by the Companies in
the Insurance Subsidiaries;
(iii) investments in (A) Subsidiaries other than Passport,
which are less than wholly owned, but over which the Borrower maintains control,
and (B) corporate entities in which the Borrower does not maintain control but
for which none of the Companies has any liability greater than its initial
investment in such entity and where the activities in which such entity engages
are consistent with the activities set forth in Section 6.1(aa), provided, that
--------
(1) the investments permitted by clauses (A) or (B) of this Section 8.2(h)(iii),
together with any other acquisitions permitted under Section 8.2(j)(iii), shall
not exceed the Permitted Acquisition Payment, (2) the stock of any such
Subsidiary or corporate entity which is owned by the Borrower or another
Subsidiary shall be pledged to the Agent for the benefit of the Banks under the
Pledge Agreement and each such Subsidiary or corporate entity shall comply with
the requirements of Section 8.1(l) as if such Section applied to all corporate
entities in which the Borrower or a Subsidiary invests as well as to
Subsidiaries (other than the requirement to join the Security Agreement), and
(3) no investments in the Insurance Subsidiaries shall be permitted under this
clause (iii) of Section 8.2(h), since the last proviso in clause (ii) of Section
8.2(h) shall govern all investments in the Insurance Subsidiaries;
(iv) intercompany loans which are subordinated to the
Loans pursuant to the Intercompany Subordination Agreement, provided that
--------
regardless of whether the intercompany loans would be subordinated to the Loans
pursuant to the Intercompany Subordination Agreement, no intercompany loans
(other than Limited Investments to the extent permitted by Section 8.2(h)(ii))
shall be made to the Insurance Subsidiaries.
(v) trade credit extended, and loans and advances
extended to subcontractors or suppliers, under usual and customary terms in the
ordinary course of business;
(vi) advances to employees to meet expenses incurred by
such employees in the ordinary course of business;
(vii) Permitted Investments;
(viii) loans, advances and investments in Subsidiaries
existing on the date hereof;
-57-
<PAGE>
(ix) Limited Investments in the Special Purpose
Subsidiaries so long as the Limited Investments in all Special Purpose
Subsidiaries do not exceed $500,000 in the aggregate; and
(x) loans by the Borrower or a Subsidiary of the Borrower
to First Data Investor Services, Inc. (or any subsidiary thereof) in an amount
not to exceed $3,000,000 in the aggregate to finance front-end broker fees,
provided that such loans are unconditionally guaranteed by Fleet Financial
- --------
Group, Inc. (or any subsidiary thereof acceptable to the Agent and the Banks)
pursuant to a Guaranty and Suretyship Agreement in form and substance acceptable
to the Agent and the Banks.
(i) Dividends and Related Distributions. The Borrower shall
-----------------------------------
not make or pay, or agree to become or remain liable to make or pay, any
dividend or other distribution of any nature (whether in cash, property,
securities or otherwise) on account of or in respect of any shares of the
capital stock of the Borrower (including the Preferred Shares and the Common
Shares), or on account of the purchase, redemption, retirement or acquisition of
any shares of the capital stock (or warrants, options or rights therefor) of the
Borrower, nor permit any such action to be taken indirectly by any of its
Subsidiaries, except:
(i) the Termination Dividend;
(ii) so long as no Event of Default or Potential Default
has occurred and is continuing, the Borrower may repurchase not in excess (i) in
fiscal year 1996, $24,420,000 of the Unpledged Shares (other than the Restricted
Stock); (ii) in fiscal year 1997 and in each fiscal year thereafter during the
term of this Agreement, $2,000,000 of the Unpledged Shares (other than the
Restricted Stock) and, (iii) during the term of this Agreement, $1,000,000 of
Restricted Stock; and at any time, the Borrower may repurchase up to $1,900,000
of the Unpledged Shares held by Mellon Bank, N.A., as trustee of the
Westinghouse Electric Corporation Master Trust Agreement for the Westinghouse
Pension Plan, or any successor trustee;
(iii) Passport or any other Subsidiary which is less than
wholly owned may make distributions as permitted under its organizational
documents; and
(iv) during the Borrower's fiscal year 1996 and thereafter,
so long as (A) no Event of Default or Potential Default has occurred and is
continuing, and (B) the Borrower is in compliance with Section 8.2(a), in the
case of both clauses (A) and (B) after giving effect to any such dividend
payment, the Borrower may make dividend payments with respect to the Common
Shares in any fiscal year in an amount not to exceed $5,000,000.
(j) Liquidations, Mergers, Consolidations and Acquisitions. The
------------------------------------------------------
Borrower shall not, and shall not permit any of its Subsidiaries to, dissolve or
liquidate or wind-up its affairs, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise all or substantially
all of the assets or capital stock of any other person, except:
(i) the merger of the Borrower with and into FII in
accordance with Section 8.1(a);
-58-
<PAGE>
(ii) any Grantor (other than the Borrower or the Insurance
Subsidiaries) may liquidate into, merge or consolidate with a wholly owned
Grantor (other than the Borrower and the Insurance Subsidiaries) and any wholly
owned Subsidiary which is not a Grantor may liquidate into, merge or consolidate
with a wholly owned Subsidiary which is not a Grantor; and
(iii) the Borrower or another Pledged Subsidiary may effect
an acquisition of the capital stock or assets (tangible or intangible) of
another person or persons, so long as (A) such person is a company which engages
in the mutual fund, investment advisory, insurance, retirement plan servicing or
financial services business, (B) if such person is a public company, the
acquisition is not hostile and (C) after giving effect to such acquisition, no
Event of Default or Potential Default shall exist or be continuing and prior to
the consummation of such acquisition, the Borrower shall have provided to the
Agent and the Banks pro forma financial statements for the Borrower and the
Consolidated Subsidiaries, after giving effect to such acquisition,
demonstrating such compliance; provided, that the cash purchase price (including
--------
liabilities assumed) for any such acquisition or series of acquisitions shall
not exceed in the aggregate through the Revolving Credit Expiration Date and
Term Loan Maturity Date $40,000,000 (the "Permitted Acquisition Payment"),
-----------------------------
provided, further, that the foregoing dollar limitation shall not apply to
- -------- -------
acquisitions in which the only assets being acquired are the right of one or
more of the Companies to receive Fund Fees and any related contract rights,
covenants not to compete, goodwill or other intangibles so long as (i) any
mutual fund generating the Fund Fees which are being acquired ("Target Fund") is
merged into an existing fund, (ii) the composition of the board of directors of
any Target Fund is identical to the board of directors of an existing Fund, or
(iii) one or more of the Companies has entered into a servicing contract with
the Target Fund and such contract or related contracts contain make-whole
provisions upon early termination reasonably acceptable to the Agent.
(k) Dispositions of Assets or Subsidiaries. The Borrower shall
--------------------------------------
not, and shall not permit any of its Subsidiaries to, sell, convey, assign,
lease, abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or intangible
(including sale, assignment, discount or other disposition of accounts, contract
rights, chattel paper, equipment or general intangibles with or without recourse
or of capital stock, shares of beneficial interest or partnership interests of a
Subsidiary), except:
(i) any sale, transfer or lease of assets by any wholly
owned Subsidiary (other than the Insurance Subsidiaries) to any other wholly
owned Grantor (other than the Borrower or the Insurance Subsidiaries) and any
sale or assignment of Designated Assets by a Subsidiary of the Borrower to a
Special Purpose Subsidiary, in connection with a securitization or other
receivables sale transaction so long as such transaction is non-recourse to any
Subsidiary of the Borrower or any Special Purpose Subsidiary (except for
customary recourse provisions);
(ii) any sale, transfer or lease of assets which are no
longer necessary or required in the conduct of the Borrower's or any
Subsidiary's business resulting in after-tax proceeds (net of reasonable and
customary expenses in connection with such sale, transfer or lease) not
exceeding in the aggregate $1,000,000 in any fiscal year;
-59-
<PAGE>
(iii) any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets acquired or leased
within the parameters of Sections 8.2(n) and (o), provided such substitute
--------
assets are subject to the Banks' Prior Security Interest; and
(iv) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) through (iii) above, which
is approved by the Required Banks and so long as a mandatory prepayment of the
Term Loans is made in accordance with Section 3.4.
(l) Self-Dealing. The Borrower shall not, and shall not
------------
permit any of its Subsidiaries to, enter into or carry out any transaction
(including purchasing property or services from or selling property or services
to any Affiliate or other person) except upon arm's-length terms and conditions
or as permitted in Section 8.2(u) or the Shareholder Rights Agreement and in
accordance with all applicable Law (including the Investment Company Act).
(m) Benefit Arrangements. The Borrower shall not, and shall not
--------------------
permit any of its Subsidiaries or member of the ERISA Group to:
(i) fail to satisfy the minimum funding requirements of
ERISA and the Internal Revenue Code with respect to any Benefit Arrangement
which is a money purchase pension plan;
(ii) request a minimum funding waiver from the IRS with
respect to any Benefit Arrangement which is a money purchase pension plan;
(iii) engage in a Prohibited Transaction with any Benefit
Arrangement which, alone or in conjunction with any other circumstances or set
of circumstances resulting in liability under ERISA, would constitute a Material
Adverse Change;
(iv) commit a COBRA Violation which would constitute a
Material Adverse Change;
(v) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change; or
(vi) adopt a Defined Benefit Pension Plan or adopt, or
otherwise agree to contribute to, a Multiemployer Plan or a Multiple Employer
Plan, provided that members of the Controlled Group other than the Companies
--------
may incur obligations under Defined Benefit Pension Plans so long as the total
"benefit liabilities" as defined in Section 4001(a)(16) of ERISA under such
Defined Benefit Pension Plans do not at any time exceed $1,000,000.
(n) Leases. The Borrower shall not, and shall not permit any
------
of its Subsidiaries to, rent or lease real or personal property of any other
person, except under usual and customary terms and in the ordinary course of
business; provided the aggregate rent payable
- --------
-60-
<PAGE>
(whether fixed or contingent) under all leases of the Companies (excluding
capitalized leases and rent payable under the leases for the Companies'
premises) in any fiscal year shall not exceed $10,000,000.
(o) Capital Expenditures. The Borrower shall not, and shall not
--------------------
permit any of its Subsidiaries to, make any payment in any fiscal year on
account of the purchase or lease of any assets which if purchased would
constitute fixed assets or which if leased would constitute a capitalized lease,
exceeding in the aggregate $15,000,000 (net of any related cash reimbursements
from third parties) in any fiscal year .
(p) Continuation of or Change in Business. The enterprises
-------------------------------------
represented by the Companies taken as a whole shall continue to engage in their
respective businesses substantially as conducted and operated by the Companies
during the present fiscal year, and the Borrower shall not permit any material
change in such businesses (i.e., the mutual fund, investment advisory,
insurance, retirement plan servicing and financial services business, and the
business of Federated Bank, as such businesses now exist or may exist in the
future), either directly or indirectly (including by means of loans and
investments), and any change must be in accordance with all applicable Law
(including the Investment Company Act); provided, that
--------
(i) with respect to the insurance business, the activities
of the Companies shall be limited to the transfer of risk between buyer and
underwriter and shall not include any participation in underwriting exposure;
provided that the Insurance Subsidiaries may participate in underwriting
- --------
by reinsuring property and casualty and errors and omissions products of any
insurance company rated A or better by Standard & Poor's or Moody's Investors
Service so long as
(A) the Limited Investments in the Insurance
Subsidiaries by the Companies are not greater than $1,000,000 in the
aggregate;
(B) each Insurance Subsidiary shall at all times
remain an Irish corporation, business trust or other entity or a
corporation, business trust or other entity organized under the laws of
another foreign jurisdiction acceptable to the Agent in its sole
discretion; and
(C) each Insurance Subsidiary shall purchase per
occurrence and aggregate excess of loss insurance to protect such Insurance
Subsidiary from individual losses and aggregate losses in each case for all
losses above the amount of the Limited Investments in such Insurance
Subsidiary and shall provide evidence in form satisfactory to the Agent of
such insurance coverage to the Agent promptly upon obtaining such insurance
coverage;
(ii) the only activities in which the Special Purpose
Subsidiaries shall be permitted to engage are to finance broker commissions with
respect to the sale of proprietary or private label mutual funds administered or
distributed by the Companies and to hold stock of other Special Purpose
Subsidiaries, provided
--------
-61-
<PAGE>
(A) the Special Purpose Subsidiaries shall not enter
into any agreements which permit any cross-defaults with any of the Senior
Loan Documents and
(B) the Limited Investments in the Special Purpose
Subsidiaries by the Companies are not greater than $500,000 in the
aggregate;
(iii) the Borrower shall cause the Insurance Subsidiaries
and the Special Purpose Subsidiaries to use every reasonable and practicable
means to assure that all persons having dealings with the Insurance Subsidiaries
or the Special Purpose Subsidiaries shall be informed that the property of the
Companies (other than in the case of an Insurance Subsidiary, the applicable
Insurance Subsidiary) or the shareholders, officers or other agents of the
Companies (other than in the case of an Insurance Subsidiary, the applicable
Insurance Subsidiary) shall not be subject to claims against or obligations of
the Insurance Subsidiaries or the Special Purpose Subsidiaries to any extent
whatsoever. The Borrower shall cause the Insurance Subsidiaries and the Special
Purpose Subsidiaries to insert in any material written agreement, undertaking or
obligation made or issued on behalf of the Insurance Subsidiaries or the Special
Purpose Subsidiaries that none of the Companies (other than in the case of an
Insurance Subsidiary, the applicable Insurance Subsidiary) or shareholders,
officers or other agents of any of the Companies (other than in the case of an
Insurance Subsidiary, the applicable Insurance Subsidiary) shall be liable
thereunder, and that the other parties to such instruments shall look solely to
the assets of the applicable Insurance Subsidiary or the Special Purpose
Subsidiary for the payment of any claim thereunder for the performance thereof;
and
(iv) the Borrower, FII, FII Holdings, Inc., Federated
Services Company and FS Holdings, Inc. shall not become registered as investment
advisers or broker-dealers.
(q) Changes in Subordinated Loan Documents. The Borrower shall
--------------------------------------
not amend or modify any provisions of the Subordinated Loan Documents, or
directly or indirectly make, or permit any Subsidiary to make, any payment on
the Senior Subordinated Term Notes which in either case would violate the
provisions of the Intercreditor Agreement.
(r) Senior Subordinated Term Notes Payments. The Borrower shall
---------------------------------------
not directly or indirectly make, or permit any of its Subsidiaries to make, any
payment on the Senior Subordinated Term Notes except (i) regularly scheduled
interest and principal payments; and (ii) prepayment in full of the Senior
Subordinated Term Notes (A) within one hundred twenty (120) days of the Closing
Date or (B) in connection with the issuance of the Senior Notes; provided that
--------
no payments under this Section 8.2(r) on the Senior Subordinated Term Notes
shall be made if an Event of Default or Potential Default exists or such payment
would cause an Event of Default or Potential Default.
(s) Changes in Other Documents. The Borrower shall not amend or
--------------------------
modify any provisions of the Shareholder Rights Agreements, the Stock Purchase
Agreement, the Declaration of Trust or, after the merger of the Borrower into
FII, the organizational documents (including Articles of Incorporation and
Bylaws) of FII, or, after the issuance of the
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Senior Notes, the Senior Notes or any related agreement, document or instrument,
without providing at least fifteen (15) Business Days' prior written notice to
the Agent and, in the event such change would be adverse to the Banks as
determined by the Agent in its sole discretion, obtaining the prior written
consent of the Required Banks.
(t) Intercompany Transactions. The Borrower shall not permit there to
-------------------------
be any restriction on the dividends payable by its Subsidiaries except as
otherwise required by Law. The Borrower shall not permit there to be any
intercompany debt owing by the Borrower to its Subsidiaries unless such debt is
subordinated to the Loans pursuant to the Intercompany Subordination Agreement.
No existing business or assets of the Companies shall be transferred or
otherwise diverted to or used for the benefit of Subsidiaries which are not
wholly owned except with respect to continuation of Passport's business, and any
Subsidiaries which are not wholly owned may only be used in connection with
generating new business opportunities (whether in existing areas of business or
otherwise), subject to the provisions of Section 82(p).
(u) Change in Ownership. The Borrower shall not permit any change in
-------------------
the ownership of the Borrower (including by means of a public offering initiated
by the Borrower), except:
(i) the issuance of up to 515,500 stock options for Class B
Shares to the holders of stock appreciation rights under the Federated Investors
Stock Appreciation Rights Plans for 1994 and 1995 and, after the Closing Date,
the issuance of up to an aggregate of 2,000,000 Class B Shares (adjusted from
time to time to reflect any stock splits, stock dividends, reorganizations or
similar events) to the Profit-Sharing Trust or employees under the Profit-
Sharing Trust, stock options, an ESOP or other employee stock arrangements;
(ii) the issuance of Class B Shares or Preferred Shares in
connection with investments or acquisitions permitted under Sections 82()() or
82 ()();
(iii) transfers of the Pledged Shares may be made among the
Management Shareholders, the Management-Related Shareholders and their family
and affiliates, so long as the transfer is subject to the Pledge Agreement;
(iv) the issuance of Class B Shares or Preferred Shares by the
Borrower in connection with a public offering (subject to compliance with any
other applicable section of this Agreement including Section 3.4(c))or transfers
of the Unpledged Shares (whether or not in a public offering) may be made by any
holder of the Unpledged Shares without restriction, so long as the Management
Shareholders, the Management-Related Shareholders, the Profit-Sharing Trust,
employees of the Borrower or its Subsidiaries and the family and affiliates of
the foregoing hold, in the aggregate, until any IPO, at least 5,000,000 of the
outstanding Class B Shares (adjusted from time to time to reflect any stock
splits, stock dividends, reorganizations or similar events) and, after any IPO,
at least 4,000,000 of the outstanding Class B Shares (adjusted from time to time
to reflect any stock splits, stock dividends, reorganizations or similar
events);
(v) notwithstanding the provisions of this Section 82(u), the
Borrower shall not take any action or permit any action to be taken which would
result in
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<PAGE>
(A) less than all of the Class A Shares continuing to be pledged at all times to
the Agent under the Pledge Agreement, (B) at any time prior to an IPO, less than
50.1% of the Class B Shares being subject to a valid Proxy, or (C) at any time
prior to an IPO, including after conversion of the Series A Preferred Shares or
exercise any options, in the Agent on behalf of the Banks, after the occurrence
of an Event of Default, not having full voting control of the Companies in all
circumstances, including without limitation, those circumstances in which the
holders of the Class B Shares or deemed holders of Class B Shares are entitled
to vote.
(v) Change in Management. The Borrower shall not permit any material
--------------------
change in the management of the Borrower. For purposes of the foregoing,
"material change" shall mean a cessation of employment of a majority of the
Management Shareholders (other than those whose employment ceases due to death,
disability or retirement after age 65).
(w) Fiscal Year and Accounting Methods. The Borrower shall not, and
----------------------------------
shall not permit any of its Subsidiaries to, (i) change its fiscal year from the
twelve (12) month period beginning January 1 and ending December 31 or (ii)
change from the accrual method of accounting.
8.3 Reporting Requirements.
----------------------
The Borrower covenants and agrees that until payment in full of the Loans
and interest thereon, satisfaction of all of the Borrower's other obligations
hereunder and termination of the Revolving Credit Commitments and the Swing Loan
Commitment, it will furnish or cause to be furnished to the Agent and each of
the Banks:
(a) Monthly Financial Statements. As soon as available and in any
----------------------------
case within forty-five (45) days after the end of each month, its operations
report, including, at a minimum, assets under management by the Borrower and its
Consolidated Subsidiaries, and consolidated financial statements of the Borrower
and its Consolidated Subsidiaries, consisting of a consolidated balance sheet as
of the end of such month and related consolidated statements of operations for
the month then ended and the fiscal year to date, all in reasonable detail.
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within forty-five (45) days after the end of each fiscal quarter in each
fiscal year, its operations report, including, at a minimum, consolidated
financial statements of the Borrower and its Consolidated Subsidiaries
consisting of a consolidated balance sheet as of the end of such fiscal quarter
and related consolidated statement of operations, retained earnings and cash
flows for the fiscal quarter then ended and the fiscal year through that date,
all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President, Chief Financial Officer,
Treasurer or Controller of the Borrower as having been prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and periods in the
previous fiscal year.
(c) Annual Financial Statements. As soon as available and in any
---------------------------
event within ninety (90) days after the end of each fiscal year of the Borrower,
financial statements of the Borrower and its Consolidated Subsidiaries
consisting of consolidated and
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consolidating balance sheets as of the end of such fiscal year, and related
consolidated and consolidating statement of operations, consolidated
stockholders' equity, consolidated statement of retained earnings and
consolidated statement of cash flow for the fiscal year then ended, all in
reasonable detail and setting forth in comparative form the financial statements
as of the end of and for the preceding fiscal year, and (in the case of the
consolidated financial statements only) certified by KPMG Peat Marwick or
another independent certified public accountant of nationally recognized
standing satisfactory to the Required Banks. The certificate or report of
accountants shall be free of qualifications (other than (A) any consistency
qualification, or (B) any qualification relating to an inconsistency with GAAP,
that may result from a change in the method used to prepare Borrower's financial
statements as to which such accountants concur) and shall not indicate the
occurrence or existence of any event, condition or contingency which would
materially impair the prospect of payment or performance of any covenant,
agreement or duty of the Borrower under any of the Senior Loan Documents,
together with a letter of such accountants substantially to the effect that
based upon their ordinary and customary examination of the affairs of the
Borrower, performed in connection with the preparation of such consolidated
financial statements, and in accordance with generally accepted auditing
standards, they are not aware of the existence of any condition or event which
constitutes or would, upon notice or lapse of time, or both, constitute an Event
of Default or, if they are aware of such condition or event, stating the nature
thereof and confirming the Borrower's calculations with respect to the
certificate to be delivered pursuant to Section 83() with respect to such
financial statements.
(d) Certificate of the Borrower. Concurrently with the financial
---------------------------
statements of the Borrower furnished to the Agent and to the Banks pursuant to
Sections 8.3(b) and 8.3(c), a certificate of the Borrower signed by the Chief
Executive Officer, President, Chief Financial Officer, Treasurer or Controller
of the Borrower, in the form of Exhibit L, to the effect that, except as
---------
described pursuant to Section 83(), (i) the representations and warranties of
the Borrower contained in Article 6 and any certifications delivered by any of
the Companies after the Closing Date are true on and as of the date of such
certificate with the same effect as though such representations, warranties and
certifications had been made on and as of such date (except representations,
warranties and certifications which expressly relate solely to an earlier date
or time) and the Borrower has performed and complied with all covenants and
conditions hereof, (ii) no Event of Default or Potential Default exists and is
continuing on the date of such certificate and (iii) containing calculations in
sufficient detail to demonstrate the Leverage Ratio and compliance as of the
date of the financial statements with the covenants contained in Sections 2.5,
3.4(b), (c) and (d), 8.1(l) and 8.2(a), (b), (c), (h), (i), (j), (k), (n), (o),
(u) and (v). The certificate delivered with the annual financial statements
pursuant to Section 83() shall include a determination in reasonable detail of
the amount of any Excess Cash Flow and the amount of any Mandatory Prepayment of
Excess Cash Flow applicable to such fiscal year pursuant to Section 3.4(a).
(e) Notice of Default. Promptly after the Borrower has learned of the
-----------------
occurrence of an Event of Default, Potential Default or Material Adverse Change,
a certificate signed by the Borrower's Chief Executive Officer, President, Chief
Financial Officer, Treasurer or Controller setting forth the details of such
Event of Default, Potential Default or Material Adverse Change and the action
which the Borrower proposes to take with respect thereto.
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<PAGE>
(f) Notice of Litigation. Promptly after the commencement thereof,
--------------------
notice of all actions, suits, proceedings or investigations before or by any
Official Body or any other person against any of the Companies or any of the
Funds or which relates to the Collateral, involves a claim or series of claims
of $1,000,000 or more or which if adversely determined would constitute a
Material Adverse Change.
(g) Certain Events. Written notice to the Agent of (i) any sale or
--------------
other transfer of assets as permitted under subsections (i), (ii), (iii) or (iv)
of Section 82(), (ii) any merger, acquisition, consolidation or liquidation
permitted under Section 82(), (iii) any change in the ownership or management of
the Borrower permitted under Section 82() or (), (iv) the creation or
acquisition of any new Subsidiaries or investment in any other corporate entity,
such notice to be delivered to the Agent within five (5) Business Days after
occurrence of such event or consummation of such transaction(s), and in the case
of the creation or acquisition of a new Subsidiary or investment in any other
corporate entity, accompanied by the items specified in Section 81() to be
delivered within thirty (30) calendar days after the creation or acquisition of
a new Subsidiary or investment in any other corporate entity, and (v) any
amendment to the declaration of trust, certificate or articles of incorporation,
bylaws, partnership agreement or other organizational documents of any of the
Companies or the use by any of the Companies of any fictitious name, it being
understood that any such amendments require at least ten (10) Business Days'
prior notice to the Agent and may in some cases, including any amendment to the
Declaration of Trust of the Borrower which the Agent has determined would be
adverse to the Banks pursuant to Section 82(), require the prior written consent
of the Required Banks.
(h) Other Notices, Reports and Information. At the same time sent or
--------------------------------------
provided to WCC, its successors or assigns under the Subordinated Loan Documents
or the holders of the Senior Notes under the Senior Notes and related documents,
all notices and reports provided under the Subordinated Loan Documents and
Senior Notes and related documents (unless already provided pursuant to any
other provision of this Section 83). Promptly upon their becoming available to
the Borrower, (i) the annual budget of the Companies, to be supplied not later
than fifteen (15) days prior to commencement of the fiscal year to which it is
applicable, (ii) any reports including management letters submitted to any of
the Companies by independent accountants in connection with any annual, interim
or special audit, (iii) any reports, or notices distributed by any of the
Companies to its shareholders on a date no later than the date supplied to the
shareholders, (iv) upon request, periodic reports filed by any of the Companies
with the Securities and Exchange Commission, (v) periodic reports of examination
by the Securities and Exchange Commission or the National Association of
Securities Dealers, Inc. of any of the Companies and any responses thereto, (vi)
any Revenue Agent's Report and accompanying Statement of Income Tax Examination
Changes and any notice of assessment or deficiency by the IRS within ten (10)
days of receipt, and (vii) such other reports and information as the Banks may
from time to time reasonably request. The Borrower shall also notify the Banks
promptly of the enactment of any legislation or adoption of any Law which may
result in a Material Adverse Change.
(i) Notices Regarding Benefit Arrangements. Promptly upon becoming
--------------------------------------
aware of the occurrence thereof, notice (including the nature of the event and,
when known, any action taken or threatened by the IRS with respect thereto) of
any Prohibited
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<PAGE>
Transaction which could subject the Borrower or any member of the ERISA Group to
a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Internal Revenue Code in connection with any Defined Benefit
Pension Plan, Benefit Arrangement or any trust created thereunder.
(j) Financial Statements Regarding the Special Purpose Subsidiaries.
---------------------------------------------------------------
At the same time that the Borrower provides the quarterly financial statements
required under Section 83(b) for the Borrower and its Consolidated Subsidiaries,
it shall also provide quarterly financial statements of the type required by
Section 8.3(b) for the Special Purpose Subsidiaries. At the same time that the
Borrower provides the annual financial statements required under Section 83(c)
for the Borrower and its Consolidated Subsidiaries, it shall also provide
consolidated and consolidating annual financial statements, of the type required
by Section 83(c), for the Borrower, its Consolidated Subsidiaries and the
Special Purpose Subsidiaries.
(k) Notices Regarding Special Purpose Subsidiaries. Within five (5)
----------------------------------------------
Business Days after the creation of any new Special Purpose Subsidiary, the
Borrower shall provide written notice to the Agent of the creation of any new
Special Purpose Subsidiary, accompanied by the declaration of trust, certificate
or articles of incorporation, bylaws or other organizational documents of the
new Special Purpose Subsidiary.
9. DEFAULT
-------
9.1 Events of Default.
-----------------
An Event of Default shall mean the occurrence or existence of any one or
more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
(a) The Borrower shall (i) fail to pay any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity) or (ii) fail to pay any interest on any Loan or any other amount owing
thereunder or hereunder within two (2) Business Days after such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made at any time by the Borrower
herein or by the Borrower or any other Loan Party in any other Senior Loan
Document, or in any certificate, other instrument or statement furnished
pursuant to the provisions hereof or thereof, shall prove to have been false or
misleading in any material respect as of the time it was made or furnished; or
(c) The Borrower shall default in the observance or performance of any
covenant, condition or provision hereof or of any other Senior Loan Document and
such default shall continue unremedied for a period of five (5) Business Days
after written notice thereof is given to the Borrower by the Agent at the
request of any Bank (such grace period to be applicable only in the event such
default can be remedied by corrective action of the Borrower as
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determined by the Agent in its sole discretion); provided no grace period shall
--------
apply to defaults in the observance or performance of Sections
8.2(a),(b),(c),(d),(i),(j),(k),(p),(r),(u) or Section 8.3(e); or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any covenant, condition or provision hereof or of
any other Senior Loan Document and such default shall continue unremedied for a
period of ten (10) Business Days after the Borrower or any other Loan Party
becomes aware of the occurrence thereof (such grace period to be applicable only
in the event such default can be remedied by corrective action of the Borrower
or any other Loan Party as determined by the Agent in its sole discretion);
provided no grace period shall apply to defaults in the observance or
- --------
performance of Sections 8.2(a), (b), (c), (d), (i), (j), (k), (p), (r), (u) or
Section 8.3(e); or
(e) A default or event of default shall occur at any time under the
Subordinated Loan Documents or under the terms of any other Indebtedness (if
any) of any of the Companies, or all or any part of the Senior Subordinated Term
Notes or other Indebtedness shall not be paid when due, and such default or
event of default or non-payment continues unremedied for five (5) Business Days
after any of the Companies becomes aware thereof; provided no grace period
--------
hereunder shall apply in any event where such default, event of default or
nonpayment permits the holder of any Indebtedness of the Companies to accelerate
such Indebtedness; or
(f) Any final unappealable judgment(s) for the payment of money in
excess of $1,000,000 in the aggregate shall be entered against any of the
Companies by a court having jurisdiction in the premises and shall remain
unsatisfied for a period of thirty (30) days; or
(g) Any of the Senior Loan Documents shall cease to be legal, valid
and binding agreements enforceable against any Loan Party executing the same or
such Loan Party's heirs, representatives, successors and assigns (as permitted
under the Senior Loan Documents) in accordance with the respective terms thereof
or shall in any way be terminated (except in accordance with its terms) or
become or be declared ineffective or inoperative or shall in any way be
challenged or contested by any Loan Party or cease to give or provide the
respective Liens, security interests, rights, titles, interests, remedies,
powers or privileges intended to be created thereby; or
(h) A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any of the Companies in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar Law now or hereafter in effect, or a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any of the Companies shall have been appointed
(pursuant to a proceeding or otherwise) or for any substantial part of its
property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
thirty (30) consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding; or
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<PAGE>
(i) Any of the Companies shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization or other similar Law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such Law, or shall consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official) of itself or for any
substantial part of its property (other than voluntary liquidations permitted
under Section 82(j)) or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any action in furtherance of any of the foregoing.
9.2 Consequences of Event of Default.
--------------------------------
(a) If an Event of Default specified under subsections (a) through (g)
of Section 91 shall occur and be continuing, no Bank shall have any further
obligation to make Loans hereunder and the Agent, upon the request of the
Required Banks, shall by written notice to the Borrower take any or all of the
following actions: (i) terminate the Commitments, (ii) declare the unpaid
principal amount of the Notes then outstanding and all interest accrued thereon,
any unpaid fees and all other Indebtedness (including the stated amount of all
outstanding Letters of Credit of the Borrower to the Banks hereunder and
thereunder to be forthwith due and payable, and the same shall thereupon become
and be immediately due and payable to the Agent for the benefit of each Bank,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and (iii) require the Borrower to, and Borrower
shall thereupon, deposit in a non-interest bearing account with the Agent, as
cash collateral for its obligations under the Senior Loan Documents, an amount
equal to the maximum amount currently or at any time thereafter available to be
drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to
the Agent and the Banks, and grants to the Agent and the Banks a security
interest in, all such cash as security for such obligations, provided that upon
the earlier of (x) the curing of all existing Events of Default to the
satisfaction of the Required Banks and (y) payment in full of the Loans,
satisfaction of all of the Borrower's other obligations hereunder and
termination of the Commitments, the Agent shall return such cash collateral to
the Borrower; and
(b) if an Event of Default specified under subsections (h) or (i) of
Section 91 shall occur, the Banks shall have no further obligation to make Loans
hereunder, the Commitments shall without any further action terminate and the
unpaid principal amount of the Notes then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness (including the stated amount
of all outstanding Letters of Credit) of the Borrower to the Banks hereunder and
thereunder shall be immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived; and
(c) In case an Event of Default shall occur and be continuing, any
Bank to whom any obligation is owed by the Borrower hereunder or under any other
Senior Loan Document or any participant of such Bank which has agreed in writing
to be bound by the provisions of Section 1014 and any branch, subsidiary or
affiliate of such Bank or participant anywhere in the world shall have the
right, in addition to all other rights and remedies available to it, without
notice to the Borrower, to set off against and apply to the then unpaid balance
of all the Loans and all other obligations of the Borrower hereunder or under
any other Senior Loan
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<PAGE>
Document any debt owing to, and any other funds held in any manner for the
account of, the Borrower by such Bank or participant or by such branch,
subsidiary or affiliate, including all funds in all deposit accounts (whether
time or demand, general or special, provisionally credited or finally credited,
or otherwise) now or hereafter maintained by the Borrower for its own account
(but not including funds held in custodian or trust accounts) with such Bank or
participant or such branch, subsidiary or affiliate. Such right shall exist
whether or not any Bank or the Agent shall have made any demand under this
Agreement or any other Senior Loan Document, whether or not such debt owing to
or funds held for the account of the Borrower is or are matured or unmatured and
regardless of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to any Bank or the Agent; and
(d) In case an Event of Default shall occur and be continuing, and
whether or not the Agent shall have accelerated the maturity of the Loans of the
Borrower pursuant to any of the foregoing provisions of this Section 92, the
Agent on behalf of the Banks may proceed to protect and enforce its rights by
suit in equity, action at law and/or other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in this
Agreement or the Notes, including as permitted by applicable Law the obtaining
of the ex parte appointment of a receiver, and, if such amount shall have become
-- -----
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of the Agent on behalf of the Banks; and
(e) From and after the date on which the Agent has taken any action
pursuant to this Section 92 and until all obligations of the Borrower have been
paid in full, any and all proceeds received by the Agent from any sale or other
disposition of the Collateral, or any part thereof, or the exercise of any other
remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks for out-of-
pocket costs, expenses and disbursements, including reasonable attorneys' fees
and legal expenses, incurred by the Agent or the Banks in connection with
realizing on the Collateral or collection of any obligations of the Borrower
under any of the Senior Loan Documents, including advances made subsequent to an
Event of Default by the Banks or any one of them or the Agent for the reasonable
maintenance, preservation, protection or enforcement of, or realization upon,
the Collateral, including advances for taxes, insurance, repairs and the like
and reasonable expenses incurred to sell or otherwise realize on, or prepare for
sale or other realization on, any of the Collateral;
(ii) second, to the repayment of all Indebtedness then due and
unpaid of the Borrower to the Banks incurred under this Agreement or any of the
Senior Loan Documents and advances made to cure defaults under the Subordinated
Loan Documents, whether of principal, interest, fees, expenses or otherwise, in
such manner as the Agent may determine in its discretion, subject to the
provisions of Section 52; and
(iii) the balance, if any, as required by Law.
(f) In addition to all of the rights and remedies contained in this
Agreement or in any of the other Senior Loan Documents, the Agent shall have all
of the rights and remedies of a secured party under the Uniform Commercial Code
or other applicable Law,
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all of which rights and remedies shall be cumulative and non-exclusive, to the
extent permitted by Law. The Agent may, and upon the request of the Required
Banks shall, exercise all post-default rights granted to the Agent and the Banks
under the Senior Loan Documents or applicable Law.
9.3 Notice of Sale.
--------------
Any notice required to be given by the Agent of a sale, lease, or
other disposition of the Collateral or any other related action by the Agent, if
given ten (10) days prior to such proposed action, shall constitute commercially
reasonable and fair notice thereof to the Borrower or any other Loan Party.
10. THE AGENT
---------
10.1 Appointment.
-----------
Each Bank hereby irrevocably designates, appoints and authorizes PNC to act as
Agent for such Bank under this Agreement to execute and deliver or accept on
behalf of each of the Banks the other Senior Loan Documents. Each Bank hereby
irrevocably authorizes, and each holder of any Note by the acceptance of a Note
shall be deemed irrevocably to authorize, the Agent to take such action on
behalf of such Bank and such holder under the provisions of this Agreement and
the other Senior Loan Documents and any other instruments and agreements
referred to herein, and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. PNC
agrees to act as the Agent on behalf of the Banks to the extent provided in this
Agreement.
10.2 Delegation of Duties.
--------------------
The Agent may perform any of its duties hereunder by or through agents
or employees (provided such delegation is exercised with reasonable care and
--------
does not constitute a relinquishment of its duties as Agent) and, subject to
Sections 105, 106 and 107, shall be entitled to engage and pay for the advice or
services of any attorneys, accountants or other experts concerning all matters
pertaining to its duties hereunder and to rely upon any advice so obtained,
provided reasonable care is used in the selection of the foregoing experts.
- --------
10.3 Nature of Duties; Independent Credit Investigation.
--------------------------------------------------
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Senior Loan Documents and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or shall otherwise exist. The
duties of the Agent shall be mechanical and administrative in nature and shall
include the duty to provide to each Bank an executed original of such Bank's
Revolving Credit Note and Term Note and an executed original of this Agreement
and a copy of the other Senior Loan Documents; the Agent shall not have by
reason of this Agreement a fiduciary or trust relationship in respect of any
Bank; and nothing in this Agreement, expressed or implied, is
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intended to or shall be so construed as to impose upon the Agent any obligations
in respect of this Agreement except as expressly set forth herein. Each Bank
expressly acknowledges (i) that the Agent has not made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower or any Subsidiary of the Borrower, shall
be deemed to constitute any representation or warranty by the Agent to any Bank;
(ii) that it has made and will continue to make, without reliance upon the
Agent, its own independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of the Borrower in connection with
this Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times thereafter.
10.4 Actions in Discretion of the Agent; Instructions from the Banks.
---------------------------------------------------------------
The Agent agrees, upon the written request of the Required Banks, to
take or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the Agent shall not
--------
be required to take any action which exposes the Agent to legal liability or
which is contrary to this Agreement or any other Senior Loan Document or
applicable Law. In the absence of a request by the Required Banks, the Agent
shall have authority, in its sole discretion, to take or not to take any such
action, unless this Agreement specifically requires the consent of the Required
Banks or all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
106. Subject to the provisions of Section 106, no Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Agent.
10.5 Reimbursement and Indemnification of the Agent by the Borrower.
--------------------------------------------------------------
The Borrower unconditionally agrees to pay or reimburse the Agent and
save the Agent harmless against (i) liability for the payment of all reasonable
and necessary out-of-pocket costs, expenses and disbursements for which
reimbursement is customarily obtained, including fees and expenses of counsel
and consultants, incurred by the Agent (a) in connection with the development,
negotiation, preparation, printing, execution, administration, interpretation
and performance of this Agreement and the other Senior Loan Documents, (b)
relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (c) in connection with the enforcement of this Agreement or
any other Senior Loan Document or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising under this
Agreement or any other Senior Loan Document, whether in bankruptcy or
receivership proceedings or otherwise, and (d) in any workout or restructuring
or in connection with the protection, preservation, exercise or enforcement of
any of the terms hereof or of any rights hereunder or under any other Senior
Loan Document or in connection with any foreclosure, collection or bankruptcy
proceedings, and (ii) all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent, in its capacity
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as such, in any way relating to or arising out of this Agreement or any other
Senior Loan Document or any action taken or omitted by the Agent hereunder or
thereunder; provided that the Borrower shall not be liable for any portion of
--------
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (a) if the same results from the Agent's
gross negligence or willful misconduct, or (b) if the Borrower was not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense, or (c) if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower which
consent shall not be unreasonably withheld.
10.6 Exculpatory Provisions.
----------------------
Neither the Agent nor any of its directors, officers, employees,
agents or affiliates shall (i) be liable to any Bank for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith,
including pursuant to any other Senior Loan Document, unless caused by its or
their own gross negligence or willful misconduct, (ii) be responsible in any
manner to any of the Banks for the effectiveness, enforceability, genuineness,
validity or the due execution of this Agreement or any other Senior Loan
Document or for any recital, representation, warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Senior Loan Document, or (iii) be under any obligation to
any of the Banks to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions hereof or thereof on the part of
the Borrower or any Subsidiary of the Borrower, or the financial condition of
the Borrower or any Subsidiary of the Borrower, or the existence or possible
existence of any Event of Default or Potential Default. Neither the Agent nor
any Bank nor any of their respective directors, officers, employees, agents,
attorneys or affiliates shall be liable to the Borrower or any other Loan Party
for consequential damages resulting from any breach of contract, tort or other
wrong in connection with the negotiation, documentation or administration of the
Senior Loan Documents or the collection of the Loans.
10.7 Reimbursement and Indemnification of the Agent by the Banks.
-----------------------------------------------------------
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent, in its capacity as such,
in any way relating to or arising out of this Agreement or any other Senior Loan
Document or any action taken or omitted by the Agent hereunder or thereunder,
provided that no such reimbursement shall be required with respect to expenses
- --------
incurred by the Agent during the time period through the Closing Date and no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
(i) if the same relates to or arises out of the Agent's gross negligence or
willful misconduct, or (ii) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense,
or (iii) if the same results from a compromise and settlement agreement entered
into without the consent of the Required Banks, which consent shall not be
unreasonably withheld.
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10.8 Reliance by the Agent.
---------------------
The Agent shall be entitled to rely upon any writing, telegram, telex
or teletype message, facsimile, resolution, notice, consent, certificate,
letter, cablegram, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or persons, and upon the advice and
opinions of counsel and other professional advisers selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
10.9 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Borrower referring to this Agreement,
specifically describing such Potential Default or Event of Default and stating
that such notice is a "notice of default."
10.10 Notices.
-------
The Agent shall promptly send to each Bank a copy of all notices
received from the Borrower and/or any other Loan Party pursuant to the
provisions of this Agreement or any other Senior Loan Document upon receipt
thereof. The Agent shall promptly notify the Borrower and the other Banks of
each change in the Base Rate and the Base Rate Margin and the effective date
thereof.
10.11 PNC Bank, National Association and the Banks in Their
-----------------------------------------------------
Individual Capacities.
---------------------
With respect to its Commitments and the Loans made by it, the Agent
shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not the Agent, and the term "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. PNC and its affiliates and each of the Banks and their respective
affiliates may, without liability to account, except as prohibited herein, make
loans to, accept deposits from, discount drafts for, act as trustee under
indentures of, and generally engage in any kind of banking or trust business
with, the Borrower and its shareholders, any Subsidiary of the Borrower and
their respective Affiliates, in the case of the Agent, as though it were not
acting as Agent hereunder and in the case of each Bank, as though such Bank were
not a Bank hereunder.
10.12 Holders of Notes.
----------------
The Agent may deem and treat any payee of any Note as the owner
thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
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conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
10.13 Equalization of the Banks.
-------------------------
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Sections 44 (), 54 or 55. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the other Banks
an interest in such Bank's Loans in such amount as shall result in a ratable
participation by the Banks and each such holder in the aggregate unpaid amount
under the Notes, provided that if all or any portion of such excess amount is
--------
thereafter recovered from the Bank or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by Law
(including court order) to be paid by the Bank or the holder making such
purchase.
10.14 Successor Agent.
---------------
The Agent (i) may resign as Agent with the consent of the Borrower,
such consent not to be unreasonably withheld or (ii) shall resign if such
resignation is requested by the Required Banks or required by Section 54(b), in
either case (i) or (ii) by giving not less than thirty (30) days' prior written
notice to the Borrower and the Banks. If the Agent shall resign under this
Agreement, then either (a) the Required Banks shall appoint from among the Banks
a successor agent for the Banks, subject to the consent of such successor agent
by the Borrower, such consent not to be unreasonably withheld, or (b) if a
successor agent shall not be so appointed and approved within the thirty (30)
day period following the Agent's notice to the Banks of its resignation, then
the Agent shall appoint, with the consent of the Borrower, such consent not to
be unreasonably withheld, a successor agent who shall serve as Agent until such
time as the Required Banks appoint, and the Borrower consents, which consent
shall not be unreasonably withheld, to the appointment of, a successor agent.
Upon its appointment pursuant to either clause (a) or (b) above, such successor
agent shall succeed to the rights, powers and duties of the Agent and the term
"Agent" shall mean such successor agent, effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the resignation of any Agent hereunder, the
provisions of this Article 10 shall inure to the benefit of such former Agent,
and such former Agent shall not by reason of such resignation be deemed to be
released from liability for any actions taken or not taken by it while it was an
Agent under this Agreement.
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<PAGE>
10.15 The Agent's Fee.
---------------
The Borrower shall pay to the Agent an annual fee (the "Agent's Fee")
-----------
payable in arrears on the second Business Day of each April, July, October and
January after the date hereof and on the later of (i) the Revolving Credit
Expiration Date or the Term Loan Maturity Date, as set forth in that certain
letter dated January 31, 1996 between the Borrower and the Agent.
10.16 Calculations.
------------
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in computing any amount payable to
any Bank is made, the Agent, the Borrower and each affected Bank shall,
forthwith upon discovery of such error, make such adjustments as shall be
required to correct such error, and any compensation therefor will be calculated
at the Federal Funds Effective Rate.
10.17 Beneficiaries.
-------------
Except as set forth in Sections 105, 1015 and 1016, the provisions of
this Article 10 are solely for the benefit of the Agent and the Banks, and the
Borrower or any other Loan Party shall not have any rights to rely on or enforce
any of the provisions hereof. In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Banks and does not assume
and shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for the Borrower or any other Loan Party.
11. MISCELLANEOUS
-------------
11.1 Modifications, Amendments or Waivers.
---- ------------------------------------
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrower may from time to time enter into
written agreements amending or changing any provision of this Agreement or any
other Senior Loan Document or the rights of the Banks, the Borrower or the other
Loan Parties hereunder or thereunder, or may grant written waivers or consents
to a departure from the due performance of the obligations of the Borrower or
the other Loan Parties hereunder or thereunder. Any such agreement, waiver or
consent made with such written consent shall be effective to bind all the Banks;
provided that without the written consent of all the Banks, no such agreement,
- --------
waiver or consent may be made which will:
(i) increase the amount of the Revolving Credit Commitment
or Term Loan Commitment of any Bank hereunder;
(ii) reduce the scheduled principal payments of any Loan,
reduce the rate of interest borne by any Loan (except as provided in Section
41()), or reduce any fees payable to any Bank hereunder;
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(iii) whether or not any Loans are outstanding, extend the
time for payment of principal or interest of any Loan or any fees payable to any
Bank hereunder;
(iv) except as permitted under Section 82(k) or in
connection with the sharing of Collateral in connection with the Senior Notes,
release any Collateral or other security, if any, for the Borrower's obligations
hereunder; or
(v) amend Sections 4.1(c), 8.2(k), 10.6 or this Section
111, alter any provision hereof regarding the pro rata treatment of the Banks
hereunder, change the definition of Required Banks, or change any requirement
providing for the Banks or the Required Banks to authorize the taking of any
action hereunder.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
---------------------------------------------------------
No course of dealing and no delay or failure of the Agent or any Bank
in exercising any right, power, remedy or privilege under this Agreement or any
other Senior Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof; nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other right,
power, remedy or privilege. The rights and remedies of the Agent and the Banks
under this Agreement and the other Senior Loan Documents are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of any
Bank of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing.
11.3 Reimbursement and Indemnification of the Banks by the Borrower;
---------------------------------------------------------------
Taxes.
-----
The Borrower agrees unconditionally upon demand to pay or reimburse to
each Bank and to save such Bank harmless against (i) liability for the payment
of all reasonable and necessary out-of-pocket costs, expenses and disbursements
for which reimbursement is customarily obtained, including fees and expenses of
counsel for each Bank incurred by such Bank (a) after the date of the closing of
the syndication hereunder, in connection with the administration and
interpretation of this Agreement and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to the provisions hereof, (c) in connection with the enforcement of
this Agreement or any other Senior Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim arising under
this Agreement or any other Senior Loan Document, whether in bankruptcy or
receivership proceedings or otherwise, and (d) in any workout, restructuring or
in connection with the protection, preservation, exercise or enforcement of any
of the terms hereof or of any rights hereunder or under any other Senior Loan
Document or in connection with any foreclosure, collection or bankruptcy
proceedings, and (ii) all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Bank, in its capacity as such, in any way relating to or arising out of this
Agreement or any other Senior Loan Document or any action taken or omitted by
such Bank hereunder or thereunder; provided that the Borrower shall not be
--------
liable for any portion of such
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liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (a) if the same results from such Bank's gross
negligence or willful misconduct, or (b) if the Borrower was not given notice of
the subject claim and the opportunity to participate in the defense thereof, at
its expense, or (c) if the same results from a compromise or settlement
agreement entered into without the consent of the Borrower, which consent shall
not be unreasonably withheld. The Banks will attempt to minimize the fees and
expenses of legal counsel for the Banks by considering the usage of one law firm
to represent the Banks and the Agent where appropriate. The Borrower agrees
unconditionally to pay all stamp, document, transfer, recording or filing taxes
or fees and similar impositions now or hereafter determined by the Agent or any
Bank to be payable in connection with this Agreement or any other Senior Loan
Document, and the Borrower agrees unconditionally to save the Agent and the
Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
11.4 Holidays.
--------
Whenever any payment or action to be made or taken hereunder shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 42(a) with respect to Euro-Rate Interest Periods), and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
(a) Notional Funding. Each Bank shall have the right from time
----------------
to time, without notice to the Borrower, to deem any branch, subsidiary or
affiliate (which for the purposes of this Section 115 shall mean any corporation
or association which is directly or indirectly controlled by or is under direct
or indirect common control with any corporation or association which directly or
indirectly controls such Bank) of such Bank to have made, maintained or funded
any Loan to which the Euro-Rate Option applies at any time, provided that
--------
immediately following (on the assumption that a payment was then due from the
Borrower to such other office) and as a result of such change the Borrower would
not be under any greater financial obligation pursuant to Section 55 than it
would have been in the absence of such change. Notional funding offices may be
selected by each Bank without regard to the Bank's actual methods of making,
maintaining or funding the Loans or any sources of funding actually used by or
available to such Bank.
(b) Actual Funding. Each Bank shall have the right from time to
time to make or maintain any Loan by arranging for a branch, subsidiary or
affiliate of such Bank to make or maintain such Loan subject to the last
sentence of this Section 115(b). If any Bank causes a branch, subsidiary or
affiliate to make or maintain any part of the Loans hereunder, all terms and
conditions of this Agreement shall, except where the context clearly requires
otherwise, be applicable to such part of the Loans to the same extent as if such
Loan were made or maintained by such Bank but in no event shall any Bank's use
of such a branch, subsidiary or affiliate to make or maintain any part of the
Loans hereunder cause such Bank or such branch, subsidiary or affiliate to incur
any cost or expenses payable by the Borrower hereunder or require
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the Borrower to pay any other compensation to any Bank (including any expenses
incurred or payable pursuant to Section 55) which would otherwise not be
incurred.
11.6 Notices.
-------
All notices, requests, demands, directions and other communications
(collectively "notices") given to or made upon any party hereto under the
-------
provisions of this Agreement shall be by telephone or in writing (including
telex or facsimile communication) unless otherwise expressly permitted hereunder
and shall be delivered or sent by telex or facsimile to the respective parties
at the addresses and numbers set forth on Schedule 11.6 or in accordance with
-------------
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of hand
delivered notice, when hand delivered, (c) in the case of telephone, when
telephoned, provided, however, that in order to be effective, telephonic notices
-------- -------
must be confirmed in writing no later than the next day by letter, facsimile or
telex, (d) if given by mail, the earlier of actual receipt or four (4) days
after such communication is deposited in the mails with first class postage
prepaid, return receipt requested, and (e) if given by any other means
(including by air courier), when delivered; provided that notices to the Agent
--------
and the Banks shall not be effective until received. Any Bank giving any notice
to the Borrower shall simultaneously send a copy thereof to the Agent, and the
Agent shall promptly notify the other Banks of the receipt by it of any such
notice.
11.7 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
11.8 Governing Law.
-------------
Each Letter of Credit and Section 210 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
11.9 Prior Understanding.
-------------------
This Agreement supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto and thereto relating to the
transactions provided for herein and therein, including any prior
confidentiality agreements and commitments.
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11.10 Duration; Survival.
------------------
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of the Loans and shall not
be waived by the execution and delivery of this Agreement, any investigation by
the Agent or the Banks, the making of the Loans, or payment in full of the
Loans. All covenants and agreements of the Borrower contained in Sections 81,
82 and 83 shall continue in full force and effect from and after the date hereof
so long as the Borrower may borrow hereunder and until payment of all amounts
due hereunder and termination of the Revolving Credit Commitments and the Swing
Loan Commitment. All covenants and agreements of the Borrower contained herein
relating to the payment of principal, interest, premiums, additional
compensation or expenses and indemnification, including those set forth in the
Notes, Article 5 and Sections 105 and 113, but not including third-party claims
with respect to which indemnification may be sought under Section 105 or 113,
shall survive for a period of one (1) year after payment in full of the Loans
and termination of the Revolving Credit Commitments and the Swing Loan
Commitment, and the Banks shall make any claim with respect to the foregoing
within such period, provided that such period shall be extended with respect to
--------
any matters pending at the end of such one (1) year period. Except as otherwise
provided above, all obligations of the Borrower and the other Loan Parties to
the Banks, including indemnification obligations with respect to third-party
claims under Section 105 or 113, shall survive the payment in full of the Loans
and of all other obligations of the Borrower and the other Loan Parties and
termination of the Revolving Credit Commitments and the Swing Loan Commitment.
11.11 Successors and Assigns.
----------------------
This Agreement shall be binding upon and shall inure to the benefit of
the Banks, the Agent, the Borrower and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights and
obligations hereunder or any interest herein except under the circumstances
contemplated under Section 81(a). Each Bank may, at its own cost, make
assignments of or sell participations in its Revolving Credit Commitment and any
Loan or Loans made by it to one (1) or more banks or other entities, subject to
compliance with the following requirements of this Section 1111. The consent of
the Borrower shall be required for any assignment or participation except with
respect to fundings by a branch, subsidiary or affiliate pursuant to Section
115, and such consent shall not be unreasonably withheld, it being understood
that the Borrower may reasonably withhold such consent only if it determines in
good faith that the prospective assignee or participant is a significant
competitor, provided the consent of the Borrower shall not be required upon the
--------
occurrence and during the continuation of an Event of Default or Potential
Default. The consent of the Agent shall also be required for any assignment
except with respect to fundings by a branch, subsidiary or affiliate pursuant to
Section 115, and such consent shall not be unreasonably withheld.
Except (i) as otherwise provided in Section 54 (b), or (ii) with the
consent of the Agent and the Borrower which consent may be withheld in their
sole discretion, assignments may not be made in amounts less than $5,000,000.
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In the case of an assignment, upon the Agent's and the Borrower's
consent thereto and receipt by the Agent from the assignee of (i) a duly
executed Assignment and Assumption Agreement and (ii) a Three Thousand Five
Hundred Dollar ($3,500) assignment fee payable to the Agent, the assignee shall
have, to the extent of such assignment (unless otherwise provided therein), the
same rights, benefits and obligations as it would have if it had been a
signatory Bank hereunder. The Revolving Credit Commitments in Section 21 shall
then be adjusted accordingly and, upon surrender of any Note subject to such
assignment, the Borrower shall execute and deliver a new Revolving Credit Note
to the assignee in an amount equal to the amount of the Revolving Credit
Commitment or Term Loan assumed by it and a new Revolving Credit Note or Term
Note to the assigning Bank in an amount equal to the Revolving Credit Commitment
or Term Loan retained by it hereunder.
In the case of a participation, except as specified in Section 92(c),
the participant shall not have any rights under this Agreement or any other
Senior Loan Document, all of such Bank's obligations under this Agreement or any
other Senior Loan Document shall remain unchanged and all amounts payable by the
Borrower hereunder or thereunder shall be determined as if such Bank had not
sold such participation. Any participant's rights against the Bank selling such
participation shall be set forth in the agreement executed by such Bank in favor
of such participant and shall not include any voting rights except with respect
to changes of the type referenced in clauses (i), (ii), (iii) or (iv), of
Section 111 and in clause (v) of Section 111 with respect to amending clauses
(i), (ii), (iii) or (iv) of Section 111.
Each Bank may furnish any publicly available information concerning
the Borrower and, on a confidential basis subject to receipt of a
confidentiality agreement in substantially the form of Exhibit M, any other
---------
information concerning the Borrower in the possession of such Bank from time to
time to assignees and participants (including prospective assignees or
participants), provided such assignees and participants agree to be bound by the
--------
provisions of Section 1112.
11.12 Confidentiality.
---------------
The Agent and the Banks each agree to keep confidential all
information obtained from the Borrower which is nonpublic and confidential or
proprietary in nature (including any information the Borrower specifically
designates as confidential), except as provided below, and to use such
information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
receipt of written undertakings from such persons to maintain the
confidentiality, (ii) to prospective assignees and participants as contemplated
by Section 1111 subject to compliance with the requirements of that Section,
(iii) to the extent requested by any bank regulatory authority or, with notice
to the Borrower to the extent practicable, as otherwise required by applicable
Law or by any subpoena or similar legal process, or in connection with any
investigation or proceeding arising out of the transactions contemplated by this
Agreement, (iv) if such information is already in the possession of the Bank on
a nonconfidential basis or is currently or becomes publicly available other than
as a result of a
-81-
<PAGE>
breach of this Agreement by the Banks or the Agent or is currently or becomes
available to the Banks or the Agent from a source not subject to confidentiality
restrictions, or (v) the Borrower shall have consented to such disclosure.
11.13 Counterparts.
------------
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
11.14 The Agent's or the Bank's Consent.
---------------------------------
Whenever the Agent's or any Bank's consent is required to be obtained
under this Agreement or any of the other Senior Loan Documents as a condition to
any action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral, the
payment of money or any other matter.
11.15 Exceptions.
----------
The representations, warranties and covenants contained herein shall
be independent of each other and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exception be deemed to permit any action or omission that would be in
contravention of applicable Law (including the Investment Company Act).
11.16 Consent to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------
The Borrower hereby irrevocably consents to the non-exclusive
jurisdiction of the Court of Common Pleas of Allegheny County and the United
States District Court for the Western District of Pennsylvania, and waives
personal service of any and all process upon it and consents that all such
service of process be made by certified or registered mail directed to the
Borrower at the addresses provided for in Section 11.6 and service so made shall
be deemed to be completed upon actual receipt thereof. The Borrower waives any
objection to jurisdiction and venue of any action instituted against it as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue. THE BORROWER, THE AGENT AND EACH OF THE BANKS HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING OR COUNTERCLAIM WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT OR THE COLLATERAL TO
THE FULL EXTENT PERMITTED BY LAW.
11.17 Limitation of Liability. (a) TO THE FULLEST EXTENT PERMITTED
-----------------------
BY LAW, NO CLAIM MAY BE MADE BY THE BORROWER OR ANY OTHER LOAN PARTY OR ANY
OTHER PERSON AGAINST THE AGENT AND THE BANKS, OR ANY OF THEM, OR ANY AFFILIATE,
DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF THE AGENT OR THE BANKS FOR ANY
SPECIAL, INDIRECT, OR
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<PAGE>
CONSEQUENTIAL DAMAGES (AS DIFFERENTIATED FROM DIRECT AND ACTUAL DAMAGES) IN
RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING
IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY
OTHER THEORY OF LIABILITY); AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
(b) The parties to this Agreement are expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of the Borrower
and the declarations of trust of certain of the Borrower's Subsidiaries and
agree that the obligations assumed by the Borrower and its Subsidiaries pursuant
to this Agreement and the other Senior Loan Documents be limited in any case to
the Borrower and its Subsidiaries and their respective assets. The parties to
this Agreement shall not seek satisfaction of any obligation of the Borrower or
its Subsidiaries under this Agreement from any of the shareholders of the
Borrower, the trustees, officers or agents of those entities, or any of them,
except as contemplated under the Pledge Agreement, the Declaration of Trust of
the Borrower and the declarations of trust of certain of the Borrower's
Subsidiaries. Notwithstanding the foregoing, nothing in such declarations of
trust or elsewhere shall prohibit the Agent on behalf of the Banks from pursuing
any remedies against any outside professionals or consultants employed by the
Companies.
11.18 Tax Withholding Clause.
----------------------
At least five (5) Business Days prior to the first date on which
interest or fees are payable hereunder for the account of any Bank, each Bank
that is not incorporated under the laws of the United States of America or a
state thereof agrees that it will deliver to each of the Borrower and the Agent
two (2) duly completed copies of (i) IRS Form W-9, 4224 or 1001, or other
applicable form prescribed by the IRS, certifying in either case that such Bank
is entitled to receive payments under this Agreement and the other Senior Loan
Documents without deduction or withholding of any United States federal income
taxes, or is subject to such tax at a reduced rate under an applicable tax
treaty, or (ii) Form W-8 or other applicable form or a certificate of the Bank
indicating that no such exemption or reduced rate is allowable with respect to
such payments. Each Bank which so delivers a Form W-8, W-9, 4224 or 1001
further undertakes to deliver to each of the Borrower and the Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, either certifying that such Bank is
entitled to receive payments under this Agreement and the other Senior Loan
Documents without deduction or withholding of any United States federal income
taxes or is subject to such tax at a reduced rate under an applicable tax treaty
or stating that no such exemption or reduced rate is allowable. The Agent shall
be entitled to withhold United States federal income taxes at the full
withholding rate unless the Bank establishes an exemption or at the applicable
reduced rate as established pursuant to the above provisions.
-83-
<PAGE>
11.19 Co-Agents.
---------
The Co-Agents shall have no rights, obligations or duties under this
agreement other than in their respective capacities as Banks hereunder.
[SIGNATURE PAGES FOLLOW]
-84-
<PAGE>
[SIGNATURE PAGE TO SENIOR SECURED CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: FEDERATED INVESTORS
_____________________________ By: /s/ Thomas R. Donahue
-----------------------------------------
Title:_______________________ Title: Vice President
---------------------------------------
(Credit Agreement)
[SEAL]
By: /s/ Thomas R. Donahue
------------------------------------------
Title: Vice President
----------------------------------------
(Amendment No. 1)
By: /s/ Thomas R. Donahue
------------------------------------------
Title: Vice President
----------------------------------------
(Amendment No. 2)
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ J. Gregory Seibly
------------------------------------------
Title: Vice President
----------------------------------------
(Credit Agreement)
By: /s/ J. Gregory Seibly
------------------------------------------
Title: Vice President
----------------------------------------
(Amendment No. 1)
By: /s/ William V. Armitage
------------------------------------------
Title: Vice President
----------------------------------------
(Amendment No. 2)
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By: /s/ Timothy L. Drone
------------------------------------------
Title: Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
-85-
<PAGE>
By: /s/ Timothy L. Drone
------------------------------------------
Title: Vice President
---------------------------------------
(Amendment No. 2)
BANK OF AMERICA ILLINOIS
By: /s/ Gary R. Peet
------------------------------------------
Title: Senior Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Gary R. Peet
------------------------------------------
Title: Senior Vice President
---------------------------------------
(Amendment No. 2)
STATE STREET BANK AND TRUST COMPANY
By: /s/ Patrick K. Armstrong
------------------------------------------
Title: Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ B. A. Siegel
------------------------------------------
Title: Assistant Vice President
---------------------------------------
(Amendment No. 2)
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Seija K. Hurskainen
------------------------------------------
Title: Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Seija K. Hurskainen
------------------------------------------
Title: Vice President
---------------------------------------
(Amendment No. 2)
-86-
<PAGE>
COMMERZBANK AKTIENGESELLSCHAFT NEW YORK BRANCH
By: /s/ A. Campbell
------------------------------------------
Title: A.C.
---------------------------------------
By: /s/ J. Schmieding
------------------------------------------
Title: Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Joseph Hayes
------------------------------------------
Title: Assistant Treasurer
---------------------------------------
By: /s/ Edward J. McDonnell
------------------------------------------
Title: Vice President
---------------------------------------
(Amendment No. 2)
THE BANK OF NEW YORK
By: /s/ Alexander Duka
------------------------------------------
Title: Assistant Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Alexander Duka
------------------------------------------
Title: Assistant Vice President
---------------------------------------
(Amendment No. 2
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
------------------------------------------
Title: Senior Manager Loan Operations
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ M.D. Smith
------------------------------------------
Title: Agent
---------------------------------------
(Amendment No. 2)
-87-
<PAGE>
CORESTATES BANK, N.A.
By: /s/ Jeanne Rosasco
------------------------------------------
Title: Assistant Vice President
---------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Jeanne Rosasco
------------------------------------------
Title: Assistant Vice President
---------------------------------------
(Amendment No. 2)
NATIONSBANK, N.A.(SOUTH)
By: /s/ James J. Killmond
-----------------------------------------
Title: Officer
--------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Ronald A. Blissett
------------------------------------------
Title: Officer
--------------------------------------
(Amendment No. 2)
NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ W.R. Earley
------------------------------------------
Title: Vice President
--------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ R.M. Moorehead
------------------------------------------
Title: Vice President
--------------------------------------
(Amendment No. 2)
STAR BANK, N.A.
By: /s/ David J. Dannemiller
-------------------------------------------
Title: Assistant Vice President
--------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ David J. Dannemiller
------------------------------------------
Title: Vice President
--------------------------------------
(Amendment No. 2)
-88-
<PAGE>
THE CHASE MANHATTAN BANK
(formerly Chemical Bank)
By: /s/ Roger A. Parker
------------------------------------------
Title: Vice President
--------------------------------------
(Assignment and Assumption
Agreement)
By: /s/ Susan Herzog
------------------------------------------
Title: Vice President
--------------------------------------
(Amendment No. 2)
-89-
<PAGE>
AMENDMENT NO.3 TO CREDIT AGREEMENT
----------------------------------
This Amendment No.3 to Credit Agreement ("Amendment No.3") is dated as
--------------
of October 1, 1997, and is by and among FEDERATED INVESTORS, a Delaware business
trust (the "Borrower"), the BANKS set forth therein (collectively, the "Banks"),
-------- -----
and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (the "Agent").
-----
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Senior Secured Credit Agreement dated as of January 31, 1996, as amended
by Amendment No. 1 to Credit Agreement dated as of June 27, 1996 and Amendment
No. 2 to Credit Agreement dated December 13, 1996 (the "Credit Agreement");
----------------
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the same meanings given to them in the Credit Agreement; and
WHEREAS, the Borrower, the Banks and the Agent wish to amend the
Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto, intending to be legally bound, agree as
follows:
1. Section 1.1 of the Credit Agreement is hereby amended by deleting the
definitions of "Consolidated Subsidiaries" and "Designated Assets" in their
entirety and inserting in lieu thereof the following definitions:
"Consolidated Subsidiaries" shall mean and include
-------------------------
those subsidiaries or other entities whose accounts are
consolidated with the accounts of the Borrower in accordance with
GAAP provided that for the purpose of calculating the financial
--------
ratios in Sections 8.2(a)-(c) the impact of the consolidation of
any Special Purpose Subsidiary or entity to which Designated
Assets are sold or assigned by a Special Purpose Subsidiary, in
either case pursuant to the Master Agreement and in accordance
with Section 8.2(k)(i), shall be excluded.
"Designated Assets" shall mean the right to receive
-----------------
deferred sales charges, including 12b-1 and contingent deferred
sales charges, and any comparable fees from a Fund relating to
the sale of Fund shares and the maintenance of customer accounts,
including shareholder servicing fees.
<PAGE>
2. Section 1.1 of the Credit Agreement is hereby amended by adding the
following definition thereto in alphabetical order:
"Master Agreement" shall mean the Federated Investors
Program Master Agreement dated September __, 1997, among Federated
Investors, Federated Funding 1997-1, Inc., Federated Investors
Management Company, Federated Securities Corp., the Owner Trustee of
the PLT Finance Trust 1997-1, PLT Finance, L.P., Putnam, Lovell &
Thorton Inc., and Bankers Trust Company, as amended from time to time
as permitted under this Agreement.
3. Section 1.3 of the Credit Agreement is hereby amended by inserting the
following immediately before the end of the first sentence:
provided that for the purpose of determining compliance with
Section 8.2(e) and (f), the impact of the incurrence of indebtedness
or creation of liens in connection with the sale or transfer of
Designated Assets as described and permitted under Section 8.2(k)(i)
shall be excluded.
4. Section 8.2(k)(i) of the Credit Agreement is hereby deleted in its
entirety and the following is inserted in lieu thereof:
(i) any sale, transfer or lease of assets by any wholly
owned Subsidiary (other than the Insurance Subsidiaries) to any other
wholly owned Grantor (other than the Borrower or the Insurance
Subsidiaries) and any sale or transfer of Designated Assets by a
Subsidiary of the Borrower to a Special Purpose Subsidiary, in
connection with a securitization or other receivables sale transaction
so long as such transaction is non-recourse to any of the Companies;
or any Special Purpose Subsidiary (except for customary recourse
provisions, including recourse to the Designated Assets being sold or
transferred).
5. This Amendment No. 3 shall become effective on the first date on which
the following conditions have been satisfied:
(a) The Agent on behalf of the Banks shall have received a certificate
signed by the Secretary or Assistant Secretary of the Borrower
certifying as to all action taken by the Borrower to authorize the
execution, delivery and performance of this Amendment No. 3 by the
Borrower and attaching thereto such resolutions.
(b) The Agent on behalf of the Banks shall have received (i) a written
opinion of Joseph M. Huber, Esq., Corporate Counsel of the Borrower,
addressed to the Agent for the benefit of the Banks, opining as to
such
-2-
<PAGE>
matters with respect to the transactions contemplated herein as
the Agent may reasonably request, in form and substance
satisfactory to the Agent and (ii) a copy of the opinion of
Sullivan & Worcester, LLP delivered pursuant to Section
3.02(m)(i) of the Master Agreement (as defined above).
(c) The Agent on behalf of the Banks shall have received a fully
executed copy of Amendment No. 1 to Note Purchase Agreement among the
Federated and the Purchasers in form and substance satisfactory to the
Agent.
6. The Borrower hereby represents to the Agent and the Banks that; the
representations and warranties of the Borrower contained in Article VI of the
Credit Agreement remain true and accurate on and as of the date hereof (except
for representations and warranties which relate solely to an earlier date or
time, which representations and warranties were true and correct on and as of
the specific dates or times referred to therein); the Borrower has performed and
is in compliance with all covenants contained in Article VIII or elsewhere in
the Credit Agreement; no Event of Default or Potential Default has occurred and
is continuing; and no less than 50.1% of the Class B Shares are subject to a
valid and enforceable Proxy.
7. The Borrower hereby agrees to reimburse the Agent and the Banks on
demand for all legal costs, expenses and disbursements relating to this
Amendment No. 3 which are payable by the Borrower as provided in Sections 10.5
and 11.3 of the Credit Agreement.
8. The Borrower and the Banks intend and agree that, except as provided
herein, the Credit Agreement shall remain in full force and effect without
modification.
9. This Amendment No. 3 shall be governed by and construed and enforced
in accordance with the internal laws of the Commonwealth of Pennsylvania without
reference to its principles of conflicts of law.
[SIGNATURE PAGES FOLLOW]
-3-
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Title:________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:___________________________________
Title:________________________________
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:___________________________________
Title:________________________________
BANK OF AMERICA ILLINOIS
By:___________________________________
Title:________________________________
STATE STREET BANK AND TRUST
COMPANY
By:___________________________________
Title:________________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:____________________________________
Title:_________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Title: Vice President
---------------------------------
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:____________________________________
Title:_________________________________
BANK OF AMERICA ILLINOIS
By:____________________________________
Title:_________________________________
STATE STREET BANK AND TRUST
COMPANY
By:____________________________________
Title:_________________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:____________________________________
Title:_________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Title: VIce President
---------------------------------
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:____________________________________
Title:_________________________________
BANK OF AMERICA ILLINOIS
By:____________________________________
Title:_________________________________
STATE STREET BANK AND TRUST
COMPANY
By:____________________________________
Title:_________________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:____________________________________
Title:_________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:____________________________________
Title:_________________________________
NATIONSBANK, N.A.
By: Stan W. Reynolds
------------------------------------
Title: Stan W. Reynolds
---------------------------------
Vice President
BANK OF AMERICA ILLINOIS
By:____________________________________
Title:_________________________________
STATE STREET BANK AND TRUST
COMPANY
By:____________________________________
Title:_________________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Title:_________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:____________________________________
Title:_________________________________
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:____________________________________
Title:_________________________________
BANK OF AMERICA ILLINOISOF
By: /s/ John G. Hayes
------------------------------------
Title: John G. Hayes
---------------------------------
VICE PRESIDENT
STATE STREET BANK AND TRUST
COMPANY
By:____________________________________
Title:_________________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:____________________________________
Title:_________________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:____________________________________
Title:_________________________________
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:____________________________________
Title:_________________________________
BANK OF AMERICA ILLINOIS
By:____________________________________
Title:_________________________________
STATE STREET BANK AND TRUST
COMPANY
By: /s/ R. Thomas Coffey
------------------------------------
Title: R. Thomas Coffey
---------------------------------
VICE PRESIDENT
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No.3 as of the date first above
written.
FEDERATED INVESTORS
By:________________________________
Title:_____________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:________________________________
Title:_____________________________
NATIONSBANK, N.A.
By: /s/ Stan W. Reynolds
--------------------------------
STAN W. REYNOLDS
Title: Vice President
-----------------------------
BANK OF AMERICA ILLINOIS
By:________________________________
Title:_____________________________
STATE STREET BANK AND TRUST
COMPANY
By:________________________________
Title:_____________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:________________________________
Title:_____________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:________________________________
Title:_____________________________
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:________________________________
Title:_____________________________
BANK OF AMERICA ILLINOIS
By: /s/ John G. Hayes
--------------------------------
JOHN G. HAYES
Title: Vice President
-----------------------------
STATE STREET BANK AND TRUST
COMPANY
By:________________________________
Title:_____________________________
<PAGE>
SIGNATURE PAGE 1 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment No. 3 as of the date first above
written.
FEDERATED INVESTORS
By:________________________________
Title:_____________________________
PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By:________________________________
Title:_____________________________
THE BOATMAN'S NATIONAL BANK OF
ST LOUIS
By:________________________________
Title:_____________________________
BANK OF AMERICA ILLINOIS
By:________________________________
Title:_____________________________
STATE STREET BANK AND TRUST
COMPANY
By: /s/ R. Thomas Coffey
--------------------------------
R. THOMAS COFFEY
Title: VICE PRESIDENT
-----------------------------
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:/s/ SEIJA K. Hurskainen
---------------------------
SEIJA K. HURSKAINEN
Title: VICE PRESIDENT
--------------------
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:___________________________
Title:________________________
THE BANK OF NEW YORK
By:___________________________
Title:________________________
THE BANK OF NOVA SCOTIA
By:___________________________
Title:________________________
CORESTATES BANK, N.A.
By:___________________________
Title:________________________
NATIONSBANK, N.A. (SOUTH)
By:___________________________
Title:________________________
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:___________________________
Title:________________________
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
BY: /s/ William Early
---------------------------
Title: William M. Early
-----------------------
Vice President
By: /s/ Edward J. McDonnell
---------------------------
Title: Edward J. McDonnell
-----------------------
Vice President
THE BANK OF NEW YORK
By:____________________________
Title:_________________________
THE BANK OF NOVA SCOTIA
By:___________________________
Title:________________________
CORESTATES BANK, N.A.
By:___________________________
Title:________________________
NATIONSBANK, N.A. (SOUTH)
By:___________________________
Title:________________________
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:________________________________
Title:_____________________________
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:________________________________
Title:_____________________________
THE BANK OF NEW YORK
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: ASSISTANT TREASURER
-----------------------------
THE BANK OF NOVA SCOTIA
By:________________________________
Title:_____________________________
CORESTATES BANK, N.A.
By:________________________________
Title:_____________________________
NATIONSBANK, N.A. (SOUTH)
By:________________________________
Title:_____________________________
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:___________________________________
Title:________________________________
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:___________________________________
Title:________________________________
THE BANK OF NEW YORK
By:___________________________________
Title:________________________________
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
------------------------------------
F.C.H Ashby
Title: Senior Manager Loan Operations
--------------------------------
CORESTATES BANK, N.A.
By:___________________________________
Title:________________________________
NATIONSBANK, N.A. (SOUTH)
By:___________________________________
Title:________________________________
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_______________________________
Title_____________________________
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:_______________________________
Title_____________________________
THE BANK OF NEW YORK
By:_______________________________
Title_____________________________
THE BANK OF NOVA SCOTIA
By:_______________________________
Title_____________________________
CORESTATES BANK, N.A.
By: [SIGNATURE ILLEGIBLE]
-------------------------------
Title: AVP
----------------------------
NATIONSBANK, N.A. (SOUTH)
By:_______________________________
Title_____________________________
<PAGE>
SIGNATURE PAGE 2 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:______________________________
Title____________________________
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By:______________________________
Title____________________________
THE BANK OF NEW YORK
By:______________________________
Title____________________________
THE BANK OF NOVA SCOTIA
By:______________________________
Title____________________________
CORESTATES BANK, N.A.
By:______________________________
Title:___________________________
NATIONSBANK, N.A.
By: /s/ Stan W. Reynolds
------------------------------
Stan W. Reynolds
Title: Vice President
<PAGE>
SIGNATURE PAGE 3 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
------------------------------------------------------------
NATIONAL CITY BANK OF PENNSYLVANIA
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: Assistant Vice President
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STAR BANK, N.A.
By:________________________________
Title:_____________________________
THE CHASE MANHATTAN BANK, N.A.
(formerly Chemical Bank)
By:________________________________
Title:_____________________________
<PAGE>
SIGNATURE PAGE 3 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
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NATIONAL CITY BANK OF PENNSYLVANIA
By:________________________________
Title: ____________________________
STAR BANK, N.A.
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Title: V P
-----------------------------
THE CHASE MANHATTAN BANK, N.A.
(formerly Chemical Bank)
By:________________________________
Title:_____________________________
<PAGE>
SIGNATURE PAGE 3 OF 3 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT
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NATIONAL CITY BANK OF PENNSYLVANIA
By:________________________________
Title:_____________________________
STAR BANK, N.A.
By:________________________________
Title:_____________________________
THE CHASE MANHATTAN BANK
(formerly Chemical Bank)
By: /s/ David J. Cintron
--------------------------------
DAVID J. CINTRON
Title: Vice President
-----------------------------
<PAGE>
EXHIBIT 4.08
================================================================================
FEDERATED INVESTORS
7.96% Senior Secured Notes due 2006
----------------------------
NOTE PURCHASE AGREEMENT
----------------------------
Dated as of June 15, 1996
================================================================================
[Exhibit 1.2(e) is a photocopy of the document as executed and delivered.
Exhibits 4.4(a) and 4.4(b) are photocopies of the opinions as delivered.]
<PAGE>
Table of Contents
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<TABLE>
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Page
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1. AUTHORIZATION OF NOTES, ETC.................................... 1
1.1. The Notes............................................... 1
1.2. Security for the Notes; the Intercreditor
Agreement.............................................. 1
2. SALE AND PURCHASE OF NOTES..................................... 2
3. CLOSING........................................................ 2
4. CONDITIONS TO CLOSING.......................................... 3
4.1. Representations and Warranties.......................... 3
4.2. Performance; No Default................................. 3
4.3. Compliance Certificates................................. 3
4.4. Opinions of Counsel..................................... 3
4.5. Security Documents; Intercreditor Agreement............. 4
4.6. Purchase Permitted by Applicable Law, etc............... 4
4.7. Sale of Notes to Other Purchasers....................... 4
4.8. Payment of Special Counsel Fees......................... 4
4.9. Private Placement Number................................ 4
4.10. Changes in Corporate Structure.......................... 5
4.11. Proceedings and Documents............................... 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 5
5.1. Organization; Power and Authority; Capital
Stock.................................................. 5
5.2. Authorization, etc...................................... 6
5.3. Disclosure.............................................. 6
5.4. Organization and Ownership of Shares of
Subsidiaries; Affiliates............................... 6
5.5. Financial Statements.................................... 7
5.6. Compliance with Laws, Other Instruments, etc............ 7
5 7. Governmental Authorizations, etc........................ 8
5.8 Litigation; Observance of Agreements, Statutes
and Orders............................................. 8
5.9. Taxes................................................... 9
5.10. Title to Property; Leases............................... 9
5.11. Licenses, Permits, etc.................................. 9
5.12. Compliance with ERISA................................... 10
5.13. Private Offering by the Company......................... 11
5.14. Use of Proceeds; Margin Regulations..................... 11
5.15. Existing Indebtedness; Future Liens..................... 12
5.16. Foreign Assets Control Regulations, etc................. 12
5.17. Status Under Certain Statutes........................... 12
5.18. Solvency................................................ 13
5.19. Environmental Matters................................... 13
5.20. Matters Relating to the Collateral...................... 14
6. REPRESENTATIONS OF THE PURCHASER............................... 15
6.1. Purchase for Investment................................. 15
6.2. Source of Funds......................................... 15
</TABLE>
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<TABLE>
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7. INFORMATION AS TO THE COMPANY.................................. 16
7.1. Financial and Business Information...................... 16
7.2 Officer's Certificate................................... 19
7.3. Inspection.............................................. 20
8. PREPAYMENT OF THE NOTES........................................ 21
8.1. Required Prepayments.................................... 21
8.2. Optional Prepayments.................................... 21
8.3. Notice of Prepayments................................... 21
8.4. Allocation of Partial Prepayments....................... 22
8.5. Maturity; Surrender, etc................................ 22
8.6. Purchase of Notes....................................... 22
8.7. Make-Whole Amount....................................... 23
9. AFFIRMATIVE COVENANTS.......................................... 24
9.1. Compliance with Law..................................... 24
9.2. Insurance............................................... 25
9.3. Maintenance of Properties............................... 25
9.4. Payment of Taxes and Claims............................. 25
9.5. Maintain Existence, Lines of Business, etc.............. 26
10. NEGATIVE COVENANTS............................................. 26
10.1. Priority Indebtedness.................................. 26
10.2. Liens.................................................. 27
10.3. Certain Financial Conditions........................... 29
10.4. Restricted Payments.................................... 29
10.5. Asset Sales............................................ 30
10.6. Merger, Consolidation, etc............................. 32
10.7. Change in Management................................... 33
10.8. Designation of Restricted and Unrestricted
Subsidiaries........................................... 33
10.9. Transactions with Affiliates........................... 34
11. EVENTS OF DEFAULT.............................................. 34
12. REMEDIES ON DEFAULT, ETC....................................... 37
12.1. Acceleration........................................... 37
12.2. Other Remedies......................................... 37
12.3. Rescission............................................. 38
12.4. No Waivers or Election of Remedies, Expenses,
etc.................................................... 38
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.................. 38
13.1. Registration of Notes.................................. 38
13.2. Transfer and Exchange of Notes......................... 39
13.3. Replacement of Notes................................... 39
14. PAYMENTS ON NOTES.............................................. 40
14.1. Place of Payment....................................... 40
14.2. Home Office Payment.................................... 40
15. EXPENSES, ETC.................................................. 41
15.1. Transaction Expenses................................... 41
15.2. Survival............................................... 42
</TABLE>
(ii)
<PAGE>
<TABLE>
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16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES ENTIRE
AGREEMENT......................................................... 42
17. AMENDMENT AND WAIVER............................................... 42
17.1. Requirements............................................ 42
17.2. Solicitation of Holders of Notes........................ 43
17.3. Binding Effect, etc..................................... 43
17.4 Noted Held by the Company, etc.......................... 44
18. NOTICES............................................................ 44
19. REPRODUCTION OF DOCUMENTS.......................................... 44
20. CONFIDENTIAL INFORMATION........................................... 45
21. SUBSTITUTION OF PURCHASER.......................................... 46
22. MISCELLANEOUS...................................................... 46
22.1. Successors and Assigns.................................. 46
22.2. Construction............................................ 46
22.3. Jurisdiction and Process; Waiver of Jury Trial.......... 47
22.4. Payments Due on Non-Business Days....................... 48
22.5. Severability............................................ 48
22.6. Accounting Terms........................................ 48
22.7. Counterparts............................................ 48
22.8. Governing Law........................................... 48
22.9. Limitation of Liability................................. 49
Schedule A - - Names and Addresses of Purchasers
Schedule B - - Defined Terms
Exhibit 1.1 - - Form of 7.96% Senior Secured Note due 2006
Exhibit 1.2(a) - - List of Security Documents
Exhibit 1.2(b) - - Form of Pledge Agreement
Exhibit 1.2(c) - - Form of Security Agreement
Exhibit 1.2 (d) - - Form of Intercompany Subordination Agreement
Exhibit 1.2(e) - - Form of Intercreditor Agreement
Exhibit 4.4(a) - - Form of Opinion of Counsel for the
Company, the Grantors and the Pledgors
Exhibit 4.4(b) - - Form of Opinion of Special Counsel for the Purchasers
Schedule 5.1 - - Capital Stock
Schedule 5.4 - - Subsidiaries
Schedule 5.5 - - Financial Statements
Schedule 5.9 - - Taxes
Schedule 5.15 - - Existing Indebtedness and Liens
</TABLE>
(iii)
<PAGE>
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
New York, New York
As of June 15, 1996
TO THE PURCHASER LISTED IN THE
ATTACHED SCHEDULE A WHICH
IS A SIGNATORY HERETO:
Ladies and Gentlemen:
FEDERATED INVESTORS a Delaware business trust (the "COMPANY), agrees
with you as follows:
1. AUTHORIZATION OF NOTES, ETC.
1.1. THE NOTES.
The Company has duly authorized the issue and sale of $98,000,000
aggregate principal amount of its 7.96% Senior Secured Notes due 2006 (the
"NOTES"), each such note to be substantially in the form set out in Exhibit 1.1.
As used herein, the term "NOTES" means all notes originally delivered pursuant
to this Agreement and the Other Agreements referred to below and all notes
delivered in substitution or exchange for any such note and, where applicable,
shall include the singular number as well as the plural. Certain capitalized and
other terms used in this Agreement are defined in Schedule B; references to a
"Schedule" or an "Exhibit" are, unless otherwise specified to a Schedule or an
Exhibit attached to this Agreement.
1.2. SECURITY FOR THE NOTES; THE INTERCREDITOR AGREEMENT.
The Notes will be secured, equally and ratably with the obligations of
the Company under the Existing Bank Credit Facility, by the Security Documents
described in Exhibit 1.2(a), which in the case of the Pledge Agreement, the
Security Agreement and the Intercompany Subordination Agreement shall be
substantially in the respective forms of Exhibits 1.2(b), 1.2(c) and 1.2 (d) .
An Intercreditor and Collateral Agency Agreement substantially in the form of
Exhibit 1.2(e) (the "INTERCREDITOR AGREEMENT"), among the Purchasers, the Credit
Facility Banks, PNC Bank, National Association, as agent for said Banks (the
"Agent") , and PNC Bank, National Association, as Collateral Agent (the
"Collateral Agent"), shall govern (i) the respective rights of the holders of
the Notes and the Credit Facility Banks against the Collateral in respect of
Indebtedness of the Company and (ii) the respective RIGHTS of the holders of the
Notes and the Credit
<PAGE>
2
Facility Banks against any other assets of the Company in respect of
Indebtedness of the Company (including without limitation the Notes).
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the Company
is entering into separate Note Purchase Agreements (the "Other Agreements")
identical with this Agreement with each of the other purchasers named in
Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to
each of the Other Purchasers of Notes in the principal amount specified opposite
its name in Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not joint
obligations and you shall have no obligation under any Other Agreement and no
liability to any Person for the performance or non-performance by any Other
Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022 at a closing (the
"Closing") on June 27, 1996 or on such other Business Day thereafter as may be
agreed upon by the Company and you and the Other Purchasers. At the Closing the
Company will deliver to you the Notes to be purchased by you IN the form of a
single Note (or such greater number of Notes in denominations of at least
$500,000 as you may request) dated the date of the Closing and registered in
your name (or in the name of your nominee), against delivery by you to the
Company or its order of immediately available funds in the amount of the
purchase price thereof or BY wire transfer of immediately available funds for
the account of the Company to account number 2434291 at PNC Bank, National
Association, ABA No. 043000096.
If at the Closing the Company shall fail to tender such Notes to YOU
AS PROVIDED ABOVE IN THIS SECTION 3, OR ANY OF THE conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
NONFULFILLMENT.
<PAGE>
3
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, Prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be Performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall nave entered into any
transaction since December 31, 1995 that would have been prohibited by any of
Sections 10.1 to 10.6, inclusive, had such Sections applied since such date.
4.3. COMPLIANCE CERTIFICATES.
(a) Officers Certificate. The Company shall have delivered to you an
--------------------
Officers Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.10 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you
----------------------
a certificate of the Secretary or an Assistant Secretary of the Company,
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of the Notes,
this Agreement, the Other Agreements and the other documents contemplated by
this Agreement and the Other Agreements.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing, from (a) Kirkpatrick & Lockhart, LLP,
counsel for the Company, the Pledgors and the Grantors, substantially in the
form set forth in Exhibit 4.4(a) (and the Company hereby instructs such counsel
to deliver such opinion to you), and (b) Willkie Farr & Gallagher, your special
counsel in connection with the transactions contemplated hereby, substantially
in the form set forth in Exhibit 4.4 (b). Each such opinion shall also cover
such other matters incident to such transactions as you may reasonably request.
<PAGE>
4
4.5. SECURITY DOCUMENTS; INTERCREDITOR AGREEMENT.
Each of the Security Documents and the Intercreditor Agreement shall
have been duly executed and delivered in the respective forms hereinabove
recited and shall be in full force and effect; certificates evidencing all of
the Pledged Collateral, together with the Proxies and appropriate blank stock
powers, shall have been duly delivered to the Collateral Agent; and the Agent
shall confirm to you and the Collateral Agent that it will not exercise its
rights under the Proxies (which may not be assignable to the Collateral Agent)
other than in accordance with the Intercreditor Agreement.
4.6. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing, your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405 (a) (8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including without limitation
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (c) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you at least two days prior to the date of the
Closing, you shall have received an Officers Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
4.7. SALE OF NOTES TO OTHER PURCHASERS.
The Company shall sell to the Other Purchasers and the Other
Purchasers shall purchase the Notes to be purchased by them at the Closing as
specified in Schedule A.
4.8. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the extent
reflected in the statement of such counsel rendered to the Company at least one
Business Day prior to the Closing.
4.9. PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
<PAGE>
5
4.10. CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of organization or
been a party to any merger or consolidation and shall not have succeeded to all
or any substantial part of the liabilities of any other entity at any time
following the date of the most recent financial statements referred to in
Schedule 5.5.
4.11. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY; CAPITAL STOCK.
The Company is a business trust duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
to do business and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The
Company has the lawful power and authority to own or hold under lease the
PROPERTIES it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement, the
Other Agreements, the Notes and the other documents to be executed and delivered
by it as contemplated by this Agreement and the Other Agreements and to perform
the provisions hereof and thereof.
The authorized capital stock and other equity interests of the Company
consists of three CLASSES OF PREFERRED STOCK, NONE of which is issued and
outstanding, 99,000 class A Shares, of which 1,000 class A shares are issued and
outstanding, and 149,700,000 class B Shares, of which 13,994,000 Class B Shares
are issued and outstanding and 6,487,758 Class B Shares are held as treasury
stock. All of such issued and outstanding common shares are validly issued,
fully paid and nonassessable. All of such outstanding Class A Shares are owned
beneficially and of record by Management Shareholders and Management-Related
Shareholders as set forth in Schedule 5.1. Except as described in Schedule 5.1,
the Company does not have any outstanding securities convertible into or
exchangeable for any shares of its capital stock.
<PAGE>
6
5.2. AUTHORIZATION, ETC.
This Agreement, the Other Agreements, the Notes and the Security
Documents to which the Company is a party have been duly authorized by all
necessary action on the part of the Company, and this Agreement and such
Security Documents constitute, and upon execution and delivery thereof each Note
will constitute, legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms. Each Security
Document required to be delivered by a Subsidiary on the date of the Closing has
been duly authorized by all necessary corporate and shareholder action on the
part of the respective Subsidiary and, upon execution and delivery thereof as
hereinabove provided, will constitute a legal, valid and binding obligation of
such Subsidiary enforceable against such Subsidiary in accordance with its
terms.
5.3. DISCLOSURE.
The Company, through its agent PNC Capital Markets, has delivered to
you a copy of a Confidential Information Memorandum dated April 1996 (the
"MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries. This Agreement,
the Memorandum, the documents, certificates or other writings delivered to you
by or on behalf of the Company in connection with the transactions contemplated
hereby (together with the Memorandum, the "DISCLOSURE DOCUMENTS"), and the
financial statements listed in Schedule 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Since December 31, 1995, there has
been no change in the financial condition, operations, business, properties or
prospects of- the Company or any Subsidiary except as disclosed in the
Disclosure Documents and other changes that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. There is no
fact known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the Disclosure
Documents.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.
(a) Schedule 5.4 contains (EXCEPT AS NOTED THEREIN) complete and
correct lists of the Company's (i) Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii)
Affiliates, other than Subsidiaries, and (iii) directors and
<PAGE>
7
senior officers. Each Subsidiary listed in Schedule 5.4 is a Restricted
Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests Of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the lawful power and authority to own
or hold under lease the properties it purports to own or hold under lease and to
transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
in Schedule 5.4 and customary limitations imposed by corporate law statutes and
applicable SEC regulations) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary. No Subsidiary is a
guarantor of any Indebtedness of the Company.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you copies of the financial statements of
the Company and its Subsidiaries listed in Schedule 5.5. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company Of this
Agreement, the Notes and the Security Documents to when
<PAGE>
8
it is a party and by the other Grantors of the respective Security Documents to
which they are party, will not (I) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any Property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, declaration of trust,
corporate charter or by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary, except that foreclosure
on the Pledged Collateral or other transfer of the Pledged Collateral under the
Pledge Agreement without obtaining the approvals described in Section 9(b) of
the Pledge Agreement may result in the termination of contracts under the
Investment Company Act.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required for the validity of the
execution, delivery or performance by the Company of this Agreement, the Notes
or any Security Documents to which it is a party, except that foreclosure on the
Pledged Collateral or other transfer of the Pledged Collateral under the Pledge
Agreement may necessitate obtaining the approvals described in Section 9(b) of
the Pledge Agreement.
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND
ORDERS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably BE EXPECTED TO have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
<PAGE>
9
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) currently payable without
penalty or interest, (b) the amount of which is not individually or in the
aggregate Material or (c) the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. Except as set forth on
Schedule 5.9, the Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income TAX liabilities of the Company and its Subsidiaries have been
determined by the Internal Revenue Service for all fiscal years up to and
including the fiscal year ended December 31, 1990.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
listed on Schedule 5.5 OR purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. Neither the Company nor any of its Subsidiaries owns any real
property; the only interests in real property that any of them hold are leases
as lessee of office space, data processing space and storage space for documents
and files. All such leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. LICENSES, PERMITS, ETC.
(a) The Company and Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks, trade names and proprietary software, or rights thereto, that
individually or in the aggregate are Material, free and clear of any Liens and
without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the Company
or any Subsidiary infringes in any Material
<PAGE>
10
respect any license, permit, franchise, authorization, patent, copyright,
service mark, trademark, trade name, Proprietary software or other right owned
by any ocher Person.
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name,
proprietary software or other right owned or used by the Company or any of its
Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a) (29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plans most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plans most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities
<PAGE>
11
attributable to continuation coverage mandated by section 4980B of the Code) of
the Company and its Subsidiaries is not Material.
(e) With respect to each employee benefit plan, if any, disclosed by
you in writing to the Company in accordance with Section 6.2(c), neither the
Company nor any "affiliate" of the Company (as defined in Section V(c) of the
QPAM Exemption) has at this time, nor has exercised at any time during the
immediately preceding year, the authority to appoint or terminate the "QPAM""
(as defined in Part V of the QPAM Exemption) disclosed by you to the Company
pursuant to Section 6.2(c) as manager of any of the assets of any such plan or
to negotiate the terms of any management agreement with such QPAN on behalf of
any such plan, and the Company is not an "affiliate" (as so defined) of such
QPAM. The Company Is not a party in interest with respect to any employee
benefit plan disclosed by you in accordance with Section 6.2(b) or 6.2(e). The
execution and delivery of this Agreement and the issuance and sale of the Notes
hereunder will not involve any prohibited transaction (as such term is defined
in section 406(a) of ERISA and section 4975(c) (1) (A)-(D) of the Code) that
could subject the Company or any holder of a Note to any tax or penalty on
prohibited transactions imposed under said section 4975 of the Code or by
section 502(i) of ERISA. The representation by the Company in the preceding
sentence of this Section 5.12(e) is made in reliance upon and subject to the
accuracy of your representation in Section 6.2 as to the sources of the funds
used to pay the purchase price of the Notes to be purchased by you.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated In respect thereof with,
any person other than you, the Other Purchasers and not more than 15 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds OF THE SALE OF THE Notes to repay
existing senior and subordinated Indebtedness. No part of the proceeds from the
sale of the Notes hereunder will be used, and (except for possible start-up and
other investments in Funds In accordance with ordinary business operations) no
part of the proceeds of such Indebtedness was used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 CFR
207), or for the purpose of buying or carrying or trading in any securities
under
<PAGE>
12
such circumstances as to involve the Company in a violation of Regulation X of
said Board (12 CFR 224) or to involve any broker OR dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock constitutes less than 10%
of the value of the assets of the Company and its Subsidiaries, as determined by
any reasonable method, and the Company does not have any present intention that
margin stock will constitute more than 25% of the value of such assets as so
determined. As used in this Section, the terms "MARGIN STOCK" AND "PURPOSE OF
BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation
G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the Company and its Subsidiaries as of June 15,
1996, since which date there has been no Material change in the amounts,
interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default, and no waiver of default is currently in effect, in
the payment or any principal or interest on any Indebtedness of the Company or
such Subsidiary, and no event or condition exists with respect to any such
Indebtedness of the Company or any Subsidiary that would permit (or that with
the giving of notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, no Indebtedness of the
Company or any Subsidiary is subject to any Lien and neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
(a) Neither the Company nor any Subsidiary is subject to regulation
under the Public Utility Holding Company Act of 19B5, as amended, the Interstate
Commerce Act, as amended, or the Federal Power Act, as amended, or an
"investment company" or company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940 as amended (the "INVESTMENT
COMPANY ACT"). Each Fund that constitutes an
<PAGE>
13
"investment company" is in compliance in all material respects with or
requirements applicable to an "investment company" under the Investment Company
Act.
(b) The Company is not required to register under or otherwise
subject to the requirements of the Investment Advisers Act of 1940, as amended
(the "Investment ADVISERS ACT") . Schedule 5.4 identifies the Subsidiaries that
are subject to the requirements of the Investment Advisers Act, and each such
Subsidiary is duly registered under and in compliance with said Act. The Company
is not prohibited by the Investment Advisers Act or the Investment Company Act,
or the rules or regulations under either of such Acts, from performing its
obligations under any advisory agreement to which it is a party.
(c) Except for periodic inspection reports from the regional office
of the SEC which have addressed various matters which are not Material, neither
the Company nor any Subsidiary has since August 1, 1989 received any
correspondence from the SEC relating to compliance with federal securities laws.
No Person is serving or acting as an officer, director or investment adviser of
the Company except in accordance with the provisions of the Investment Company
Act and the Investment Advisers Act and the rules and regulations of the SEC
under such Acts.
5.18. SOLVENCY.
The Company is, and after giving effect to the issuance of the
Notes on the date of the Closing will be, a "solvent institution", as said term
is used in Section 1405(c) of the New York Insurance Law, whose "obligations. .
. are not in default as to principal or interest", as said terms are used in
said Section 1405 (c)
5.19. ENVIRONMENTAL MATTERS.
(a) Neither Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violations of
any Environmental Laws.
(b) Neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use.
(c) Neither the Company nor any Subsidiary has stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by any of
them and has not disposed of any
<PAGE>
14
Hazardous Materials in a manner contrary to any Environmental Laws.
(d) To the knowledge of the Company, all buildings on all real
properties now leased or operated by the Company or any Subsidiary are in
substantial compliance with applicable Environmental Laws .
5.20. MATTERS RELATING TO THE COLLATERAL.
The Liens created in favor of the Collateral Agent pursuant to the
Security Documents in respect of the Collateral constitute and will constitute
first priority perfected security interests under the Uniform Commercial Code
as in effect in each applicable jurisdiction, entitled to all rights, benefits
and priority Cs provided by such Uniform Commercial Code or other applicable
jaw; and the granting of such Liens does not and will not impair or cause the
termination of any investment advisory or other contact of the Company or any
of its Subsidiaries under the Investment Company Act or any other applicable
law. Upon the filing of financing statements relating to such security
interests in each office and in each jurisdiction where required in order to
perfect the security interests described above, taking possession of any stock
certificates evidencing the Pledged Collateral and recordations of the Security
Agreements in the United States Patent and Trademark Office, all such action as
is necessary or advisable to establish such rights of the Collateral Agent will
have been taken. There will be upon execution and delivery of the Security
Agreement and the Pledge Agreement and such filings and such taking of
possession referred to in the preceding sentence, no necessity for any further
action in order to preserve, protect and continue such rights, except the
filing of continuation statements with respect to such financing statements
within six months prior to each five year anniversary of the filing of such
financing statements, provided that foreclosure on the Pledged Collateral or
other transfer of the Pledged Collateral under the Pledge Agreement may
necessitate obtaining one approvals described in Section 9(b) of the Pledge
AGREEMENT.
The Pledged Collateral is sufficient to give the Collateral Agent on
behalf of the holders from time to time of the Notes and the Credit Facility
Banks, after the occurrence of an Event of Default, full voting control of the
Company and its Restricted Subsidiaries except as to matters in respect of which
holders of Class B Shares have voting rights pursuant to the Declarations of
Trust; and the Proxies are sufficient to give the Agent full voting control of
such Class B Shares as a class.
<PAGE>
15
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of
one or more pension or trust funds and not with a view to the distribution
thereof, provided that the disposition of your or their property shall at all
times be within your or their control. You understand that the Notes have
not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption
from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account", as such
term is defined in Prohibited Transactions Exemption (""PTE"") 95-60
(issued July 12, 1995), and the purchase of the Notes by you is eligible
for, and satisfies the requirements of, the exemption provided in Section
I of PTE 95-60 as in effect as of the date of this Agreement; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-I (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
PROFESSIONAL ASSET MANAGER" OR "QPAM" (within the meaning of PART V OF THE
QPAM EXEMPTIONS), no employee benefit PLANS ASSETS THAT ARE INCLUDED in
SUCH investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c) (1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part 1(c) and (g) of the QPAM Exemption are
<PAGE>
16
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit PLANS, or a separate
account or trust fund comprising one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used IN this Section 6.2, the TERMS "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to
SUCH TERMS in section 3 of ERISA.
7. INFORMATION AS TO THE COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(a) Quarterly Statements - AS SOON AS AVAILABLE AND IN ANY event
--------------------
within 45 days after the end of each quarterly fiscal period in each fiscal
year of the Company (other than the last quarterly fiscal period of each
such fiscal year), duplicate copies of
(i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries as at the end of such quarter, and
(ii) CONSOLIDATED STATEMENTS OF INCOME, SHAREHOLDERS EQUITY
AND CASH FLOWS OF THE COMPANY and its Restricted Subsidiaries for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the consolidated figures for
the corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial Officer
as fairly presenting, in all material respects, the financial position of
the companies being reported on and
<PAGE>
17
their results of operations and cash flows, subject to changes resulting
from year-end adjustments;
(b) Annual Statements -- as soon as available and in any event within
-----------------
120 days after the end of each fiscal year of the Company, duplicate
copies of
(i) a consolidated balance sheet of the Company and its
Restricted Subsidiaries as at the end of such year,
(ii) consolidated statements of income, shareholders equity
and cash flows of the Company and its Restricted Subsidiaries for such
year, and
(iii) if available other than pursuant to requirements of this
Agreement, a consolidating balance sheet of the Company and its
Restricted Subsidiaries as of the end of such year and the related
consolidating statements of income, shareholders equity and cash flows
of the Company and its Restricted Subsidiaries for such year,
setting forth in each case in comparative form the consolidated figures for
the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent public accountants of
recognized national standing, which shall (x) state that such
consolidated financial statements present fairly , in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, that the examination of such accountants in
connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the
circumstances and (y) be free of qualifications (other than any
qualifications relating to consistency, or relating to any
inconsistency with GAAP, that may result from a change in the method
used to prepare such financial statements and as to which such
accountants concur), and
(B) a certificate of such accountants stating further
whether, in making their audit, they have become aware of the
existence of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event then exists,
specifying the nature and period of the existence thereof (it being
understood that such accountants shall not be liable, directly or
indirectly, for any failure to
<PAGE>
18
obtain knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in making an audit
in accordance with generally accepted auditing standards or did not
make such an audit)
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
one copy of (i) each financial statement or report, notice, proxy statement
or press release sent by the Company or any Subsidiary to the Credit
Facility Banks or the banks or other financial institutions party to any
New Credit Facility or generally to its non-management shareholders (other
than the Company or a Subsidiary) or its other creditors, and (ii) each
regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder) and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the SEC;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
EVENT within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or under the Existing Bank Credit Facility or that any Person has given any
notice or taken any action with respect to a claimed default of the type
referred to in Section 11(f), A written notice specifying the nature and
period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
-------------
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action , if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable EVENT, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
of its ERISA Affiliates of a notice from a Multiemployer Plan that
such action has been taken by the PEGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the
incurrence of any liability by the
<PAGE>
19
Company or any of its ERISA Affiliates pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on any of the
rights , properties or assets of the Company or any such ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise
tax provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably be
expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
-----------------------------------
within five days of receipt thereof, copies of any notice to the Company
or any Subsidiary from any Federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect (which in
any event shall include any notice as to the existence 0:, or as to any
facts or circumstances that might reasonably be expected to lead to, a
proceeding that could adversely affect the registration or good standing of
the Company or any Subsidiary with the SEC);
(g) Accountants Letters and Audits -- promptly, and in any event
-------------------------------
within five days after receipt thereof by a Responsible Officer, one copy
of each report as to material inadequacies in accounting controls submitted
by independent accountants in connections with any audit of the Company or
any of its Subsidiaries or any interim or special audit of the Company or
any of its Subsidiaries; and
(h) Requested Information -- with reasonable promptness, such other
data and information to the relating business, operations, affairs,
financial condition, assets or properties or the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes and the Security Documents to
which it is a party as from time to time may be reasonably requested by
such holder of Notes, provided that the Company shall not be required to
deliver any such information to a Competitor if the Company determines in
good faith that such information is of a competitive or sensitive nature.
The Company shall deliver, with reasonable promptness after a written
request therefor by any holder of a Note or a prospective transferee of a Note,
information satisfying the requirements of subsection (d) (4) (i) of Rule 144A
of the SEC or any similar rule then in effect.
7.2. OFFICERS CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be
<PAGE>
20
accompanied by a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
-------------------
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1 to 10.6, inclusive,
during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount ratio or
percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b) Default -- a statement that such Senior Financial Officer has
-------
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervisions, a review of the transactions and conditions
of the Company and its Subsidiaries from the beginning of the quarterly
or annual period covered by the statements then being furnished to the
date of the certificate and that such review shall not have period
disclosed the existence during such of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including without limitation any such event or
conditions resulting from the failure of the Company or any Subsidiary to
comply with any Environmental Law), specifying the nature and period of
existence thereof and what action the Company shall have taken or proposes
to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor (except that no Competitor shall be
entitled to exercise rights under clause (a) below):
(a) No Default -- if no Default or Event of Default then EXISTS, AT
----------
THE EXPENSE of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be unreasonably withheld) its independent public accountants, and
(with the consent of the Company, which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company to visit and inspect any of the offices or
properties of the Company or any
<PAGE>
21
Subsidiary, to examine all their respective books of account, records,
reports and other papers, to make copies and extracts therefrom, and to
discuss their respective affairs, finances ant accounts with their
respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes at the final maturity thereof, the Company will make required, and
may make optional, prepayments in respect of the Notes, all as hereinafter
provided.
8.1. REQUIRED PREPAYMENTS.
On June 27, 2000 and each June 27 thereafter to and including June
27, 2005, the Company will prepay $14,000,000 principal amount (or such lesser
principal amount as shall then be outstanding) of the Notes, such prepayment
to be made at the principal amount to be prepaid, together with accrued
interest thereon to the date of such prepayment, without premium and allocated
as provided in Section 8.4, provided that upon any partial prepayment of the
Notes pursuant to Section 8.2 or 10.5(d) the principal amount of each required
prepayment of the Notes becoming due under this Section 8.1 on and after the
date of such prepayment shall be reduced in the same proportion as the
aggregate unpaid principal amount of the Notes is reduced as a result of such
prepayment.
8.2. OPTIONAL PREPAYMENTS
The Company may, at its option and upon notice as provided in
Section 8.3, prepay at any time all, or from time to time any part of, the
Notes (but, if in part, then in a minimum amount of $5,000,000 and otherwise in
multiples of $100,000) at the principal amount so prepaid, together with
interest accrued thereon to the date of such prepayment, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
8.3. NOTICE OF PREPAYMENTS
The Company will give each holder of Notes written notice of each
optional prepayment under Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall
specify the date fixed for such prepayment (which shall be a Business Day) ,
the aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.4) and the
<PAGE>
22
interest to be paid on the prepayment date with respect to such principal amount
being prepaid.
Each such notice of prepayment shall be accompanied by a certificate
of a Senior Financial Officer as to the estimated Make-Whole Amount due in
connection with such prepayment (calculated as if the date of such notice were
the date of the prepayment) , setting forth the details of such
computations. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date. If for any reason any holder of the Notes, by notice to
the Company, objects to such calculation of the Make-Whole Amount for such
Notes, the Make-Whole Amount for such Notes calculated by such holder and
specified in such notice shall be final and binding upon the Company and the
holders of such Notes absent manifest error. If any such holder of a Note
shall give the notice specified in the preceding sentence , the Company will
forthwith provide copies of such notice to all other holders of outstanding
Notes.
8.4. ALLOCATION OF PARTIAL PREPAYMENTS
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof.
8.5. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall thereafter be
surrendered to the Company and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any prepaid principal amount of any Note .
8.6. PURCHASE OF NOTES.
The Company will not, and will not permit any Affiliate to, purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel (or will cause to be promptly canceled) all Notes acquired by
it or any Affiliate in connection with any payment, prepayment or
<PAGE>
23
purchase of Notes pursuant to any provision of this Agreement and no Notes may
be issued in substitution or exchange or any such Notes .
8.7. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note cover the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or 10.5 or has
become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time, on the third Business Day
preceding the Settlement Date with respect to such Called Principal, on
the display designated as "Page 678" on the Telerate Access Service (or
such other display as may replace Page 678 on Telerate Access Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date,
or (ii) if such yields are not reported as of such time or the Yields
reported as of such time are not ascertainable, the Treasury Constant
Maturity Series Yields reported, for the latest day for which such Yields
have been so reported as of the third Business Day preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the
<PAGE>
24
actively traded U.S. Treasury security with a maturity closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with a maturity closest to and less than the Remaining
Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2, 10.5
or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or 10.5 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding
(and without limiting specific obligations of the Company or any Subsidiary
under any Security Document):
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including without limitation Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
<PAGE>
25
maintains in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are maintained with respect
thereto) as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
9.3. MAINTENANCE OF PROPERTIES.
Subject to Sections 10.5 and 10.6, the Company will and will cause
each of its Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that
such discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary and (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
<PAGE>
26
9.5. MAINTAIN EXISTENCE, LINES OF BUSINESS, ETC.
Subject to Section 10.5, the Company will at all times preserve and
keep in full force and effect its existence as a business trust or other legal
entity. Subject to Sections 10.5 and 10.6, the Company will at all times
preserve and keep in full force and effect the corporate existence (or existence
as another legal entity) of each of its Subsidiaries (unless merged into the
Company or a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate or
other existence, right or franchise could not, individually or in the aggregate,
have a Material Adverse Effect.
The Company and its Subsidiaries will at all times continue to engage
in their respective businesses substantially as conducted and operated by them
as of the date of this Agreement (i.e., mutual fund investment advisory,
insurance, retirement plan services and financial services business and the
business of Federated Bank), and without any material change, either directly
or indirectly, in the businesses conducted and operated by them as a whole.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. PRIORITY INDEBTEDNESS.
The Company will not permit the sum (without duplication) of (a) the
aggregate unpaid principal amount of Indebtedness (including Capitalized Lease
Obligations) of the Company secured by Liens permitted by Sections 10.2(i) plus
(b) the aggregate unpaid principal amount of Indebtedness of all Restricted
Subsidiaries (other than unsecured Indebtedness owing to the Company or a
Wholly-Owned Restricted Subsidiary) to exceed the greater of (i) 50% of
Consolidated Cash Flow for the period of four fiscal quarters then most recently
ended and (ii) $25,000,000.
For purposes of this Section 10.1, (A) a Restricted Subsidiary shall
be deemed to have incurred Indebtedness in respect of any obligation previously
owed to the Company or to a Wholly-Owned Restricted Subsidiary on the date the
obligee ceases for any reason to be the Company or a Wholly-Owned Restricted
Subsidiary and (B) a Person that hereafter becomes a Restricted Subsidiary shall
be deemed at that time to have incurred all of its outstanding Indebtedness.
<PAGE>
27
10.2. LIENS.
The Company will not and will not permit any Restricted Subsidiary to
create, assume, incur or suffer to exist any Lien upon or with respect to any
property or assets, whether now owned or hereafter acquired, provided that
nothing in this Section 10.2 shall prohibit:
(a) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(b) pledges or deposits made in the ordinary course of business to
secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, old-age
pensions or other social security programs;
(c) Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable and Liens of landlords securing
obligations to pay lease payments that are not yet due and payable or in
default;
(d) good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety,
appeal, indemnity, performance or other similar bonds required in the
ordinary course of business (but not involving judgements) and (ii) Liens
granted to surety companies or to financial institutions to secure standby
letters of credit issued by such institutions to surety companies as an
inducement for such surety companies to issue or maintain existing surety,
appeal, indemnity, performance or other similar bonds required in the
ordinary course of business (but not involving judgments);
(e) Liens consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs
the use of such property or the value thereof, and none of which is
violated in any material respect by existing or proposed structures or
land use;
(f) Liens in favor of the holders of the Notes;
(g) Liens existing on the date of this Agreement and described on
Schedule 5.15, provided that the principal amount secured by any such Lien
as of the date of the Closing is not increased and no additional assets
become subject to any such Lien;
<PAGE>
28
(h) the following (none of which may affect the Collateral and so
long as all of which in the aggregate could not reasonably be expected to
have a Material Adverse Effect):
(i) claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the Company
maintains such reserves or other appropriate provisions as shall be
required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;
(ii) claims, Liens or encumbrances upon, and defects of title
to, real or personal property other than the Collateral, including any
attachment of personal or real property or other legal process prior
to adjudication of a dispute on the merits;
(iii) claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory consensual Liens; or
(iv) Liens of governmental entities arising under federal or
state Environmental Laws;
and provided further that in any such case (1) the validity or amount of
any thereof is being contested in good faith by appropriate and lawful
proceedings diligently conducted so long as levy and execution thereon have
been stayed and continue to be stayed or (2) if a final judgment is entered
in respect of any thereof and such judgment is discharged within 30 days of
entry; and
(i) Liens which would otherwise not be permitted by clauses (a)
through (h) above, securing Indebtedness of the Company or a Restricted
Subsidiary, provided that the Company will not permit the sum (without
duplication) of (i) the aggregate unpaid principal amount of Indebtedness
(including Capitalized Lease Obligations) of the Company secured by all
such Liens not permitted by clauses (a) through (h) above plus (ii) the
aggregate unpaid principal amount of Indebtedness of all Restricted
Subsidiaries (other than unsecured Indebtedness owing to the Company or a
Wholly-Owned Restricted Subsidiary) to exceed the greater of (i) 50% of
Consolidated Cash Flow for the period of four fiscal quarters then most
recently ended and (ii) $25,000,000.
For purposes of this Section 10.2 any Lien existing in respect of property at
the time such property is acquired or in respect of property of a Person at the
time such Person is acquired, consolidated or merged with or into the Company or
a Restricted Subsidiary shall be deemed to have been created at that time.
<PAGE>
29
10.3. CERTAIN FINANCIAL CONDITIONS.
The Company will not permit
(a) Fixed Charge Coverage Ratio -- the ratio of Consolidated Earnings
---------------------------
Available for Fixed Charges to Consolidated Fixed Charges as of the end
of any fiscal quarter for the four fiscal quarters then ended to be less
than 2.0 to 1.0, or
(b) Debt Service and Dividend Coverage Ratio -- the ratio of
----------------------------------------
Consolidated Earnings Available for Debt Service and Dividends to
Principal and Dividend Payments as of the end of any fiscal quarter for
the four fiscal quarters then ended to be less than 1.0 to 1.0, or
(c) Leverage Ratio -- the ratio of Consolidated Indebtedness as of
--------------
any date to Consolidated Cash Flow for the four fiscal quarters then most
recently ended to exceed the ratio set forth below during the periods
specified below (including without limitation on a pro forma basis as
described below):
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Fiscal Years 1996-2000 4.0 to 1.0
Fiscal Year 2001 and thereafter 3.0 to 1.0
</TABLE>
For purposes of clause (c) above (i) Indebtedness under securities clearing
arrangements entered into in the ordinary course of business and secured by
marketable securities and related cash balances with customary loan-to-value
ratio shall be excluded from Consolidated Indebtedness, and (ii) Consolidated
Indebtedness and Consolidated Cash Flow shall be determined on a pro forma
basis in accordance with GAAP after giving effect to all material acquisitions
and material dispositions made during the period with respect to which any
computation is being made as if such acquisitions and dispositions were made on
the first day of such period; and for such purpose a "material acquisition" or
"material disposition" shall be deemed to include any transaction or series of
related transactions having an aggregate purchase price of at least $20,000,000.
10.4. RESTRICTED PAYMENTS.
The Company will not, directly or indirectly, make or declare any
Restricted Payment unless
(a) after giving effect to any such action, the aggregate amount of
all Restricted Payments made during the period from January 1, 1996 to and
including the date of such action (the "COMPUTATION PERIOD") would not
exceed the sum of $5,000,000 plus 50% (or minus 100% in the case of a
<PAGE>
30
deficit) of Consolidated Adjusted Net Income for the Computation Period,
and
(b) after giving effect to any such action, no Default or Event of
Default shall have occurred and be continuing.
The Company will not declare any Restricted Payment that is payable
more than 60 days after the date of declaration or permit any Subsidiary to
make any Restricted Payment. Notwithstanding the limitations of clause (a)
above, (x) no payment made to Aetna Life Insurance Company or any of its
affiliates prior to the date of this Agreement or stock redemption in
connection therewith prior to the date of this Agreement, in each case in
connection with the Repurchase described in the Disclosure Documents, shall be
deemed to constitute a Restricted Payment and (y) the Company may from time to
time from the date of the Closing until payment in full of all outstanding
Notes repurchase Class B Shares issued in accordance with the Federated
Investors Employees Restricted Stock Plan for an aggregate amount not to exceed
$1,000,000, and no such repurchase shall be deemed to constitute a Restricted
Payment.
10.5. ASSET SALES.
The Company will not and will not permit any Restricted Subsidiary
to, directly or indirectly, make any sale, transfer, lease (as lessor) , loan or
other disposition of any property or assets (an "ASSET SALE") other than
(a) Asset Sales permitted by Sections 10.6;
(b) Asset Sales in the ordinary course of business;
(c) Asset Sales by a Wholly-Owned Restricted Subsidiary (other than
an Insurance Subsidiary) to any other Wholly-Owned Restricted Subsidiary
(other than an Insurance Subsidiary);
(d) Asset Sales for cash of Designated Assets by a Restricted
Subsidiary to a Special Purpose Subsidiary in connection with a
securitization or other receivables sale transaction, provided in each case
that
(i) such Asset Sale is properly (in accordance with GAAP), and
is, accounted for as a true sale by such Restricted Subsidiary,
(ii) any adjustments to the initial sale price after such
Asset Sale is consummated shall be accounted for on the cash basis,
(iii) the consideration received by such Restricted Subsidiary
in connection with such Asset Sale is not less than 75% of the
unamortized amount of
<PAGE>
31
commissions and similar fees paid by such Restricted Subsidiary to
unaffiliated broker-dealers or others in respect of sales or other
transactions giving rise to such Designated Assets,
(iv) the terms of such Asset Sale are reasonable in light of
custom in the market for such transactions at such time, and
(v) the net cash proceeds realized upon completion of such Asset
Sale are applied by the Company within five days after the effective
date of such Asset Sale to repay Indebtedness under the Existing Bank
Credit Facility or any bank credit facility entered into in order to
refinance or replace the Existing Bank Credit Facility; and
(e) other Asset Sales for fair value, provided in each case that
(i) immediately before and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing, and
(ii) the aggregate book value attributable to property or assets
disposed of in such Asset Sale and all other Asset Sales by the
Company and its Restricted Subsidiaries (x) during the 12-month period
ending on the date of such Asset Sale does not exceed 10% of
Consolidated Total Assets as of the end of the then most recent fiscal
year and (y) during the period from the date of the Closing to the
date of such Asset Sale does not exceed 30% of Consolidated Total
Assets as of the end of the then most recent fiscal year,
and provided further that for purposes of clause (ii) above there shall be
excluded the book value attributable to property or assets disposed of in
an Asset Sale equal to the net cash proceeds realized upon completion of
such Asset Sale and applied by the Company or a Restricted Subsidiary
within 365 days after the effective date of such Asset Sale (x) to the
acquisition of assets, of at least equivalent value and earning power,
which are used or useful in the business of the Company and its Restricted
Subsidiaries or (y) to repay Funded Indebtedness of the Company or any
Restricted Subsidiary (and in that connection the Company shall have made
an offer to the holders of all Notes at the time outstanding to prepay, pro
rata among all Notes tendered, an aggregate principal amount of Notes at
least equal to a pro rata portion of all such Funded Indebtedness to be
prepaid, at the principal amount of such Notes, together with interest
accrued thereon to the date of such prepayment, plus the Make-Whole Amount
determined for the prepayment date with respect to such principal amount,
and
<PAGE>
32
which offer shall provide each holder with sufficient information to make
an informed decision and shall remain open for at Least 20 Business Days).
For purposes of this Section 10.5 any shares of Voting Stock of a
Subsidiary that are the subject of an Asset Sale shall be valued at the greater
of the fair market value of such shares as determined in good faith by the Board
and an amount equal to the product of (1) aggregate net book value of the assets
of such Subsidiary as of the fiscal quarter then most recently ended and (2) a
fraction of which the numerator is the aggregate number of shares of Voting
Stock of such Subsidiary disposed of in such Asset Sale and the denominator is
the aggregate number of shares of Voting Stock of such Subsidiary outstanding
immediately prior to such Asset Sale.
10.6. MERGER, CONSOLIDATION, ETC.
The Company will not and will not permit any Restricted Subsidiary to
consolidate with or merge or amalgamate with any Person or convey, transfer or
lease all or substantially all of its assets in a single transaction or series
of transactions to any Person except:
(a) a Restricted Subsidiary may consolidate with or merge or
amalgamate with, or convey or transfer all or substantially all of its
assets to the Company (provided that the Company shall be the continuing or
surviving entity) or a then existing Wholly-Owned Restricted Subsidiary;
(b) the Company may consolidate with or merge or amalgamate with, or
convey or transfer all or substantially all of its assets to a corporation
or other entity organized and existing under the laws of the United States
or any State thereof, provided that
(i) if the Company is not the continuing, surviving or acquiring
entity, the surviving corporation or other entity shall have (A)
executed and delivered to each holder of a Note its assumption in form
and substance satisfactory to the Required Holders of the due and
punctual performance and observance of all obligations of the Company
and under this Agreement, the Other Agreements, the Notes and the
Security Documents to which the Company is a party and (B) caused to
be delivered to each holder of a Note an opinion of counsel reasonably
satisfactory to the Required Holders to the effect that all agreements
or instruments effecting such assumption are enforceable in accordance
with their terms and comply with the terms hereof, and
<PAGE>
33
(ii) immediately before and after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation or other entity that shall theretofore have become such in the
manner prescribed in this Section 10.6 from its respective liabilities under
this Agreement or the Notes.
10.7. CHANGE IN MANAGEMENT.
The Company will not permit any material change in the management of
the Company and its material Restricted Subsidiaries taken as a whole. For
purposes of the foregoing, "MATERIAL CHANGE" means a cessation of employment of
a majority of the Management Shareholders (other than those whose employment
ceases due to death, disability or retirement after age 65).
10.8. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
(a) The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary unless
(i) such Subsidiary was not previously (directly or indirectly) an
Unrestricted Subsidiary,
(ii) such Subsidiary does not own or hold any Indebtedness, shares
or other securities of the Company or another Restricted Subsidiary, and
(iii) immediately before and after giving pro forma effect to such
designation (including without limitation after giving pro forma effect to
such designation for purposes of Section 10.3), no Default or Event of
Default shall have occurred and be continuing.
(b) The Company will not designate any Person as a Restricted
Subsidiary unless
(i) such Subsidiary was not previously (directly or indirectly) a
Restricted Subsidiary, and
(ii) immediately before and after giving pro forma effect to such
designation (including without limitation after giving pro forma effect to
such designation for purposes of Section 10.3), no Default or Event of
Default shall have occurred and be continuing.
(c) Forthwith and in any event within ten Business Days after a
designation pursuant to clause (a) or (b) above, the Company will furnish each
holder of the Notes with a certificate of a Senior Financial Officer specifying
the effective date of
<PAGE>
34
such designation and setting forth calculations in reasonable detail
demonstrating compliance with the conditions to such designation set forth in
clause (a) or (b), as applicable.
10.9. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or group Of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or a Fund or Wholly-Owned Restricted Subsidiary), except
in the ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business, in each case upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than would be
obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) default in the payment of any principal or Make-Whole Amount, if
any, on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) default in the payment of any interest on any Note for more than
five Business Days after the same becomes due and payable; or
(c) default in the performance of or compliance with any term
contained in Sections 10.1 to 10.7, inclusive, and in the case of Section
10.2 such default shall have continued for a period of ten Business Days
after a Senior Financial Officer obtains knowledge thereof, or default in
the performance of or compliance with any term contained in Section 7.1(d);
or
(d) default in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) or in any Security Document or in the payment of
any fees due pursuant to the Intercreditor Agreement and such default is
not remedied within 30 days after a Senior Financial Officer obtains
knowledge thereof; or
(e) any representation or warranty made in writing by or on behalf of
the Company or any Subsidiary or by any officer of the Company or any
Subsidiary in this Agreement or any Security Document or in any writing
furnished in connection with the transactions contemplated hereby proves
<PAGE>
35
to have been false, incorrect or incomplete in any material respect on the
date as of which made; or
(f) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness (other
than the Notes) beyond any period of grace provided with respect thereto,
or (ii) the Company or any Restricted Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such default
or condition such Indebtedness has become, or has been declared (or one or
more Persons have been entitled for at least ten Business Days to declare
such Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a consequence
of the occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Indebtedness to convert such
Indebtedness into equity interests), (x) the Company or any Restricted
Subsidiary has become obligated to purchase or repay any Indebtedness
before its regular maturity or before its regularly scheduled dates of
payment, or (y) one or more Persons have the right to require the Company
or any Restricted Subsidiary so to purchase or repay such Indebtedness,
provided that the aggregate outstanding principal amount of Indebtedness
(without duplication) affected by defaulted payments and other events
described in clauses (i), (ii) and (iii) above shall exceed $3,000,000; or
(g) the Company or any Restricted Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any
Restricted Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
<PAGE>
36
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any Restricted Subsidiary, or any such Petition shall be
filed against the Company or any Restricted Subsidiary and such petition
shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 are rendered against one or more of the
Company and its Restricted Subsidiaries which judgments are not, within 30
days after entry thereof, bonded, paid, discharged or stayed pending
appeal, or are not discharged within 30 days after the expiration of such
stay; or
(j) any Security Document shall cease to be in full force and effect
as an enforceable instrument of the Company or any Grantor or Pledgor, or
any Person at its authorized direction or on its behalf shall assert that
any Security Document is unenforceable in any material respect, or the
security interests purported to be created by any Security Document shall
cease to be enforceable and of the same effect and priority as purported to
be created thereby; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (iii) the aggregate "amount
of unfunded benefit liabilities" (within the meaning of section 4001(a)
(18) of ERISA) under all Plans, determined in accordance with Title IV of
ERISA, shall exceed $1,000,000, (iv) the Company or any ERISA Affiliate
shall have incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions
of the Code relating to employee benefit plans, (v) the Company or any
ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary thereunder; and any
such event or events described in clauses (i) through (vi) above, either
individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
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37
As used in Section 11 (k), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in section 3 of ERISA
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Majority Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes at the time outstanding to be immediately due
and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
such holder or holders to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) (to the full extent permitted by applicable law)
the Make-Whole Amount determined in respect of such principal amount, shall all
be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided) and that the provision for payment of a
Make-Whole Amount by the Company in respect thereof in the event that the Notes
are prepaid or are accelerated as a result of an Event of Default, is intended
to provide compensation for the deprivation of such right under such
circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the
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38
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, has been paid, (b) all Events of Default and Defaults, other than the non-
payment of amounts that have become due solely by reason of such declaration,
have been cured or have been waived pursuant to Section 17, and (c) no judgment
or decree has been entered for the pavement of any monies due pursuant hereto or
to such Notes. No rescission and annulment under this Section 12.3 will extend
to or affect any subsequent Event of Default or Default or impair any right
consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15, the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including without
limitation reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any
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39
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
such holder's attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), within five
Business Days thereafter the Company shall execute and deliver, at its expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred except in
denominations of $500,000 or more, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be issued to such holder in a denomination of less than $500,000.
You agree that the Company shall not be required to register the
transfer of any Note to any Person (other than your nominee) or to any separate
account maintained by you unless the Company receives from the transferee a
customary representation to the Company (and appropriate information as to any
separate accounts or other matters) or other assurances reasonably satisfactory
to the Company to the effect that such transfer does not involve a prohibited
transaction (as such term is defined in section 406 (a) of ERISA and section
4975 (c) (1) (A) - (D) of the Code). You shall not be liable for any damages in
connection with any such representations or assurances provided to the Company
by any transferee.
Any transferee of a Note, by its acceptance of such Note, shall be
deemed to have represented to the Company that it is not a Competitor, unless
prior to the transfer of such Note and in lieu of such representation the
proposed transferee of such Note notifies the Company in writing that it may be
a Competitor and either agrees in writing that it will be subject to the
limitations applicable to a Competitor hereunder or requests that the Company
advise it as to whether such proposed transferee would be deemed to be a
Competitor. If a proposed transferee makes such request the Company shall,
within two
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40
Business Days after being requested so to do, determine on a reasonable basis
and in good faith in consultation with such proposed transferee whether such
proposed transferee would be deemed to be a Competitor. Any holder of a Note
which is a Competitor (whether by agreement or the Company's determination as
aforesaid) shall be subject to the applicable limitations specified in Sections
7.1(h) and 7.3(a).
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for or an Affiliate of, an original Purchaser or any
other Institutional Investor with a minimum net worth of at least
$25,000,000, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
within five Business Days thereafter the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest shall have been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, premium, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of Citibank, N.A. in New York City. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in New York City or the principal office of a bank or trust company in
New York City.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if
<PAGE>
41
any, and interest by the method and at the address specified for such purpose
below your name in Schedule A, or by such other method or at such other address
as you shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, you shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at the place for notices most recently
designated by the Company pursuant to Section 18. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at your election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the Company in
exchange for a new Note or Notes pursuant to Section 13.2. The Company will
afford the benefits of this Section 14.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you have
made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers, consents or
other actions under or in respect of this Agreement, the Notes, the
Intercreditor Agreement or any Security Document (whether or not such amendment,
waiver or consent or other action becomes effective), including without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement, the Notes, the Intercreditor Agreement or any Security Document or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement, the Notes, the Intercreditor
Agreement or any Security Document, or by reason of being a holder of any Note;
(b) the costs and expenses, including financial advisors' and accountants' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes; and (c) the costs and
expenses incurred from time to time in connection with execution and delivery of
any instruments or documents contemplated by this Agreement, the Intercreditor
Agreement or any Security Document. The Company will pay, and will save you and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or
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42
expenses, if any, of brokers and finders (other than those retained by you).
In furtherance of the foregoing, on the date of the Closing the
Company will pay or cause to be paid the reasonable fees and disbursements
(including estimated unposted disbursements as of the date of the Closing) of
your special counsel which are reflected in the statements of such counsel
submitted to the Company at least one Business Day prior to the date of the
Closing. The Company will also pay, promptly upon receipt of supplemental
statements therefor, reasonable additional fees, if any, and disbursements of
such counsel in connection with the transactions hereby contemplated (including
disbursements unposted as of the date of the Closing to the extent such
disbursements exceed estimated disbursements paid as aforesaid).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument or
document delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
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43
amount or time of any prepayment or payment of principal of, or change the rate
or the time of Payment or method of computation of interest or of the Make-Whole
Amount on, the Notes, (ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any such amendment or
waiver, or (iii) amend any of Sections 8, 11 (a), 11 (b), 12, 17 or 20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the Provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
-------
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or such security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver or- any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
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44
17.4. NOTES HELD BY THE COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and, unless otherwise herein provided, sent (a) by telecopy if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by registered or certified
mail with return receipt requested (postage prepaid), or (c) by a recognized
overnight delivery service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of the Vice President - Finance,
with a copy to Allan Finegold, Kirkpatrick & Lockhart, LLP, 1500 Oliver
Building, Pittsburgh, PA 15222, or at such other address as the Company
shall have specified to the holder of each Note in writing. Notices under
this Section 18 will be deemed given only when actually received (or when
the recipient rejects delivery thereof).
19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees
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45
and stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or you or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with your normal
practices with respect to the protection of confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, trustees, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors whose duties require them to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other
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46
Person to which such delivery or disclosure may be necessary or appropriate (w)
to effect compliance with any law, rule, regulation or order applicable to you,
(x) in response to any subpoena or other legal process, (y) in connection with
any litigation to which you are a party or (z) if an Event of Default has
occurred and is continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement, such word shall no longer be
deemed to refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
22.2. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent
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47
of each other covenant contained herein, so that compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
22.3. JURISDICTION AND PROCESS; WAIVER OF JURY TRIAL.
(a) The Company irrevocably submits to the non-exclusive in personam
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement, the Notes, any Subsidiary Guarantee or any
Security Document. To the fullest extent permitted by applicable law, the
Company irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the in personam
jurisdiction of any such court, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
(b) The Company consents to process being served in any suit, action
or proceeding of the nature referred to in Section 22.3(a) by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the Company at its address specified in Section 18 or at such
other address of which you shall then have been notified pursuant to said
Section. The Company agrees that such service upon receipt by the Company or by
its agent as aforesaid (i) shall be deemed in every respect effective service of
process upon it in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by applicable law, be taken and held to be valid
personal service upon and personal delivery to the Company. Notices hereunder
shall be conclusively presumed received as evidenced by a delivery receipt
furnished by the United States Postal Service.
(c) Nothing in this Section 22.3 shall affect the right of any holder
of a Note to serve process in any manner permitted by law, or limit any right
that the holders of any of the Notes may have to bring proceedings against the
Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(d) THE COMPANY AND (BY ACCEPTANCE OF A NOTE) EACH HOLDER OF A NOTE
WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT,
THE OTHER AGREEMENTS, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
HEREWITH OR THEREWITH.
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48
22.4. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirement in Section 8.3 that notice
of any optional prepayment specify a Business Day as the date fixed for such
prepayment), any payment of principal of or Make-Whole Amount (if any) or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
22.5. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
22.6. ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP; and, if at the time that any such statement or computation
is required to be made the Company shall not have any Restricted Subsidiary,
such terms shall mean a financial statement or a financial computation, as the
case may be, with respect to the Company only.
22.7. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.8. GOVERNING LAW.
This Agreement and the Notes shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the Commonwealth of Pennsylvania excluding choice-of-law principles of the law
of such
<PAGE>
49
Commonwealth that would require the application of the laws or a jurisdiction
other than such Commonwealth.
22.9. LIMITATION OF LIABILITY.
You and (by acceptance of a Note) each holder of a Note are expressly
put on notice of the limitation of liability as set forth in the Declaration of
Trust of the Company and the declarations of trust of certain of the Company's
Subsidiaries and agree that the obligations assumed by the Company and its
Subsidiaries pursuant to this Agreement and the Security Documents shall be
limited in any case to the Company and its Subsidiaries and their respective
assets. You and (by acceptance of a Note) each holder of a Note agree not to
seek satisfaction of any obligation of the Company or its Subsidiaries under
this Agreement from any of the shareholders of the Company, the trustees,
officers or agents of those entities, or any of them, except as contemplated
under the Pledge Agreement, the Declaration of Trust of the Company and the
declarations of trust of certain or the Company's Subsidiaries. Notwithstanding
the foregoing, nothing in such declarations of trust or elsewhere shall prohibit
any holder of a Note or the Collateral Agent on behalf of the holders of the
Notes from pursuing any remedies against any outside professionals or
consultants employed by the Company or its Subsidiaries.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
FEDERATED INVESTORS
By THOMAS R. DONAHUE
Vice President
The foregoing is hereby agreed to as of the date thereof.
[The forms of signature by each of the Purchasers, as they appear on the
respective Note Purchase Agreements, are set forth below.]
THE TRAVELERS INSURANCE COMPANY
By CRAIG H. FARNSWORTH
2nd Vice President
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA INVESTMENTS, INC.
By JAMES F. COGGINS, JR.
Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
on behalf of one or more separate accounts
By CIGNA INVESTMENTS, INC.
By JAMES F. COGGINS, JR.
Managing Director
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
BY PATRICIA W. WILSON
Authorized Representative
By STEVEN M. LAUDE
Authorized Representative
ALLSTATE INSURANCE COMPANY
By PATRICIA W. WILSON
Authorized Representative
By STEVEN M. LAUDE
Authorized Representative
NORTHERN LIFE INSURANCE COMPANY
By GREGORY M. ANDERSON
Assistant Treasurer
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By GREGORY M. ANDERSON
Authorized Representative
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY
By DAVID FUSSELL
Vice President
Securities Department
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By ERNIE P. FRIESEN
Assistant Vice President
Investments
By JAMES G. LOWERY
Assistant Vice President
Private Placement Investments
<PAGE>
SCHEDULE A
This Schedule A shows the names and addresses of the Purchasers under
the foregoing Note Purchase Agreement and the ether Agreements referred to
therein and the respective principal amounts of Notes to be purchased by each.
@@
Principal Amount
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
THE TRAVELERS INSURANCE COMPANY $25,000,000
(1) All payments on account of the Notes
shall be made by wire transfer of
federal or other immediately available
funds prior to 12:00 noon (New York
time) on the due date to The Travelers
Insurance Company -- Consolidated
Private Placement Account No. 910-2-
587434 at The Chase Manhattan Bank,
N.A., One Chase Plaza, New York, New
York 10081, ABA# 021-000021, with
sufficient information (including
interest rate and maturity) to
identify the source and application of
such funds including the PPN: 31420#
AB 9 of the Notes.
(2) Address for all notices in respect of
payment:
One Tower Square
Hartford, CT 06183-2030
Attn: Securities Department-
Cashier
(3) Address for all other communications:
One Tower Square
Hartford, CT 06183-2030
Attention: Securities Department-
Private Placements
Telecopy: (203) 954-5243
(4) Tax Identification No.: 06-0566090
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
CONNECTICUT GENERAL LIFE INSURANCE COMPANY $15,000,000
(Notes registered in the name of
CIG & CO.)
(1) All payments on account of the Notes
shall be made in the form of bank
wire transfer or other immediately
available funds to: FED ABA
#02100002l Chase NYC/CTR/BNF=CIGNA
Private Placements/AC=9009001802
OBI= __________
PPN: 31420# AB 9, the amount of
interest and/or principal, the amount
of any prepayment, the payable date,
the originator's contact name and
telephone number
(2) Address for all notices in respect to
payments:
CIG & CO.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Processing (S-206)
With a copy of such notice to:
The Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
(3) Address for all other communications:
CIG & CO.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities
Division (S-307)
(4) Tax Identification Number: 13-3574027
A-2
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, $10,000,000
on behalf of one or more separate
accounts
(Notes registered in the name of
CIG & CO.)
(1) All payments on account of the Notes
shall be made in the form of bank
wire transfer or other immediately
available funds to: FED ABA
#02l000021 Chase NYC/CTR/BNF=CIGNA
Private Placements/AC=9009001802
OBI= _________
PPN: 31420# AB 9, the amount of
interest and/or principal, the amount
of any prepayment, the payable date,
the originator's contact name and
telephone number
(2) Address for all notices in respect to
Payments:
CIG & CO.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Processing (S-206)
With a copy of such notice to:
The Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
(3) Address for all other communications:
CIG & CO.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities
Division (S-307)
(4) Tax Identification Number: 13-3574027
A-3
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
ALLSTATE LIFE INSURANCE COMPANY $12,500,000
(1) All payments by Fedwire transfer of
immediately available funds,
identifying the name of the Company,
the Private Placement Number
preceded by "DPP" and the payment as
principal, interest or premium, in
the format as follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance
Company
Collection Account #168-1l7-0
ORG = Federated Investors
OBI = DPP (31420# AB 9)
Payment Due Date (MM/DD/YY) -
P________ (Enter "P" and
amount of principal being
remitted, for example,
P5000000.00) -
I________ (Enter "I" and
amount of interest being
remitted, for example,
I225000.00)
(2) All notices of scheduled payments
and written confirmation of such
wire transfers to be sent to:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-8709
Telecopy: (847) 402-7331
A-4
<PAGE>
(3) Securities to be delivered to:
Harris Trust and Savings Bank
111 West Monroe Street
Institutional Custody, 5E
Chicago, Illinois 60690
Attn: Lisa Cox
For Allstate Life Insurance
Company/Safekeeping Account
No. 23-91317
(4) All financial reports, compliance
certificates and all other written
communications, including notice of
prepayments, to be sent to:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, IL 60062-7154
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
(5) Tax Identification No.: 36-2554642
A-5
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
ALLSTATE INSURANCE COMPANY $7,500, 000
(1) All payments by Fedwire transfer of
immediately available funds,
identifying the name of the Company,
the Private Placement Number preceded
by "DPP" and the payment as principal,
interest or premium, in the format
as follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-114-7
ORG = Federated Investors
OBI = DPP (31420# AB 9)
Payment Due Date (MM/DD/YY) -
P________ (Enter "P" and
amount of principal being
remitted, for example,
P5000000.00) -
I________ (Enter "I" and
amount of interest being
remitted, for example,
1225000.00)
(2) All notices of scheduled payments
and written confirmation of such
wire transfers to be sent to:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, STE G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-8709
Telecopy: (847) 402-7331
A-6
<PAGE>
(3) Securities to be delivered to:
Harris Trust and Savings Bank
111 West Monroe Street
Institutional Custody, 5E
Chicago, Illinois 60690
Attn: Lisa Cox
For Allstate Life Insurance
Company/Safekeeping Account
No. 23-91316
(4) All financial reports, compliance
certificates and all other written
communications, including notice of
prepayments, to be sent to:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, STE G3A
Northbrook, IL 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
(5) Tax Identification No.: 36-0719665
A-7
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
NORTHERN LIFE INSURANCE COMPANY $6,000,000
(1) All payments on account of the Notes
shall be made by wire transfer of
federal or other immediately
available funds to:
First National Bank
N.A. /Minneapolis
601 2nd Ave. S.
Acct. # 1602-3237-6105
Bank ABA t 091000022
Attn: Securities Accounting
Ref: Issuer (S) , Cusip, Coupon &
Maturity
(2) Address for all communications:
ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2147
Attn: Private Placements
612-372-5257
Fax: 612-372-5368
(3) Tax Identification No.: 41-1295933
A-8
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY $4, 000,000
(1) All payments on account of the Notes
shall be made by wire transfer of
federal or other immediately
available funds to:
First National Bank
N.A. /Minneapolis
601 2nd Ave. S.
Acct. # 1102-4001-4461
Bank ABA # 091000022
Attn: Securities Accounting
Ref: Issuer(s), Cusip, Coupon &
Maturity
(2) Address for all communications:
ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2147
Attn: Private Placements
612-372-5257
Fax: 612-372-5368
(3) Tax Identification No.: 41-0451140
A-9
<PAGE>
Principal Amounts
of Notes
Name and Address of purchaser to be Purchased
- ----------------------------- ---------------
PROVIDENT LIFE AND ACCIDENT INSURANCE $10,000,000
COMPANY
(Notes registered in the name of the
following nominee: PEPA & CO.)
(1) All Payments on account of the Notes
shall be made by wire transfer of
immediately available funds to:
PEPA & CO.
c/o Bankers Trust Company
New York, NY
ABA No. 021001033
PVT PLACEMENT PROC
No. 99 911 145
For credit to: Provident Life and
Accident Insurance Company
Custodial Account No. 99296
Ref: Federated Investors 7.96%
Senior Secured Notes due June 27,
2006
PPN# 31420# AB 9
Principal $_________, Interest $_______
(2) Address for all notices with respect to payments
and for all other communications
Provident Life and Accident Insurance
Company
Private Placements/Investment
Department
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755-1365
Telecopy: (423) 755-3351
(3) Tax Identification Number: 13-2895637
(PEPA & CO.)
A-10
<PAGE>
Principal Amounts
of Notes
Name and Address of Purchaser to be Purchased
- ----------------------------- ---------------
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY $8,000,000
(1) All payments on account of the Notes
shall be made by wire transfer of
federal or other immediately
available funds to
ABA #091-000-019 NW MPLS/TRUST
CLEARING
ACCT #08-40-245
Attn: Acct #12468800
with sufficient information
(including interest rate
and maturity) to identify the
issue to which the payment
relates and the source and
application of such funds,
including the amount of principal,
interest and premium and
the PPN: 31420# AB 9 of the Notes.
(2) Address for all notices in respect
of payment:
Norwest Bank Minnesota, N.A.
733 Marquette Ave.
Investors Bldg., 5th Floor
Minneapolis, Minnesota 55479-0047
Attn: Income Collections
(3) Address for all other communications:
Great-West Life & Annuity Insurance
Company
8515 East Orchard Road
3rd Floor, Tower 2
Englewood, Colorado 80111
Attn: U.S. Private Placements
Telecopier: 303-689-6193
(4) Tax Identification No.: 84-0467907
A-11
<PAGE>
SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" as to any person means any other person (a) which directly
or indirectly controls, is controlled by, or is under common control with such
person, (b) which beneficially owns or holds 10% or more of any class of the
Voting Stock of such person, or (c) 10% or more of the Voting Stock (or in the
case of a person which is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held, directly or indirectly, by such person.
"CONTROL" OR "CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be.
"AGENT" is defined in Section 1.2.
"BOARD" means The Board of Trustees or Board of Directors, as
appropriate, of the Company or a committee of trustees or directors lawfully
exercising the relevant powers of the Board of Trustees or Board of Directors.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City or Pittsburgh, Pennsylvania are
required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person, all
outstanding obligations of such Person in respect of Capital Leases, taken at
the capitalized amount thereof accounted for as indebtedness in accordance with
GAAP.
"CLASS A SHARES" means the Class A Common Shares of the Company.
"CLASS B SHARES" means the Class B Common Shares of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
<PAGE>
"COLLATERAL" means the Pledged Collateral and the UCC Collateral.
"COLLATERAL AGENT" means PNC Bank, National Association, or its
successors as collateral agent under the Intercreditor Agreement and the
Security Documents.
"COMMON SHARES" means the Class A Shares and Class B Shares.
"COMPETITOR" means, at any date, any Person which directly, or
indirectly through one or more Affiliates, is actively engaged to a material
extent in direct competition with the Company or any of its Subsidiaries in the
management of open and closed end mutual fund assets, provided that no Person
shall be deemed to be a Competitor if (a) the aggregate amount of assets so
managed (excluding assets relating to life insurance or annuity products) by
such Person and its Affiliates is less than $4 billion or (b) such Person is not
directly engaged in such management and such Person agrees with the Company not
to disclose any Confidential Information to any Affiliate of such Person which
may be engaged in such management. The determination of whether a Person is a
Competitor shall be made in accordance with Section 13.2.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED ADJUSTED NET INCOME" means for any period of
determination the sum of (a) Consolidated Net Income for such period plus (b)
all non-cash charges to net income for such period on account of revaluation of
intangible assets in accordance with GAAP.
"CONSOLIDATED CASH FLOW" means for any period of four fiscal quarters
means (a) the sum of Consolidated Net Income plus all amounts that were deducted
from gross revenues in computing Consolidated Net Income on account of
depreciation, amortization, other non-cash charges to net income (excluding any
non-cash charges which require an accrual or reserve for cash charges for any
future period), interest expense and income tax expense, minus (b) non-cash
credits to net income, in each case of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED EARNINGS AVAILABLE FOR DEBT SERVICE AND DIVIDENDS" means
for any period of determination (a) the sum of Consolidated Net Income plus all
amounts that were deducted from gross revenues in computing Consolidated Net
Income on account of depreciation, amortization, other non-cash charges to net
income (excluding any non-cash charges which require an accrual or reserve for
cash charges for any future period), minus (b) non-cash credits to net income,
in each case of the Company and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP.
B-2
<PAGE>
"CONSOLIDATED EARNINGS AVAILABLE FOR FIXED CHARGES" for any period of
determination means the sum of (a) Consolidated Cash Flow for such period plus
(b) Consolidated Rental Expense for such period.
"CONSOLIDATED FIXED CHARGES" means, for any period of determination,
the sum (without duplication) of (a) Consolidated Interest Expense for such
period, (b) all dividends payable during such period in respect of Preferred
Stock of any Restricted Subsidiary not owned by the Company directly or
indirectly through one or more Wholly-owned Restricted Subsidiaries and (c)
Consolidated Rental Expense for such Period.
"CONSOLIDATED INDEBTEDNESS" means, at any date, all indebtedness of
the Company and its Restricted Subsidiaries, determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means for any period of determination
all interest payable in respect of the Notes and any other then outstanding
Indebtedness (including imputed interest in respect of Capitalized Lease
Obligations), determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means for any period of determination the
net income of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, excluding
(a) the proceeds of any life insurance policy,
(b) any gains arising from (1) the sale or other disposition of any
assets (other than current assets) to the extent that the aggregate amount
of the gains exceeds the aggregate amount of the losses from the sale,
abandonment or other disposition of assets (other than current assets),
(2) any write-up of assets, or (3) the acquisition of outstanding
securities of the Company or any Restricted Subsidiary,
(c) any amount representing any interest in the undistributed
earnings of any other Person (other than a Restricted Subsidiary),
(d) any earnings, prior to the date of acquisition, of any Person
acquired in any manner, and any earnings of any Restricted Subsidiary
acquired prior to becoming a Restricted Subsidiary,
(e) any earnings of a successor to or transferee of the assets of the
Company prior to becoming such successor or transferee,
(f) any deferred credit (or amortization of a deferred credit)
arising from the acquisition of any Person,
B-3
<PAGE>
(g) any portion of the net income of any Restricted Subsidiary which
for any reason is unavailable for payment of dividends to the Company or to
another Restricted Subsidiary, and
(h) any extraordinary gains.
"CONSOLIDATED RENTAL EXPENSE" means for any period of determination
the aggregate amount of rental and other obligations required to be paid by the
Company and its Restricted Subsidiaries as lessee under all operating leases
(excluding any amounts required to be paid by the lessee on account of
maintenance and repairs, insurance, taxes, assessments, utilities, operating and
labor costs and similar charges), determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED TOTAL ASSETS" means, at any date, all assets of the
Company and its Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"CREDIT FACILITY BANKS" means the banks party to the Existing Bank
Credit Facility.
"DECLARATION OF TRUST" means the Restated Declaration of Trust of the
Company dated as of July 28, 1989, as the same may be supplemented or amended
from time to time.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the giving of notice or the lapse of time, or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of (i)
9.96% and (ii) 2% above the rate of interest publicly announced by Citibank,
N.A. from time to time at its principal office in New York City as its prime
rate.
"DESIGNATED ASSETS" means the right to receive deferred sales charges,
including 12b-1 fees and contingent deferred sales charges, and (to the extent
reasonably necessary to permit any securitization transaction described in
Section 10.5(d)) shareholder servicing fees related thereto, and any comparable
fees from a Fund.
"ENVIRONMENTAL LAWS" means any and all Federal, state and local, and
any and all foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses, agreements
or governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
B-4
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXISTING BANK CREDIT FACILITY" means the Senior Secured Credit
Agreement dated as of January 31, 1996 among the Company, the banks party
thereto and PNC Bank, National Association, as agent, as supplemented, amended
or restated from time to time.
"FUND FEES" means 12b-1, back-end and other similar fees contractually
due the Company or any of its Restricted Subsidiaries.
"FUNDED INDEBTEDNESS" with respect to any Person means, at any time,
(a) all Indebtedness for borrowed money of such Person or which has been
incurred by such Person in connection with the acquisition of assets having a
final maturity of one or more than one year from the date of origin thereof (or
which is renewable or extendible at the option of the obligor for a period or
periods more than one year from the date of origin), including all payments in
respect thereof that are required to be made within one year from the date of
any determination of Funded Debt, whether or not included in current
liabilities, (b) all Capitalized Leases, and (c) all Guarantees of such Person
of Funded Indebtedness of others.
"FUNDS" means the mutual funds for which the Company or any Restricted
Subsidiary serves as an advisor, an administrator, a distributor, a transfer
agent, a portfolio or fund accountant, or a clearing servicer.
"GAAP" means generally accepted accounting principles from time to
time in the United States.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States or any State thereof or other political
subdivision of any thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or
B-5
<PAGE>
which asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial
regulatory or administrative functions of, or pertaining to, any such
government (including without limitation the National Association of
Insurance Commissioners).
"GRANTORS" means the Company and certain of its Subsidiaries who are
signatories to the Security Agreement as indicated in Exhibit 1.2(a).
"GUARANTEE" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including without limitation obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such Indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or obligation
against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the
obligor under any Guarantee, the Indebtedness or other obligations that are the
subject of such Guarantee shall be assumed to be direct obligations of such
obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law (including
without limitation
B-6
<PAGE>
asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" means as to any person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such person for or in respect of (a) borrowed money, (b) amounts
raised under or liabilities in respect of any note purchase or acceptance credit
facility, (c) reimbursement obligations under any letter of credit, currency
swap agreement, interest rate swap, cap, collar or floor agreement or other
interest rate protection device, (d) any other transaction (including forward
sale or purchase agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of money entered into by
such person to finance its operations or capital requirements (but not including
trade payables and accrued expenses incurred in the ordinary course of business
which are not represented by a promissory note or other evidence of indebtedness
and which are not more than 30 days past due), or (e) any Guarantee of
Indebtedness for borrowed money.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note
(including any Affiliate of such purchaser) and (b) any holder of a Note holding
(together with one or more of its Affiliates) more than 2% of the aggregate
principal amount of the Notes then outstanding.
"INSURANCE SUBSIDIARY" means Federated Reinsurance Limited, an Irish
corporation, and any other corporation, business trust or other entity which is
(a) organized under the laws of Ireland or any other jurisdiction acceptable to
the Majority Holders, (b) formed by the Company to engage in the Limited
insurance activities permitted by Section 8.2(p) (i) of the Existing Bank Credit
Facility, and (c) a Wholly-Owned Restricted Subsidiary (provided that if such
Insurance Subsidiary is organized under the law of a foreign jurisdiction which
requires that residents of such foreign jurisdiction maintain a certain level of
ownership interest in such Insurance Subsidiary, then not less than 98% of the
outstanding shares or other equity interests of such Insurance Subsidiary shall
be owned by one or more Wholly-Owned Restricted Subsidiaries).
"INTERCOMPANY SUBORDINATION AGREEMENT" means the Intercompany
Subordination Agreement, substantially in the form of Exhibit 1.2(d), executed
and delivered by the Company and its Subsidiaries in favor of the holders from
time to time of the Notes and the other holders of Senior Debt referred to
therein.
"INTERCREDITOR AGREEMENT" is defined in Section 1.2.
B-7
<PAGE>
"INVESTMENT ADVISERS ACT" is defined in Section 5.17 (b).
"Investment Company Act" is defined in Section 5.17(b).
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance (including without limitation any
of the foregoing resulting from a sale or other disposition of receivables with
recourse), or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"MAJORITY HOLDERS" means, at any time, the holders of at least a
majority in unpaid principal amount of the Notes at the time outstanding.
"MAKE-WHOLE AMOUNT" is defined in Section 8.7.
"MANAGEMENT-RELATED SHAREHOLDERS" means the persons or entities
identified as such on Schedule 5.1.
"MANAGEMENT SHAREHOLDERS" means the eleven individuals identified as
such on Schedule 5.1.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Restricted Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets, properties or
prospects of the Company and its Restricted Subsidiaries taken as a whole, (b)
the ability of the Company to perform its obligations under this Agreement, the
Notes and any Security Document to which it is a party or (c) the validity or
enforceability of this Agreement, the Notes or any Security Document.
"MEMORANDUM" is defined in Section 5.3.
"NOTES" is defined in Section 1.1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
B-8
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" or "person" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization,
or a government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PLEDGE AGREEMENT" means the Amended and Restated Pledge Agreement,
substantially in the form of Exhibit 1.2(b), executed and delivered by the
Pledgors to the Collateral Agent.
"PLEDGED COLLATERAL" means that portion of the Collateral which
consists of the issued and outstanding shares of capital stock, beneficial
interests or partnership interests of the Companies and related items which are
pledged under the Pledge Agreement.
"PLEDGED SHARES" means that portion Of the Pledged Collateral which
consists of all of the issued and outstanding Class A Shares.
"PLEDGED SUBSIDIARY" means a Subsidiary of the Company whose
outstanding capital stock or shares of beneficial interest or partnership
interests are pledged to the Collateral Agent under the Pledge Agreement.
"PLEDGING SUBSIDIARIES" means Federated Investors, Inc., FII Holdings,
Inc., Federated International Management, Ltd., Federated Services Company, FS
Holdings, Inc. and Federated Shareholder Services Company.
"PLEDGORS" means the Company, the Pledging Subsidiaries and the
holders of the Class A Shares.
"PREFERRED STOCK", as applied to any corporation or other Person,
means shares or other equity interests of such corporation or Person that shall
be entitled to preference or priority over any other shares or equity interests
of such corporation or Person in respect of either the payment of dividends or
the distribution of assets upon liquidation, or both.
"PRINCIPAL AND DIVIDEND PAYMENTS" means for any period of
determination the sum of (a) scheduled principal payments on all Indebtedness of
the Company and its Restricted Subsidiaries
B-9
<PAGE>
(other than intercompany Indebtedness) plus (b) all dividend payments on the
Common Shares and Preferred Stock actually paid in cash.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, inchoate
or otherwise.
"PROXIES" has the meaning specified in the Existing Bank Credit
Facility.
"PTE" is defined in Section 6.2(a).
"REQUIRED HOLDERS" means, at any time, the holders of at least 66
2/3% in unpaid principal amount of the Notes at the time outstanding.
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"RESTRICTED PAYMENT" means
(a) the declaration of any dividend on, or the incurrence of any
liability to make any other payment or distribution in respect of, any
shares or equity interests of any class of the Company (other than one
payable solely in Common Shares),
(b) any payment or distribution on account of the purchase,
redemption or other retirement of any shares or equity interests of any
class of the Company, or of any warrant, option or other right to acquire
such shares or equity interests, and
(c) any payment or distribution on account of the principal of or
premium, if any, with respect to Indebtedness of the Company that is
subordinated to the Notes other than mandatory sinking fund or other
retirement payments required by the terms thereof.
The amount of any Restricted Payment in property shall be deemed to be the
greater of its fair value (as determined by the board of trustees of the
Company) and its net book value.
"RESTRICTED SUBSIDIARY" as of the date of this Agreement means each
Subsidiary designated as a "Restricted Subsidiary" in Schedule 5.41, and
thereafter means each Subsidiary not designated as an Unrestricted Subsidiary
pursuant to Section 10.8.
"SEC" means the Securities and Exchange Commission.
B-10
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY AGREEMENT" means the Amended and Restated Security
Agreement, substantially in the form of Exhibit 1.2(c), executed and delivered
by the Grantors to the Collateral Agent.
"SECURITY DOCUMENTS" means the Security Agreement, the Pledge
Agreement, the Proxies and any other instruments, certificates, powers of
attorney or documents delivered or contemplated to be delivered thereunder or in
connection herewith, as the same may be supplemented or amended from time to
time in accordance herewith.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, vice
president of finance, principal accounting officer, treasurer or comptroller of
the Company.
"SPECIAL PURPOSE SUBSIDIARY" means any corporation, business trust or
other entity formed by the Company to engage in the limited activities permitted
by Section 8.2(p) (ii) of the Existing Bank Credit Facility and which shall be a
Wholly-Owned Restricted Subsidiary, provided that if the Special Purpose
Subsidiary is organized under the law of a foreign jurisdiction which requires
that residents of such foreign jurisdiction maintain a certain level of
ownership interest in such Special Purpose Subsidiary, then not less than 98% of
the outstanding shares or other equity interests of such Special Purpose
Subsidiary shall be owned by a Wholly-Owned Restricted Subsidiary.
"SUBSIDIARY" means, as to any Person, (a) any corporation or other
business entity 50% or more of the combined voting power of all Voting Stock of
which is owned directly or indirectly by such Person or one or more of its
Subsidiaries or (b) any partnership in which such Person is a general partner or
of which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of its Subsidiaries, except that
no Fund shall be deemed to be a Subsidiary of the Company. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
B-11
<PAGE>
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"UCC Collateral" means that portion of the Collateral in which
security interests are granted under the Security Agreement.
"Unrestricted Subsidiary" means any Subsidiary other than a Restricted
Subsidiary
"Voting Stock" means, with respect to any Person, any shares of stock
or other equity interests of any class or classes of such Person whose holders
are entitled under ordinary circumstances (irrespective of whether at the time
stock or other equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency) to vote
for the election of a majority of the directors, managers, trustees or member of
any other type of governing body of such Person.
"Wholly-Owned Restricted Subsidiary" means, at any time, any
Restricted Subsidiary all of the equity interests (except directors' qualifying
shares) and voting interests of which are owned by any one or more of the
Company and the Company's other Wholly-Owned Restricted Subsidiaries at such
time.
B-12
<PAGE>
EXHIBIT 1.1
[FORM OF NOTE]
FEDERATED INVESTORS
7.96% Senior Secured Note due 2006
No. R- New York, New York
$______________ [Date]
PPN: 31420# AB 9
FEDERATED INVESTORS, a Delaware business trust (the "Company"),
for value received, hereby promises to pay to ___________________, or
registered assigns, the principal sum of ____________________ Dollars (or so
much thereof as shall not have been prepaid) on June 27, 2006, and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal balance thereof from the date of this Note at the rate of
7.96% per annum, quarterly on March 27, June 27, September 27 and December 27 in
each year until such principal sum shall have become due and payable (whether at
maturity, at a date fixed for prepayment or by declaration, acceleration or
otherwise), and to pay on demand interest (so computed) on any overdue
principal and premium, if any, and (to the extent permitted by applicable law)
on any overdue interest, at a rate per annum equal to the greater (determined on
a daily basis) of (i) 9.96% and (ii) 2% above the rate of interest publicly
announced by Citibank, N.A. from time to time at its principal office in The
City of New York as its prime or base rate. Payments of principal , premium, if
any, and interest shall be made in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts in the manner and to the address designated by the holder hereof
and, in the absence of such designation, at said principal office of Citibank,
N.A.
This Note is one of an issue of Senior Secured Notes due 2006 of the
Company issued pursuant to the several Note Purchase Agreements dated as of June
15, 1996 (the "Note Purchase Agreements"), entered into by the Company with
certain institutional investors. The holder of this Note is entitled to the
benefits of the Note Purchase Agreements and is also entitled to the benefits
and security of certain Security Documents referred to in the Note Purchase
Agreements. Pursuant to Section 13.2 of the Note Purchase Agreements, each
transferee of a Note, by its acceptance of such Note, shall be deemed to have
represented to the Company that it is not a Competitor (as such term is defined
in the Note Purchase Agreements) unless prior to the transfer of such Note such
transferee notifies the Company that it may be such a Competitor or the Company
makes a determination as to whether it is a Competitor; and if the holder of
this Note is or is determined to be a Competitor as provided
<PAGE>
2
in said Section 13.2, such holder shall not be entitled to exercise certain
rights, or the exercise of such rights will be subject to limitations, under
Sections 7.1(h) and 7.3(a) of the Note Purchase Agreements.
This Note is subject to required prepayments by the Company on the
dates and in the amounts specified in the Note Purchase Agreements. The Company
may at its election prepay this Note, in whole or in part, and the maturity
hereof may be accelerated following an Event of Default, all as provided in the
Note Purchase Agreements, to which reference is made for the terms and
conditions of such provisions as to prepayment and acceleration, including
without limitation the payment of a make-whole premium in connection therewith.
Upon surrender of this Note for registration of transfer or exchange,
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and, at the
option of the holder, registered in the name of, the transferee. The Company
and any agent of the Company may deem and treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payments of
the principal of, premium, if any, and interest hereon and for all other
purposes whatsoever, whether or not this Note is overdue, and the Company shall
not be affected by any notice to the contrary.
As provided in the Note Purchase Agreements, this Note shall be
governed by and construed in accordance with the law of the Commonwealth of
Pennsylvania.
The holder of this Note is expressly put on notice of the limitation
of liabi1ity as set forth in the Declaration of Trust of the Company and the
declarations of trust of certain of the Company's Subsidiaries and, by
acceptance of this Note, agrees that the obligations assumed by the Company and
its Subsidiaries pursuant to this Note, the Note Purchase Agreements and the
Security Documents are limited in any case to the Company and its Subsidiaries
and their respective assets. The holder of this Note agrees not to seek
satisfaction of any obligation of the Company or its Subsidiaries under this
Agreement from any of the shareholders of the Company, the trustees, officers or
agents of those entities, or any of them, except as contemplated under the
Pledge Agreement, the Declaration of Trust of the Company and the declarations
of trust of certain of the Company's Subsidiaries. Notwithstanding the
foregoing, nothing in such declarations of trust or elsewhere shall prohibit the
Collateral
<PAGE>
3
Agent on behalf of the holders from pursuing any remedies against any outside
professionals or consultants employed by the Company or its Subsidiaries.
FEDERATED INVESTORS
By________________________________________
Title:
<PAGE>
________________________________________________________________________________
FEDERATED INVESTORS
___________________________
SUPPLEMENTAL AGREEMENT
Dated as of October 1, 1997
amending the
Note Purchase Agreements dated AS of June 15, 1996
___________________________
7.96% Senior Secured Notes due 2006
________________________________________________________________________________
<PAGE>
FEDERATED INVESTORS
SUPPLEMENTAL AGREEMENT
as of October 1, 1997
Re: 7.96% Senior Secured Notes due 2006
TO THE SEVERAL NOTEHOLDERS WHOSE
NAMES APPEAR IN THE ACCEPTANCE
FORM AT THE END HEREOF
Ladies and Gentlemen:
FEDERATED INVESTORS, a Delaware business trust (the "COMPANY"), hereby
agrees with you as follows:
1. Original Note Purchase Agreements and the Notes; Proposed Amendments.
Pursuant to the several Note Purchase Agreements dated as of June 15,
1996 (the "ORIGINAL NOTE PURCHASE AGREEMENTS") entered into by the Company with
the institutional investors named in Schedule A thereto, the Company issued and
sold $98,000,000 aggregate principal amount of its 7.96% Senior Secured Notes
due 2006 (the "NOTES"), of which Notes in said unpaid principal amount remain
outstanding on the date hereof. Unless the context otherwise requires,
capitalized terms used herein without definition have the respective meanings
ascribed thereto in the Original Note Purchase Agreements.
The company proposes to enter into a program in respect of the
securitization of Designated Assets. In connection therewith the Company
proposes to amend the Original Note Purchase Agreements as hereinafter set forth
(the original note purchase Agreements as so amended are sometimes called the
"Amended Note Purchase Agreements").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you as of the Effective Date
(as below defined) as follows:
A. Organization, Authorization. Etc. The Company is a business trust
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to execute, deliver
and perform its obligations under this Supplemental Agreement and the Amended
Note Purchase Agreements.
<PAGE>
2
The execution and delivery of this Supplemental Agreement and the
performance of this Supplemental Agreement and the Amended Note Purchase
Agreements have been duly authorized by all necessary corporate and, if
required, stockholder action on the part of the Company. This Supplemental
Agreement and the Amended Note Purchase Agreements are legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
B. Compliance with Laws, Other Instruments, Etc. The execution,
--------------------------------------------
delivery and performance by the Company of this Supplementa1 Agreement and the
Amended note Purchase Agreements do not and will not (A) contravene, result in
any breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of the Company or any Subsidiary under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which the
company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (B) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (C) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
C. No Default, etc. No Event of Default or Default has occurred and
---------------
is continuing, and neither the Company nor any Subsidiary is in default (whether
or not waived) in the performance or observance of any of the terms, covenants
or conditions contained in any instrument evidencing any Indebtedness and there
is no pending request by the Company (except pursuant to this Supplemental
Agreement and the Existing Bank Credit Facility in respect of the transactions
contemplated hereby) or any subsidiary for any amendment or waiver in respect of
any contemplated or possible default with respect to such Indebtedness and no
event has occurred and is continuing which, with notice or lapse of time or
both, would become such a default.
d. No Undisclosed Fees. The Company has not, directly or indirectly,
-------------------
paid or caused to be paid any consideration (as supplemental or additional
interest, a fee or otherwise) to any holder of Notes in order to induce such
holder to enter into this Supplemental Agreement or take any other action in
connection with the transactions contemplated hereby, nor has the Company agreed
to make any such payment.
3. Representation of the Noteholder.
You represent to the Company that you are the beneficial owner of
Notes in the aggregate unpaid principal
<PAGE>
3
amount set forth below your name in the acceptance form of this Supplemental
Agreement.
4. Amendments of Original Note Purchase Agreements, Etc.
The original Note Purchase Agreements are amended pursuant to Section
17.1 thereof, as follows:
A. Section 10.3 is amended by adding the following
sentences at the end thereof:
"Without limiting the generality of the foregoing or the definition of
'Consolidated net income', no gain or income attributable to any
interest by the company or a Restricted Subsidiary in an entity
resulting from a Qualifying Asset Sale (other than cash actually
distributed) shall be included as income for any purposes under this
Agreement. In addition, for purposes of calculating the ratios set
forth in clauses (a), (b) and (c) above, the impact of nonrecourse
Indebtedness incurred in connection with, and the cash flows
(including any non-cash interest expense) related to, a Qualifying
Asset Sale Shall be excluded."
B. Clause (i) of Section 10.5(d) is amended to read as follows:
"(i) such Asset Sale is properly (in accordance with GAAP), and
is, accounted for as a true sale by such Restricted Subsidiary, or is
a Qualifying Asset Sale,"
C. Schedule B is amended by adding a new definition of "Qualifying
asset sale", to read as follows:
"'Qualifying Asset Sale' means an Asset Sale to a Special Purpose
Subsidiary (whether or not accounted for as a true sale in accordance
with GAAP) satisfying the following conditions:
(a) such Special Purpose Subsidiary is a 'bankruptcy
remote' entity with a separate legal existence that would not be
disregarded (and accordingly the assets and liabilities of such
entity would not be subject to substantive consolidation with
those of the Company and its other Restricted Subsidiaries) in a
bankruptcy proceeding involving the company or such other
Restricted Subsidiary as a debtor;
(b) in the opinion of the Company and its counsel, such
Asset Sale would be deemed to be a sale or absolute assignment in
case of a
<PAGE>
4
bankruptcy proceeding involving the transferor restricted
subsidiary;
(c) such Asset Sale is pursuant a Master Agreement with
respect to a program entered into by the Company with Federated
Funding 1997-1, Inc., Federated Investors Management Company,
Federated Securities Corp., the Owner Trustee of the PLT Finance
Trust 1997-1, PLT Finance, L.P., Putnam, Lovell & Thorton Inc.,
and Bankers Trust Company, all as described to the holders of the
Notes in reasonable detail in writing prior to the initial Asset
Sale thereunder;
(d) such Asset Sale is without recourse to the company or
any other Restricted Subsidiary (except for recourse in respect
of customary representations and warranties made to the
purchaser, none of which shift the economic risk of nonpayment
from the purchaser); and
(e) each holder of a Note shall have received a copy of the
opinion of Sullivan & Worcester LLP, or other counsel reasonably
satisfactory to the Majority Holders, rendered to investors and
other interested parties in connection with such Asset Sale
pursuant to such Master Agreement (including without limitation
as to the matters specified in clauses (a) , (b) and (d) above)
and an Officer's Certificate as to the matters specified in
clauses (a) to (d) above."
5. Effectiveness of this Supplemental Agreement.
This Supplemental Agreement will become effective on the date (the
"EFFECTIVE DATE") on which all of the following conditions precedent shall have
been satisfied:
A. Proceedings. All proceedings taken by the Company in connection
-----------
with the transactions contemplated hereby and all documents and papers incident
thereto shall be satisfactory to you, and you and your special counsel shall
have received all such counterpart originals or certified or other copies of
such documents and papers, all in form and substance satisfactory to you, as
you or they may reasonably request in connection therewith.
B. Execution of this Supplemental Agreement. Counterparts of this
----------------------------------------
Supplemental Agreement shall have been executed and delivered by the Company and
the Required Holders.
C. Opinion of Counsel. You shall have received an opinion, dated the
------------------
Effective Date, addressed to you and otherwise
<PAGE>
5
satisfactory in scope and substance to you, from Joseph M. Huber, Esq.,
Corporate Counsel for the Company, as to the due authorization, execution and
delivery by the Company of this Supplemental Agreement and covering such other
matters incident to the transactions contemplated hereby as you may reasonably
request.
D. Payment of Fees. The Company shall have paid the fees and
---------------
disbursements of your special counsel as contemplated by Section 7 of this
Supplemental Agreement.
6. Notation of Notes.
Prior to any transfer of an outstanding Note by the holder thereof,
such holder shall either make a notation on said Note to reflect the
transactions contemplated by this Supplemental Agreement and the amendment to
such Note or surrender such Note for a new Note (the text of which may make
reference to this Supplemental Agreement) in accordance with Section 13.2 of the
Amended Note Purchase Agreements.
7. Expenses.
Without limiting the generality of Section 15.1 of the Amended Note
Purchase Agreements, the Company Agrees, whether or not the transactions
contemplated hereby are consummated, to pay the reasonable fees and
disbursements of Willkie Farr & Gallagher, your special counsel, for their
services rendered in connection with such transactions and with respect to this
Supplemental Agreement and any other document delivered pursuant to this
Supplemental Agreement and reimburse you for your out-of-pocket expenses in
connection with the foregoing.
In furtherance of the foregoing, on the Effective Date the Company
will pay or cause to be paid the reasonable fees and disbursements of Willkie
Farr & Gallagher which are reflected in the statement of Willkie Farr &
Gallagher delivered to the Company on or prior to the Effective Date. The
Company will also pay promptly upon receipt of supplemental statements therefor,
reasonable additional fees, if any, and disbursements of Willkie Farr &
Gallagher in connection with the transactions contemplated hereby (including
disbursements unposted as of the Effective Date).
8. Ratification.
Except as amended hereby, the Original Note Purchase Agreements are in
all respects ratified and confirmed and the provisions thereof shall remain in
full force and effect.
9. Counterparts.
This Supplemental Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
<PAGE>
6
all of which together shall constitute one and the same instrument.
10. Governing Law.
This supplemental agreement shall be governed by and construed in
accordance with the laws of the State of New York.
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Supplemental Agreement
shall become a binding agreement between you and the Company, subject to
becoming effective as hereinabove provided.
FEDERATED INVESTORS
BY [SIGNATURE ILLEGIBLE]
--------------------------
TITLE:
ACCEPTED AND AGREED:
NOTEHOLDERS:
THE TRAVELERS INSURANCE COMPANY
By__________________________
Title:
Principal Amount of Notes Held: $25,000,000
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA INVESTMENTS, INC.
By________________________
Title:
Principal Amount of Notes Held: $15,000,000
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of one or more
separate accounts
By CIGNA INVESTMENTS, INC.
By________________________
Title:
<PAGE>
7
Principal Amount of Notes Held: $10,000,000
ALLSTATE LIFE INSURANCE COMPANY
By________________________
Title:
By________________________
Title:
PRINCIPAL AMOUNT OF NOTES HELD: $12,500,000
ALLSTATE INSURANCE COMPANY
By________________________
Title:
By________________________
Title:
Principal Amount of Notes Held: $7,500,000
NORTHERN LIFE INSURANCE COMPANY
By________________________
Title:
Principal Amount OF Notes Held: $6,000,000
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By________________________
Title:
Principal Amount of Notes Held: $4,000,000
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY
By________________________
Title:
Principal Amount of Notes Held: $10,000,000
<PAGE>
OCTOBER __, 1997
The Noteholders whose names
appear in the Acceptance Form at
the end of the Supplementa1 Agreement
as defined below
Re: Federated Investors
Ladies and Gentlemen:
I have acted as Corporate Counsel to Federated Investors, a Delaware
business trust (the "Company"), in connection with the execution and delivery of
the Supplemental Agreement dated as of October 1, 1997 amending the Note
Purchase Agreements dated as of June 15,1996 (the "Amendment"). I furnish you my
written opinion pursuant to Section 5(c) of the Amendment.
Capitalized terms used in this opinion that are not otherwise defined
herein shall have the respective meanings set forth in the Amendment and said
Note Purchase Agreements.
In connection with this opinion I have examined, or have had attorneys in
the Legal Department of the Company examine, the originals or copies of such
records, agreements and instruments of the Company, certificates of public
officials and of officers of the Company and such other documents and records,
and such matters of law, as I have deemed appropriate as a basis for the
opinions hereinafter expressed. In making such examination, I have assumed the
genuineness of all signatures, other than those of the Company, the authenticity
of all documents submitted to me as originals and the conformity to the
originals of all documents submitted to me as copies, which facts I have not
independently verified. As to various facts material to the opinions set forth
herein, I have relied without independent verification upon factual
representations made by the Company in the Amendment, upon certificates of
public officials and upon facts certified by officers of the Company.
For purposes of the opinions expressed herein, I have assumed that
each party (other than the Company) to the Amendment and to all other documents,
agreements and instruments examined by me have all requisite power and authority
and have taken all necessary action to enter into and perform all of its
obligations under the Amendment or such other documents, agreements and
instruments to which they are a party, and that each such Amendment and other
document, agreement and instrument is and will be the valid, binding and
enforceable obligation of each party thereto. I express no opinion upon the
application of any federal, state or local statute, law, rule
<PAGE>
Noteholders
October __, 1997
Page 2
or regulation to the authority of any such other party to enter into and to
carry out its respective obligations or exercise rights or remedies under the
Amendment or such other documents, agreements and instruments.
I am a member of the Bar of the Commonwealth of Pennsylvania, and I
express no opinions herein with respect to the law of any other jurisdiction
except the federal laws of the United States, and the Business Trust Act of the
State of Delaware. As to matters governed by the laws of the State of New York,
I have assumed that such laws are the same as the laws of the Commonwealth of
Pennsylvania.
Other than as expressly addressed below, I express no opinion herein with
respect to the application of or compliance with any federal or state securities
or antitrust or unfair competition laws or regulations (including without
limitation any filing or notice requirements thereunder), and for purposes of
this opinion have assumed compliance by all parties with such laws and
regulations.
On the basis of and subject to the foregoing and the limitations,
qualifications and exceptions set forth herein, as well as my consideration of
such questions of law as, in my judgment, are necessary or appropriate to enable
me to render the opinions herein expressed, I am of the opinion, as follows:
(1) The Company is a business trust, duly organized, validly existing
and in good standing under the laws of Delaware. The Company has the lawful
power to engage in the business it presently conducts; and is duly licensed or
qualified and in good standing in each jurisdiction wherein it owns or leases
property or conducts a material amount of business.
(2) The Company has full power to enter into, execute and deliver the
Amendment and to perform its obligations under the Amendment; and all such
actions have been duly authorized by all necessary proceedings on the part of
the Company.
(3) The Amendment has been duly and validly executed and delivered by
the Company. The Amendment constitutes a legal, valid and binding obligation of
the Company and is enforceable against the Company in accordance with its terms.
(4) Neither the execution and delivery of the Amendment by the Company
nor the consummation of the transactions contemplated in the Amendment or
compliance with the terms thereof by the Company, violate the declaration of
trust, or by-laws, of the Company or violate any applicable law or result in a
default under any material agreement or instrument, to which the Company is a
party or is bound or to which it is subject or result in the creation or
enforcement of any Lien, charge or
<PAGE>
8
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By________________________
Title:
By________________________
Title:
Principal Amount of Notes Held: $8,000,000
<PAGE>
October __, 1997
The Noteholders whose names
appear in the Acceptance Form at
the end of the Supplemental Agreement
as defined below
Re: Federated Investors
Ladies and Gentlemen:
I have acted as Corporate Counsel to Federated Investors, a Delaware
business trust (the "Company"), in connection with the execution and delivery of
the Supplemental Agreement dated as of October 1,1997 amending the Note Purchase
Agreements dated as of June 15, 1996 (the "Amendment"). I furnish you my written
opinion pursuant to Section 5(c) of the Amendment.
Capitalized terms used in this opinion that are not otherwise defined
herein shall have the respective meanings set forth in the Amendment and said
Note Purchase Agreements.
In connection with this opinion I have examined, or have had attorneys in
the Legal Department of the Company examine, the originals or copies of such
records, agreements and instruments of the Company, certificates of public
officials and of officers of the Company and such other documents and records,
and such matters of law, as I have deemed appropriate as a basis for the
opinions hereinafter expressed. In making such examination, I have assumed the
genuineness of all signatures, other than those of the company, the authenticity
of all documents submitted to me as originals and the conformity to the
originals of all documents submitted to me as copies, which facts I have not
independently verified. As to various facts material to the opinions set forth
herein, I have relied without independent verification upon factual
representations made by the Company in the Amendment, upon certificates of
public officials and upon facts certified by officers of the Company.
For purposes of the opinions expressed herein, I have assumed that each
party (other than the Company) to the Amendment and to all other documents,
agreements and instruments examined by me have all requisite power and authority
and have taken all necessary action to enter into and perform all of its
obligations under the Amendment or such other documents, agreements and
instruments to which they are a party, and that each such Amendment and other
document, agreement and instrument is and will be the valid, binding and
enforceable obligation of each party thereto. I express no opinion upon the
application of any federal, state or local statute, law, rule
<PAGE>
or regulation to the authority of any such other party to enter into and to
carry out its respective obligations or exercise rights or remedies under the
Amendment or such other documents, agreements and instruments.
I am a member of the bar of the Commonwealth of Pennsylvania, and I express
no opinions herein with respect to the law of any other jurisdiction except the
federal laws of the United States, and the Business Trust Act of the State of
Delaware. As to matters governed by the laws of the State of New York, I have
assumed that such laws are the same as the laws of the Commonwealth of
Pennsylvania.
Other than as expressly addressed below, I express no opinion herein
with respect to the application of or compliance with any federal or state
securities or antitrust or unfair competition laws or regulations (including
without limitation any filing or notice requirements thereunder), and for
purposes of this opinion have assumed compliance by all parties with such laws
and regulations.
On the basis of and subject to the foregoing and the Limitations,
qualifications and exceptions set forth herein, as well as my consideration of
such questions of law as, in my judgment, are necessary or appropriate to enable
me to render the opinions herein expressed, I am of the opinion, as follows:
(1) The Company is a business trust, duly organized, validly existing and
in good standing under the laws of Delaware. The company has the lawful power to
engage in the business it presently conducts; and is duly licensed or qualified
and in good standing in each jurisdiction wherein it owns or leases property or
conducts a material amount of business.
(2) The Company has full power to enter into, execute and deliver the
Amendment and to perform its obligations under the Amendment; and all such
actions have been duly authorized by all necessary proceedings on the part of
the Company.
(3) The Amendment has been duly and validly executed and delivered by the
Company. The Amendment constitutes a legal, valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms.
(4) Neither the execution and delivery of the Amendment by the Company nor
the consummation of the transactions contemplated in the amendment or compliance
with the terms thereof by the Company, violate the declaration of trust, or by-
laws, of the Company or violate any applicable law or result in a default under
any material agreement or instrument, to which the Company is a party or is
bound or to which it is subject or result in the creation or enforcement of any
Lien, charge or
<PAGE>
Noteholders
October __, 1997
Page3
encumbrance whatsoever upon any property of the Company or any of the other
Subsidiaries or the other Pledgors (other than Liens granted under the Senior
Loan Documents.
(5) Except for Amendment No.3 to Credit Agreement between the Company and
the Credit Facility Banks, which has been obtained, no consent, approval,
exemption, order or authorization of, or registration or filing with any
Official Body or any other persons is required by any Law or, to my knowledge,
any agreement in connection with the execution and delivery of the Amendment by
the Company.
This opinion is made solely for the benefit of the Noteholders and their
successors-in-interest; and no other person shall be entitled to rely thereon.
Furthermore, I have rendered this opinion as of the date hereof, and I do not
undertake to supplement my opinion with respect to factual matters or changes in
the law which may hereafter occur. This opinion may not be assigned, quoted or
used without my specific prior written consent.
Sincerely,
Joseph M. Huber
Corporate Counsel
<PAGE>
6
all of which together shall constitute one and the same instrument.
10. Governing Law.
This Supplemental Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Supplemental Agreement
shall become a binding agreement between you and the company, subject to
becoming effective as hereinabove provided.
FEDERATED INVESTORS
By [SIGNATURE ILLEGIBLE]
-----------------------------
TITLE:
ACCEPTED AND AGREED:
NOTEHOLDERS:
THE TRAVELERS INSURANCE COMPANY
BY /s/ Craig H. Farnsworth
---------------------------
Craig H. Farnsworth
TITLE: 2/nd/ Vice President
Principal Amount of Notes Held: $25,000,000
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA INVESTMENTS, INC.
By_________________________
TITLE:
Principal Amount of Notes Held: $15,000,000
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of one or more
separate accounts
BY CIGNA INVESTMENTS, INC.
By________________________
Title:
<PAGE>
6
all of which together shall constitute one and the same instrument.
10. Governing Law.
This Supplemental Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
If you are in agreement with the foregoing, please sign the form of
acceptance in the space below provided, whereupon this Supplemental Agreement
shall become a bargaining agreement between you and the Company, subject to
becoming effective as hereinabove provided.
FEDERATED INVESTORS
By_______________________
Title:
ACCEPTED AND AGREED:
NOTEHOLDERS:
THE TRAVELERS INSURANCE COMPANY
By__________________________
Title:
Principal Amount of Notes Held: $25,000,000
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA INVESTMENTS, INC.
By /s/ James F. Coggins Jr.
------------------------
Title: James F. Coggins Jr., Managing Director
Principal Amount of Notes Held: $15,000,000
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
on behalf of one or more
separate account
By CIGNA INVESTMENTS, INC.
By /s/ James F. Coggins Jr.
------------------------
Title: James F. Coggins Jr., Managing Director
<PAGE>
7
Principal Amount of Notes Held: $10,000,000
ALLSTATE LIFE INSURANCE
By [SIGNATURE ILLEGIBLE]
----------------------------
Title: AUTHORIZES SIGNATORY
By [SIGNATURE ILLEGIBLE]
----------------------------
Title: AUTHORIZES SIGNATORY
Principal Amount of Notes Held: $12,500,000
ALLSTATE INSURANCE COMPANY
By [SIGNATURE ILLEGIBLE]
----------------------------
Title: AUTHORIZED SIGNATORY
By [SIGNATURE ILLEGIBLE]
----------------------------
Title: AUTHORIZED SIGNATORY
Principal Amount of Notes Held: $7,500,000
NORTHERN LIFE INSURANCE COMPANY
By_____________________________
Title:
Principal Amount of Notes Held: $6,000,000
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By_____________________________
Title:
Principal Amount of Notes Held: $4,000,000
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY
By____________________________
Title:
Principal Amount of Notes Held: $10,000,000
<PAGE>
7
Principal Amount of Notes Held: $10,000,000
ALLSTATE LIFE INSURANCE COMPANY
By____________________________
Title:
By____________________________
Title:
Principal Amount of Notes Held: $12,500,000
ALLSTATE INSURANCE COMPANY
By____________________________
Title:
By____________________________
Title:
Principal Amount of Notes Held: $7,500,000
NORTHERN LIFE INSURANCE COMPANY
By /s/ James V. Wittich
----------------------------
Title: James V. Wittich
Assistant Treasurer
Principal Amount of Notes Held: $6,000,000
RELIASTAR LIFE INSURANCE COMPANY
f/k/a NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By /s/ James V. Wittich
----------------------------
Title: James V. Wittich
Authorized Representative
Principal Amount of Notes Held: $4,000,000
PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY.
BY____________________________
Title
Principal Amount of Notes Held: $10,000,000
<PAGE>
8
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By /s/ Ernie P. Friesen
--------------------------
ERNIE P. FRIESEN
Title: ASSISTANT VICE PRESIDENT
INVESTMENTS
By /s/ Mark Corbett
--------------------------
MARK CORBETT
Title: VICE PRESIDENT
INVESTMENTS
Principal Amount of Notes Held: $8,000,000
<PAGE>
8
GREAT-WESTERN LIFE INSURANCE COMPANY
ERNIE P. FRIESEN
By /s/ Ernie P. Friesen VICE PRESIDENT
--------------------------
Title: INVESTMENTS
MARK CORBETT
By /s/ Mark Corbett VICE PRESIDENT
--------------------------
Title: INVESTMENTS
Principal Amount OF Notes Held: $8,000,000
<PAGE>
EXHIBIT 1.2(a)
Attachments Available upon Request
LIST OF SECURITY DOCUMENTS
1. Security Agreement
2. Pledge Agreement
3. Intercompany Subordination Agreement
4. Proxies
<PAGE>
EXHIBIT 9.01
THE VOTING SHARES
IRREVOCABLE TRUST AGREEMENT
---------------------------
MADE AND ENTERED INTO this 31st day of May in the year 1989 by and between
JOHN F. DONAHUE, an individual resident of the City of Pittsburgh, County of
Allegheny and Commonwealth of Pennsylvania, and RHODORA J. DONAHUE, an
individual of the City of Pittsburgh, County of Allegheny and Commonwealth of
Pennsylvania, husband and wife (hereinafter each individually sometimes called
the "Settlor" and both collectively sometimes called the "Settlors"), of the
first part,
a
n
d
J. CHRISTOPHER DONAHUE, an individual of the City of Pittsburgh, County of
Allegheny and Commonwealth of Pennsylvania, JOHN F. DONAHUE, an individual
resident of the City of Pittsburgh, County of Allegheny and Commonwealth of
Pennsylvania, and RHODORA J. DONAHUE, an individual of the City of Pittsburgh,
County of Allegheny and Commonwealth of Pennsylvania (hereinafter each
individually sometimes called the "Trustee" and all collectively sometimes
called the "Trustees"), as Trustees, of the second part.
<PAGE>
WITNESSETH THAT:
WHEREAS, the Settlors desire to establish an irrevocable trust to be known
as "The Voting Shares Irrevocable Trust" for the purposes hereinafter mentioned
and hereby transfer and deliver to the Trustees absolutely and irrevocably all
right, title and interest of the Settlors in and to their subscription for One
Thousand (1,000) shares of the Class A Voting Common Stock, without par value,
(hereinafter sometimes called the "Stock") of FEDERATED INVESTORS, a Delaware
business trust, under and in accordance with the provisions of their
subscription agreement therefor in the form set forth in Exhibit "A" attached
hereto and made a part hereof (hereinafter sometimes called the "Subscription
Agreement") and in and to the Stock, to be held in trust hereunder; and
WHEREAS, the Trustees are willing to accept the same on the terms and
conditions and for the uses and purposes hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the Settlors and the Trustees hereby agree that the Trustees shall hold the
Stock transferred and delivered thereto upon the issue of the Stock to the
Trustees, the proceeds therefrom, including but not limited to dividends and
other distributions with respect thereto, and any other property transferred and
delivered to the Trustees under this instrument
-2-
<PAGE>
as hereinafter provided (hereinafter sometimes collectively called the "Trust
Estate") IN TRUST for the following uses and purposes:
ARTICLE I
Distributions of Income During Lifetime of the Settlors
-------------------------------------------------------
The Trustees shall hold, manage, invest and reinvest the Trust Estate
during the lifetime of the Settlors and the survivor of them and shall pay all
the income therefrom in convenient installments, but no less often than quarter-
annually, to or for the benefit of the grandchildren of the Settlors whose names
are set forth in, Exhibit "B" attached hereto and made a part hereof, then
living, in equal shares. In the event that any one or more of such
grandchildren shall not then be living, the Trustees shall pay the share of
income thereof hereunder to the other of such grandchildren then living in equal
shares. No income shall be distributed to or for the benefit of the Settlors or
accumulated for future distribution to the Settlors.
ARTICLE II
Distributions of Income During Remainder of Term
------------------------------------------------
Upon the death of the survivor of the Settlors, if any one or more of the
grandchildren of the Settlors whose names are set forth on Exhibit "B" hereto
shall then be living, the Trustees shall continue to hold, manage, invest and
reinvest the Trust Estate during the lifetime of the last survivor of such
grandchildren of the Settlors whose names are set forth on
-3-
<PAGE>
Exhibit "B" hereto and shall pay all the income therefrom in convenient
installments, but no less often than quarter-annually, to or for the benefit of
all the grandchildren of the Settlor then living, including but not limited to
those grandchildren of the Settlors whose names are set forth on Exhibit "B"
hereto and grandchildren of the Settlors born after the date hereof, in equal
shares. In the event that any one or more of such grandchildren, regardless of
when born, shall not then be living, the Trustees shall pay the share of income
thereof hereunder to the other of such grandchildren then living, regardless of
when born, in equal shares.
ARTICLE III
Division into Shares
--------------------
Upon the death of the survivor of the Settlors, if none of the
grandchildren of the Settlors whose names are set forth on Exhibit "B" hereto
shall then be living, or upon the death of the last survivor of the
grandchildren of the Settlors whose names are set forth thereon, the Trust
Estate as then constituted shall be divided into as many equal shares as there
are (1) children of the Settlors then living without issue then living, (2)
children of the Settlors then living with issue then living and (3) children of
the Settlors then deceased with issue then living. The share of each of such
children of the Settlors shall be held by the Trustees in a separate trust or
distributed in accordance with the provisions hereinafter contained in Article
IV hereof.
-4-
<PAGE>
ARTICLE IV
Distribution of Principal and Income after Division into Shares
---------------------------------------------------------------
Upon the division of the Trust Estate into shares as provided in Article
III hereof, the Trust Estate as then constituted shall be held or distributed
upon the following terms and conditions:
(A) In the case of a child of the Settlors then living without
issue then living, the share of such child shall be transferred and
delivered, absolutely and free of trust, to such child .
(B) In the case of a child of the Settlor then living with issue
then living, the share of such child shall be transferred and
delivered, absolutely and free of trust, to such issue of such child,
per stirpes, subject, however, to the provisions for beneficiaries
under the age of twenty-one (21) years hereinafter contained in
Article VI hereof.
(C) In the case of a deceased child of the Settlor with issue
then living, the share of such child shall be transferred and
delivered, absolutely and free of trust, to such issue of such child,
per stirpes, subject, however, to the
-5-
<PAGE>
provisions for beneficiaries under the age of twenty-one (21) years
hereinafter contained in Article VII hereof.
ARTICLE V
Intestate Distribution
----------------------
Notwithstanding anything contained herein to the contrary, if the Settlors
shall have no children or other issue then living at the time of the death of
the last survivor of the Settlors and their grandchildren whose names are set
forth on Exhibit "B" hereto, any portion of the Trust Estate then remaining
shall be then transferred and delivered, absolutely and free of trust, to those
persons who would have been entitled thereto if each of the Settlors had then
owned one-half (1/2) thereof and had died at the time intestate, unmarried and
domiciled in the Commonwealth of Pennsylvania, subject, however, to the
provisions or beneficiaries under the age of twenty-one (21) years hereinafter
contained in Article VII hereof.
ARTICLE VI
Early Termination and Distribution
----------------------------------
Notwithstanding anything contained herein to the contrary, if the Trustees
shall sell or otherwise dispose of all of the Stock and no longer maintain and
hold as part of the Trust Estate hereunder stock or other securities of any
corporation, business trust or other business organization referred to in
Article XII
-6-
<PAGE>
hereof, the Trustees shall have the full power and authority at any time
following the sale or other disposition of the Stock, in their discretion, to
divide the Trust Estate into shares in the manner provided in Article III
hereof, regardless of whether the Settlors or either one of them or any of the
grandchildren of the Settlors whose names are set forth on Exhibit "B" hereto
shall then be living, and to hold the shares in a separate trust or distribute
the shares in the manner provided in Article IV hereof. Nothing contained in
this Article VI shall preclude any such grandchildren of the Settlors from the
receipt of any share or part thereof hereunder.
ARTICLE VII
Beneficiaries under the Age of Twenty-one Years
-----------------------------------------------
If any beneficiary entitled to receive a share of principal hereunder shall
be under the age of twenty-one (21) years, such share shall not be distributable
to such beneficiary, but shall be retained by the Trustees for the period until
the time when the beneficiary attains the age of twenty-one (21) years, at which
time the principal shall be paid to such beneficiary absolutely and free of
trust. During such period, the Trustees shall pay so much of the income and
principal as the Trustees shall deem advisable for such beneficiary's
comfortable maintenance and support, as well as to provide for the graduate or
professional education of such beneficiary, to pay or the wedding expenses of
such beneficiary, and to assist such
-7-
<PAGE>
beneficiary in purchasing a residence or in entering a business or profession,
and shall add the remaining income to principal, to be invested as such. If such
beneficiary dies before reaching the age of twenty-one (21) years, the Trustees
are authorized in their discretion to pay part or all of such beneficiary's
funeral and burial expenses; and the remaining principal shall be paid to the
personal representatives of such beneficiary's estate. Notwithstanding the
foregoing in this Article VI, if the Trustees, in the exercise of their
discretion, shall at any time determine not to continue to hold any such share
in trust as provided in this Article VI, the Trustees shall have the full power
and authority to transfer and pay over such share, without bond, to such
beneficiary.
ARTICLE VIII
Spendthrift Provisions
----------------------
The interests of any beneficiary hereunder shall not be subject to
voluntary or involuntary alienation; and the principal and income of the Trust
Estate shall be paid by the Trustees directly to or for the use of the
beneficiary entitled thereto, without regard to any assignment, order,
attachment or claim whatever.
-8-
<PAGE>
ARTICLE IX
Principal and Income
--------------------
(A) Income accrued on any property received by the Trustees either at the
inception of the trust or as an addition thereto shall be treated as income and
not as principal.
(B) Corporate distributions received by the Trustees in shares of the
distributing corporation shall be treated as principal and not as income,
regardless of the number of shares and however described or designated by the
distributing corporation.
(C) Upon the death of any beneficiary of income, any undistributed income
in the hands of the Trustees held for such beneficiary at the time of such
beneficiary's death shall be paid to the person or persons for whom the
principal is continued in trust or to whom it is distributed under the terms
hereof.
ARTICLE X
Distributions to Minor Beneficiaries
------------------------------------
Where, under the provisions hereof, the Trustees are authorized to
distribute or expend the income or principal of the trust or any fund to, or for
the benefit of, a beneficiary who is then a minor, the Trustees may distribute
such income or principal (i) directly to such minor, (ii) to the person having
custody of such minor, (iii) to the guardian of such minor's estate or (iv) to a
custodian for such minor under any applicable Uniform Gift to Minors Act or
Uniform Transfers to Minors Act,
-9-
<PAGE>
whether previously appointed or appointed by the Trustees for the purposes of
receiving the distribution thereof, all without liability on the part of the
Trustees to see to the application thereof.
ARTICLE XI
Powers of the Trustees
----------------------
In acting as trustees hereunder, the Trustees shall have full power and
authority, without the necessity of obtaining the consent of any court, to do
all acts, to execute, acknowledge and deliver all instruments and to exercise
for the sole benefit of the beneficiaries hereunder any and all powers and
discretions which would be lawful for them were they in their own right the
actual owner of the property held in trust, including by way of illustration,
but not limitation, any or all of the following:
(A) To enter into, execute and deliver the Subscription
Agreement; to undertake and perform their obligations under the
Subscription Agreement; to accept in kind the Stock under and in
accordance with the provisions of the Subscription Agreement, subject
to the conditions thereof; to pledge the Stock as collateral security
for the performance of the obligations of FEDERATED INVESTORS as
referred to in the
-10-
<PAGE>
Subscription Agreement; and to maintain and hold the Stock, without
any duty of diversification thereof;
(B) To accept in kind any other investments or other property,
real or personal including without limitation any shares of capital
stock or other securities issued by PNC FINANCIAL CORP., a
Pennsylvania corporation, or any successor thereto, notwithstanding
the service of PITTSBURGH NATIONAL BANK, a national banking
association, or any successor to the trust business thereof, as a
fiduciary hereunder;
(C) To retain any or all securities and other property, real or
personal, including without limitation the Stock, which at any time
may be or become a part of the Trust Estate, as well as any property
into which the same or any part thereof may be converted by reason of
any reorganization, recapitalization, consolidation, merger,
liquidation, exchange or other transaction, for such time as the
Trustees shall deem advisable, notwithstanding the fact that any or
all of such securities and other property so
-11-
<PAGE>
retained are of a character or size which, but for this express
authority, would not be considered proper for trustees;
(D) To sell, convert, assign, convey, exchange, transfer or
otherwise dispose of, or grant options with respect to any or all
securities or other property, real or personal, at any time
constituting part of the Trust Estate, at public or private sale, for
such consideration and upon such terms and conditions as the Trustees
shall deem advisable, and without liability on the part of the
purchaser to see to the application of the purchase money or to
inquire into the validity or propriety of such sale; and to execute
and deliver good and sufficient deeds for any real estate, conveying
title free and clear of all trusts;
(E) To hold in the form of cash, awaiting distribution or
desirable investments, such portion of the Trust Estate as at any time
and from time to time the Trustees in their discretion shall deem
advisable, without liability to account for interest thereon;
-12-
<PAGE>
(F) To invest and reinvest the Trust Estate or any part thereof
in any other kind of property, real or personal, or part interest
therein, including without limitation, mortgages or mortgage
participations, partnership interests, common trust funds, common
stocks, preferred stocks, bonds, notes and other securities,
regardless of whether the same are legal investments for trust funds
as now or hereafter defined by law, whether by statutory enactment,
judicial decision or otherwise;
(G) To exercise any option which at any time may be or become as
part of the Trust Estate to purchase securities as the Trustees at
their discretion shall deem advisable and to acquire and hold such
securities as part of the Trust Estate;
(H) To manage and operate all real estate at any time held
hereunder; to lease all or any part of the same for such terms and
rentals and upon such conditions as the Trustees shall deem advisable,
notwithstanding the fact that the term of such lease may extend beyond
the life of any trust hereunder; to release, partition, vacate or
-13-
<PAGE>
abandon the same; to grant and acquire licenses and easements with
respect thereto; to make improvements to or upon the same; to
construct, demolish, alter, repair, maintain and rebuild buildings and
other improvements; and to use other assets of the Trust Estate for
any of such purposes;
(I) To borrow money for any purpose, including without
limitation the payment of the purchase price of any securities
acquired as part of the Trust Estate pursuant to the exercise of any
option therefor, from any source, including the Trustees; and to
secure the repayment of any and all amounts so borrowed by mortgage or
pledge of any property;
(J) To maintain policies of life insurance insuring the life of
the Settlors, the life of either one of them, or, insuring the life of
any beneficiary hereunder; to pay for all premiums thereon from
principal or income; to exercise any option or other right under such
policies, including without limitation the right to convert any group
term or other life insurance to whole or
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<PAGE>
ordinary life; to collect the proceeds therefrom upon the death of the
insured or at such other time as may be specified therein; to receipt
for such proceeds in order to release the insurer form liability
thereon; and to take all steps necessary in their opinion to enforce
payment thereof;
(K) To carry the securities and other property held hereunder
either in their own name or in the name of a nominee;
(L) To vote, in person or by proxy, all securities held
hereunder, including without limitation the Stock; to join in or to
dissent from and oppose the reorganization, recapitalization,
consolidation, merger, liquidation or sale of any corporation,
business trust or properties; to exchange securities for other
securities issued in connection with or resulting from any such
transaction; to pay any assessment or expense which the Trustees may
deem advisable for the protection of their interests as holder of any
such securities; to deposit securities in any voting trust or with any
protective or like committee or with a trustee or
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<PAGE>
depository; to exercise any options appurtenant to any securities for
the conversion thereof into other securities; and to exercise or sell
any rights issued upon or with respect to the securities of any
corporation or business trust, all upon such terms as the Trustees
shall deem advisable;
(M) To prosecute, defend, compromise, arbitrate or otherwise
adjust or settle claims in favor of or against the Trustees or the
Trust Estate;
(N) To have or retain investment counsel, attorneys, auditors,
bookkeepers or other agents and to employ persons to perform services
as the situations require and charge the income or principal of the
Trust Estate for the fees or other compensation paid to them; and to
have and maintain banking, custodian, agency, investment and advisory
accounts; and to maintain such accounts in the name of a nominee; and
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<PAGE>
(0) To make division or distribution hereunder in kind or in
money, or partly in kind and partly in money; to determine the fair
value of the property then being divided or distributed; to allot
different kinds of or interests in property to different shares; and
to take any action that may be necessary or proper in making any such
division or distribution; with the designation, division or partition
of any or all of such property, real or personal, binding and
conclusive upon all persons interested therein.
ARTICLE XII
Special Powers of the Trustees
------------------------------
In addition to, and not in limitation of, the powers indicated in Article
XI hereof, the Trustees, shall have, without the necessity of obtaining the
consent of any court, the following additional powers with respect to the Stock
or the stock or other securities of any corporation, business trust or other
business organization, including without limitation, FEDERATED INVESTORS, the
majority or more of the outstanding voting stock of which may be included in the
Trust Estate:
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<PAGE>
(A) To retain as an investment of the Trust Estate those shares
of stock of such business organization without liability for any loss
to the Trust Estate hereunder resulting from such retention or
resulting from retention of any other shares of stock of such business
organization or other securities or obligations of such business
organization which may be acquired for the Trust Estate;
(B) To acquire additional shares of the stock of such business
organization or any other securities issued by such business
organization as investments for the Trust Estate whether by purchase,
subscription or otherwise, and to utilize moneys of the Trust Estate
for the purpose, or to borrow money for the purpose and to pledge such
securities and/or other assets of the Trust Estate to secure other
shares of the stock of such business organization or other securities
issued by such business organization; to sell such shares of stock to
such business organization; and otherwise to deal in the securities of
such business organization for the benefit of the Trust Estate, all
upon such terms and conditions as the
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Trustees shall deem advisable in their discretion; and the Trustees
shall not be liable for any loss to the Trust Estate attributable (1)
to the acquisition of additional shares of stock of such business
organization or other securities issued by such business organization,
(2) to the pledge of assets of the Trust Estate, (3) to the borrowing
of moneys for the purpose of acquiring such additional shares or other
securities of such business organization, (4) to the lending of money
of the Trust Estate secured by pledge of shares of any such stock or
other securities of such business organization otherwise or (5) to
action in good faith for the benefit of the Trust Estate with respect
to such business organization;
(C) Whether or not the shares of stock of such business
organization held by the Trustees enable them at the time to control
the management of such business organization, to vote or cause to be
voted the shares of stock of such business organization held by them
either directly or by proxy (conferring discretionary power upon the
proxy if so desired) and to vote on any matters in their discretion,
including without limitation the
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alteration of the capital structure of such business organization by
provision for the issuance of secured or unsecured bonds or debentures
or different classes of stock, having preference or no preference, and
voting rights or no voting rights, and to accept as investments for
the Trust Estate, without liability for loss attributable thereto, any
such bonds, debentures or shares of stock issued to them accordingly;
to vote for the dissolution of such business organization, the sale of
its assets to, or its merger or consolidation with, any other business
organization, or for the transfer of assets of such business
organization to one or more partnerships and thereby to render the
Trust Estate liable to the full extent of its assets for the
obligations of such partnership or partnerships; to declare or omit
declarations of dividends and leave income from the business at the
risk of the business of such business organization by way of loans
subordinate to other creditors; and to do any and all things and to
take any and all other steps which they may deem necessary, desirable
or convenient to enable them to protect and improve the value of the
investment
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<PAGE>
of the Trust Estate in the business of such business organization, all
without liability to any beneficiary hereunder for any loss
attributable to such action if taken by the Trustees in good faith for
the benefit of the Trust Estate;
(D) To take an active part in the management and control of the
internal affairs of such business organization in such way and to such
extent as the Trustees may deem advisable; and to take any action in
respect of the management of such business which the Settlors, as
owners of the stock of such business organization, could have taken if
living, including the power to vary the nature of the business by
reducing, expanding, limiting or otherwise changing the same or the
type of merchandise dealt in or product manufactured by or service
rendered by such business organization; and
(E) In voting the stock of such business organization held by
the Trust Estate, to vote the stock so as to elect or cause to be
appointed themselves or their own employees or business
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<PAGE>
associates as directors, trustees and officers of such business
organization (and the persons so elected may continue to serve as
employees or business associates of the Trustees while serving as
directors, trustees or officers of such business organization), to
engage management consultants to supervise the operation and
management of such business organization and to advise the Trustees;
and to cause such business organization to pay reasonable compensation
to such management consultants and to others who may be employed in
the normal course of business to assist in the management and
operation of such business organization
ARTICLE XIII
Authority of the Trustees and Other Persons
-------------------------------------------
(A) The Trustees shall have full and complete power, authority and
discretion to deal with any situation which may arise respecting the Trust
Estate or any part thereof in such manner as they shall deem advisable and for
the best interests of the Trust Estate. The grant to the Trustees of any
specific power, authority or discretion, or the failure to grant specifically
herein any other power, authority or discretion
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<PAGE>
shall not be construed to limit or curtail in any way or to any extent such full
and complete power, authority and discretion which it is intended and directed
shall be exercisable at all times by the Trustees respecting any and all matters
of whatsoever character pertaining to the Trust Estate or any part thereof.
(B) Notwithstanding anything contained herein to the contrary, no power
enumerated herein or accorded to trustees generally pursuant to law shall be
construed to cause the Trust Estate, or any part thereof, to be included in the
gross estate of the Settlors upon the death of either of them for federal estate
tax purposes or taxable for state inheritance or other succession tax purposes.
(C) Furthermore, notwithstanding anything herein contained to the
contrary, no power enumerated herein or accorded to trustees generally pursuant
to law shall be construed to enable any person, including without limitation the
Settlors, to purchase, exchange, or otherwise deal with or dispose of the
principal or income of the Trust Estate, for less than an adequate or full
consideration in money or money's worth, or to enable any person to borrow the
principal or income of the Trust Estate, directly or indirectly, without
adequate interest or security. No person, other than the Trustees or a person
designated by the Trustees, shall have or exercise the power to vote or direct
the voting of any stock or other securities of the trust, to control
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the investment of the Trust Estate either by directing investments or
reinvestments or by vetoing proposed investments or reinvestments, or to
reacquire or exchange any property of the Trust Estate by substituting other
property of an equivalent value.
(D) Notwithstanding the foregoing, as among the Trustees, no Trustee shall
have any incident of ownership over any policies of life insurance insuring his
or her life and held in the Trust Estate hereunder; and the exercise of any
right and authority over such policies, including without limitation the right
to designate or change the beneficiary thereunder, the right to assign, the
right to revoke an assignment thereof and the right to pledge for a loan, shall
rest exclusively with the other Trustees.
ARTICLE XIV
Exculpation
-----------
The Trustees shall not be liable for any loss or damage occurring hereunder
without their willful default or deliberate wrongdoing, unless such loss or
damage be occasioned by a violation of an express provision hereof by the
Trustees; and the Trustees shall not be liable to the Settlors or any
beneficiary or other person interested hereunder for any loss or depreciation
which may arise from any investment retained or made in accordance with the
provisions hereof or which may be occasioned by the exercise of any discretion
authorized herein.
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ARTICLE XV
Accounting
----------
Within ninety (90) days following the end of each fiscal year of any trust
created hereunder, the Trustees shall render to the beneficiary thereof or to
the person having custody of any minor beneficiary thereof, an annual written
accounting of the income and principal thereof. Unless such beneficiary or
person having custody of any minor beneficiary shall object in writing to such
accounting within six (6) months from the receipt thereof, the Trustees shall
not be required to file such accounting in any court and the Trustees shall be
forever discharged from any liability or further accountability for any matter
set forth in such accounting.
ARTICLE XVI
Additions to Trust
------------------
The Settlors shall have the right to increase the principal of the trust
hereunder by adding thereto, with the consent of the Trustees, any securities
and other property, either by inter vivos transfer or by Will, or by naming the
Trustees as primary or contingent beneficiary of policies of life insurance
insuring the life of either of them or their joint lives. The principal of the
trust hereunder may also be added to by the Will or by conveyance of gifts inter
vivos made by any person with the consent or ratification of the Trustees.
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ARTICLE XVII
Disclaimer
----------
Any person named as a beneficiary hereunder may disclaim, renounce and
relinquish, in whole or in part, any provision herein in his or her favor. In
the event of any disclaimer, renunciation and relinquishment thereof, the
portion of the Trust Estate covered by such provision, to the extent disclaimed,
renounced and relinquished, shall be distributed as though such person had died
at the time of such disclaimer, renunciation or relinquishment.
ARTICLE XVIII
The Trustees
------------
(A) As among the Trustees, any one of the Trustees may delegate from time
to time, by an instrument in writing, any or all of the rights, powers and
duties of such Trustee to any other Trustee hereunder.
(B) As among the Trustees, in the event of any disagreement over any
matter relating to the Trust Estate, its administration or distribution,
including without limitation any disagreement over any matter relating to the
Stock, or any other stock or securities of a business organization referred to
in Article XII hereof, or the voting thereof, the decision of a majority of the
Trustees shall prevail.
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(C) In the event of the death, legal incapacity or resignation of any one
of the Trustees, including any successor Trustee, the other Trustees shall have
the power, by an instrument in writing delivered to the new successor Trustee,
to appoint a successor Trustee to such deceased, incapacitated or resigned
Trustee and such new successor Trustee shall become a Trustee hereunder without
the execution or filing of any other paper or any further action, with like
effect as if such new successor Trustee had originally been named one of the
Trustees herein; provided, however, that such new successor Trustee shall be
either (1) a child or grandchild of the Settlors or (2) a spouse of such child
or grandchild or (3) the chief executive officer or chief operating officer of
FEDERATED INVESTORS, or any successor to substantially all the business thereof;
and provided further, however, that such new successor Trustee shall accept the
trust hereunder. Notwithstanding anything contained herein, nevertheless, any
successor Trustee who was a spouse of such child or grandchild at the time of
his or her appointment as Trustee hereunder shall no longer be eligible to serve
as Trustee hereunder upon the divorce thereof from such child or grandchild and
any successor Trustee who was the chief executive officer or chief operating
officer of FEDERATED INVESTORS, or any successor to substantially all the
business thereof, shall no longer be eligible to serve as Trustee hereunder upon
the termination of his or her employment as such officer, regardless of the
cause
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therefor. Any successor Trustee who shall no longer be eligible to serve as
Trustee hereunder shall be deemed to resign as Trustee immediately at the time
when such successor Trustee shall no longer be eligible to serve as Trustee
hereunder.
(D) In the event thereafter of the death, legal incapacity or resignation
of another of the Trustees including any successor Trustee, and no other Trustee
shall then be remaining on account of the failure of such Trustee to appoint a
successor Trustee hereunder, PITTSBURGH NATIONAL BANK, a national banking
association, or any successor to the trust business thereof, shall become the
sole new successor corporate Trustee hereunder, without the execution or filing
of any paper or any further action on the part of the parties hereto, with the
effect as if such corporate Trustee had originally been named one of the
trustees hereunder; provided, however, that such new corporate Trustee shall
accept the trust hereunder.
(E) Any corporation into which the corporate Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the corporate Trustee may be a party, or any corporation
succeeding to the business of the corporate Trustee or to which substantially
all of its assets may be transferred, shall be the successor corporate Trustee
hereunder without the execution or filing of
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any paper or any further action, with like effect as if such successor corporate
Trustee had originally been named the corporate Trustee herein.
(F) Any of the Trustees, including any successor Trustee, shall have the
right to resign as trustee hereunder at any time, without stating cause, in the
case of an individual Trustee, by an instrument in writing delivered to the
other Trustees, and, in the case of the corporate Trustee, by petition to a
court of competent jurisdiction to designate and appoint a successor corporate
Trustee with like effect as if such successor corporate Trustee had originally
been named the corporate Trustee herein; provided, however, that any such
successor corporate Trustee shall be a corporation chartered as a banking
corporation or association authorized to engage in trust business in the
Commonwealth of Pennsylvania with a net worth at the time of its appointment
hereunder of not less than One Hundred Million Dollars ($100,000,000.00); and
provided further, however, that any such successor corporate Trustee shall
accept the trust hereunder.
ARTICLE XIX
Compensation of Trustees
------------------------
The individual Trustees hereunder shall receive a reasonable compensation
for the services rendered thereby. The corporate Trustee, as compensation for
its services, shall receive such fees as provided in its uniform schedule of
fees in effect at the
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time when the services are performed. In the absence of such uniform schedule of
fees, the corporate Trustee shall receive a reasonable compensation for the
services rendered thereby.
ARTICLE XX
No Bond
-------
During the term hereof, the Trustees shall not be required to submit any
bond or other security in connection with their administration of the Trust
Estate hereunder.
ARTICLE XXI
Interpretation
--------------
(A) Whenever used in this trust instrument, the singular shall include the
plural, the plural shall include the singular and the use of any gender shall be
applicable to all genders, whenever appropriate.
(B) The term "income", as used herein, shall mean the gross income of the
Trust Estate (other than income from the sale or exchange of a capital asset or
property used in the trade or business) after deducting therefrom all charges,
taxes (other than taxes based upon or measured by capital gains or gains from
the sale or exchange of assets used in its trade or business), fees and
expenses, including without limitation payments of principal and interest on any
indebtedness to which the Trust Estate, or any part thereof, may be subject,
incurred during the administration thereof, except for charges for amortization,
depletion or depreciation. Notwithstanding the foregoing,
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however, no deduction shall be made for the purpose of determining income
hereunder of principal repaid with respect to any loan or other borrowing made
by the Trustees hereunder other than the refinancing of any indebtedness to
which any of the assets constituting part of the Trust Estate were subject at
the time of their transfer to the Trustees hereunder.
(C) The term "issue", as used herein, shall be construed to include any
issue whether by blood or adoption. An adopted issue shall inherit and
participate hereunder in all respects as those of the whole blood. A child born
to persons who are openly living together as husband and wife after the
performance of a marriage ceremony between them and such child's lawful issue
shall be considered as lawful issue of such child's parents and of any ancestor
of such child's parents, regardless of the fact that a purported divorce of one
or both of such persons with respect to a prior marriage may be invalid.
ARTICLE XXII
Governing Law
-------------
This trust has been accepted by the Trustees and will be administered in
the Commonwealth of Pennsylvania; and its validity, construction,
administration, and all rights thereunder shall be governed by the laws of the
Commonwealth of Pennsylvania regardless of its rules relating to the conflict of
laws.
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<PAGE>
ARTICLE XXIII
Severability
------------
If any provisions, or portion thereof, of this trust instrument, or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder hereof, or the application of such
provisions, or portion thereof, to any other persons or circumstances shall not
be affected thereby; and each provision of this trust agreement shall be valid
and enforceable to the fullest extent permitted by law.
ARTICLE XXIV
Irrevocable Trust
-----------------
This Agreement and the trust created hereunder shall be irrevocable; and
the Settlors hereby expressly acknowledge that they shall have no right or
power, whether alone or in conjunction with others, and in whatever capacity, to
alter, amend, supplement, revoke or terminate this agreement, or any of the
terms hereof, in whole or in part.
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<PAGE>
IN WITNESS WHEREOF, the Settlors and the Trustees have duly executed this
Irrevocable Trust Agreement the day and year first above written.
Witness: SETTLORS:
As to each
/s/ John F. Donahue
_____________________________ ---------------------------- [Seal]
John F. Donahue
[SIGNATURE ILLEGIBLE] /s/ Rhodora J. Donahue
_____________________________ ---------------------------- [Seal]
Rhodora J. Donahue
As to each TRUSTEES:
/s/ J. Christopher Donahue
_____________________________ ---------------------------- [Seal]
J. Christopher Donahue
/s/ John F. Donahue
_____________________________ ---------------------------- [Seal]
John F. Donahue
[SIGNATURE ILLEGIBLE] /s/ Rhodora J. Donahue
_____________________________ ---------------------------- [Seal]
Rhodora J. Donahue
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ACKNOWLEDGMENTS
---------------
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
On this, the 31st day of May, 1989, before me, a Notary Public, in and for
said County and State, personally appeared the above-named JOHN F. DONAHUE and
RHODORA J. DONAHUE, known to me (or satisfactorily proven) to be the persons
whose names are subscribed to the foregoing Irrevocable Trust Agreement as
Settlors thereunder and acknowledged that they executed the same for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Loretta Y. Crum
--------------------
Notary Public
[Notarial Seal]
My commission expires:
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
On this, the 31st day of May, 1989, before me, a Notary Public, in and for
said County and State, personally appeared the above-named J. CHRISTOPHER
DONAHUE, JOHN F. DONAHUE and RHODORA J. DONAHUE, known to me (or satisfactorily
proven) to be the persons whose names are subscribed to the foregoing
Irrevocable Trust Agreement as Trustees thereunder and acknowledged that they
executed the same for The purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Loretta Y. Crum
---------------------
Notary Public
[Notarial Seal]
My commission expires:
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<PAGE>
FEDERATED INVESTORS, INC.
STOCK INCENTIVE PLAN
(Adopted as of February 20, 1998)
1. PURPOSE
The purpose of the Federated Investors, Inc. Stock Incentive Plan (the
"Plan") is to:
(a) Facilitate the assumption by Federated Investors, Inc., as the
surviving corporation of a merger with its parent corporation,
Federated Investors, of certain stock incentive awards previously made
by Federated Investors to its employees; and
(b) Continue to promote the long-term growth and performance of Federated
Investors, Inc. and its affiliates and to attract and retain
outstanding individuals by awarding directors, executive officers and
key employees stock options, stock appreciation rights, performance
awards, restricted stock and/or other stock-based awards.
2. DEFINITIONS
The following definitions are applicable to the Plan:
"Award" means the grant of Options, SARs, Performance Awards, Restricted
Stock or other stock-based award under the Plan.
"Board" means the Board of Directors of the Company.
"Board Committee" means the committee of the Board appointed in accordance
with Section 4 to administer the Plan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class B Common Stock of the Company, par value
$0.01 per share.
"Company" means Federated Investors, Inc., a Pennsylvania corporation, and
its successors and assigns.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, on any date, the closing sale price of one share
of Common Stock, as reported on the New York Stock Exchange or any national
securities exchange on which the Common Stock is then listed or on The NASDAQ
Stock Market's National Market ("NNM") if the Common Stock is then quoted
thereon, as published in the Wall Street Journal or another newspaper of general
circulation, as of such date or, if there were no sales reported as of such
date, as of the last date preceding such date as of which a sale was reported.
In the event that the Common Stock is not listed for trading on a national
securities exchange or authorized for quotation on NNM, Fair Market Value shall
be the closing bid price as reported by The NASDAQ Stock Market or The NASDAQ
SmallCap Market (if applicable), or if no such prices shall have been so
reported for such date, on the next preceding date for which such prices were so
reported. In the event that the Common Stock is not listed on the New York Stock
Exchange, a national securities exchange or NNM, and is not listed for quotation
on The NASDAQ Stock Market or The NASDAQ SmallCap Market, Fair Market Value
shall be determined in good faith by the Board Committee in its sole discretion,
and for this purpose the Board Committee shall be entitled to rely on the
opinion of a qualified appraisal firm with respect to such Fair Market Value,
but the Board Committee shall in no event be obligated to obtain such an opinion
in order to determine Fair Market Value.
"Grant Date" means the date on which the grant of an Option under Section
5.1 hereof or a SAR under Section 6.1 hereof becomes effective pursuant to the
terms of the Stock Option Agreement or Stock Appreciation Rights Agreement, as
the case may be, relating thereto.
"Incentive Stock Option" means an option to purchase shares of Common Stock
designated as an incentive stock option and which complies with Section 422 of
the Code.
"Non-Statutory Stock Option" means an option to purchase shares of Common
Stock which is not an Incentive Stock Option.
"Offering" means the initial public offering of Class B Common Stock by
United States and international underwriters.
"Option" means any option to purchase shares of Common Stock granted under
Sections 5.1 or 10.1 hereof.
"Option Price" means the purchase price of each share of Common Stock under
an Option.
"Outside Director" means a member of the Board who is not an employee of
the Company or any Subsidiary.
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<PAGE>
"Participant" means any salaried employee of the Company and its affiliates
designated by the Board Committee to receive an Award under the Plan.
"Performance Award" means an Award of shares of Common Stock granted under
Section 7.
"Performance Period" means the period of time established by the Board
Committee for achievement of certain objectives under Section 7.1 hereof.
"Restriction Period" means the period of time specified in a Performance
Share Award Agreement or a Restricted Stock Award Agreement, as the case may be,
between the Participant and the Company during which the following conditions
remain in effect: (i) certain restrictions on the sale or other disposition of
shares of Common Stock awarded under the Plan, and (ii) subject to the terms of
the applicable agreement, a requirement of continued employment of the
Participant in order to prevent forfeiture of the Award.
"Stock Appreciation Rights" or "SARs" means the right to receive a cash
payment from the Company equal to the excess of the Fair Market Value of a
stated number of shares of Common Stock at the exercise date over a fixed price
for such shares.
"Subsidiary" means any corporation, business trust or partnership (other
than the Company) in an unbroken chain of corporations, business trusts or
partnerships beginning with the Company if each of the corporations, business
trusts or partnerships (other than the last corporation, business trust or
partnership in the chain) owns stock, beneficial interests or partnership
interests possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations, business trusts or
partnerships in the chain.
"Ten Percent Holder" means a person who owns (within the meaning of Section
424(d) of the Code) more than ten percent of the voting power of all classes of
stock of the Company or of its parent corporation or Subsidiary.
3. SHARES SUBJECT TO PLAN
3.1 Shares Reserved under the Plan. Subject to adjustment as provided in
Section 3.2, the number of shares of Common Stock cumulatively available under
the Plan shall equal 9,000,000 shares. All of such authorized shares of Common
Stock shall be available for the grant of Incentive Stock Options under the
Plan. No Participant shall receive Awards in respect of more than 200,000 shares
of Common Stock in any fiscal year of the Company. In addition, the aggregate
Fair Market Value (determined on the Grant Date) of Common Stock with respect to
which Incentive Stock Options granted a Participant become exercisable for the
first time in any single calendar year shall not exceed $100,000. Any Common
Stock issued by the Company through the assumption or substitution of
outstanding grants from an acquired corporation or entity shall not reduce the
shares available for grants under the Plan. Shares of Common Stock to be issued
pursuant to the Plan may be authorized and unissued shares, treasury shares, or
any combination
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<PAGE>
thereof. Subject to Section 6.2 hereof, if any shares of Common Stock subject to
an Award hereunder are forfeited or any such Award otherwise terminates without
the issuance of such shares of Common Stock to a Participant, or if any shares
of Common Stock are surrendered by a Participant in full or partial payment of
the Option Price of an Option, such shares, to the extent of any such
forfeiture, termination or surrender, shall again be available for grant under
the Plan.
3.2 Adjustments. The aggregate number of shares of Common Stock which may
be awarded under the Plan and the terms of outstanding Awards shall be adjusted
by the Board Committee to reflect a change in the capitalization of the Company,
including but not limited to, a stock dividend or split, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares, spin-
off, spin-out or other distribution of assets to shareholders; PROVIDED that the
number and price of shares subject to outstanding Options granted to Outside
Directors pursuant to Section 10 hereof and the number of shares subject to
future Options to be granted pursuant to Section 10 shall be subject to
adjustment only as set forth in Section 10 hereof.
3.3 Merger With Federated Investors. Notwithstanding the foregoing,
the Company's merger with Federated Investors and assumption of its outstanding
stock incentive awards will not result in any adjustment to the number of shares
available under the Plan and will reduce the number of shares available under
this Plan accordingly. For purposes of this Plan, after the merger all such
stock incentive awards shall be treated as Awards under this Plan, except that
any Grant Date, Performance Period or Restricted Period shall relate back to the
date on which the awards were made by Federated Investors.
4. ADMINISTRATION OF PLAN
4.1 Administration by the Board Committee. The Plan shall be administered
as follows.
(a) Prior to an Offering, the Plan shall be administered by either the
full Board or by the Board Committee if one is established by the
Board. Prior to an Offering, any member of the Board may serve on the
Board Committee.
(b) After an Offering, the Plan shall be administered by the Board
Committee, which shall consist of no fewer than two members of the
Board who are (i) "Non-Employee Directors" for purposes of Rule 16b-3
of the Commission under the Exchange Act and (ii) to the extent
required to ensure that awards under the Plan are exempt for purposes
of Section 162(m) of the Code, "outside directors" for purposes of
Section 162(m); PROVIDED, HOWEVER, that the Board Committee may
delegate some or all of its authority and responsibility under the
Plan with respect to Awards to Participants who are not subject to
Section 16 of the Exchange Act to the Chief Executive Officer of the
Company. In the event that, after an Offering, the Board does not have
two members who qualify
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<PAGE>
has "Non-Employee Directors" for purposes of Rule 16b-3, the Plan
shall be administered by the full Board.
(c) The Board Committee shall have authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to
the Plan, to prescribe the form of any agreement or instrument
executed in connection herewith, and to make all other determinations
necessary or advisable for the administration of the Plan. All such
interpretations, rules, regulations and determinations shall be
conclusive and binding on all persons and for all purposes. In
addition, the Board Committee shall have authority, without amending
the Plan, to grant Awards hereunder to Participants who are foreign
nationals or employed outside the United States or both, on terms and
conditions different from those specified herein as may, in the sole
judgment and discretion of the Board Committee, be necessary or
desirable to further the purpose of the Plan.
(d) Notwithstanding the foregoing, the Board Committee shall not have any
discretion with respect to Options granted to Outside Directors
pursuant to Section 10 hereof. In the event that the Board does not
establish a Board Committee for any reason, any reference in this Plan
to the Board Committee shall be deemed to refer to the full Board.
4.2 Designation of Participants. Participants shall be selected, from
time to time, by the Board Committee, from those executive officers and key
employees of the Company and its affiliates who, in the opinion of the Board
Committee, have the capacity to contribute materially to the continued growth
and successful performance of the Company. Outside Directors shall be
Participants only in accordance with Section 10.
5. STOCK OPTIONS
5.1 Grants. Options may be granted, from time to time, to such
Participants as may be selected by the Board Committee on such terms, not
inconsistent with this Plan, as the Board Committee shall determine. The Option
Price shall be determined by the Board Committee effective on the Grant Date;
PROVIDED, HOWEVER, that (i) in the case of Incentive Stock Options granted to a
Participant who on the Grant Date is not a Ten Percent Holder, such price shall
not be less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the Grant Date, (ii) in the case of an Incentive Stock Option
granted to a Participant who on the Grant Date is a Ten Percent Holder, such
price shall be not less than one hundred and ten percent (110%) of the Fair
Market Value of a share of Common Stock on the Grant Date, and (iii) in the case
of Non-Statutory Stock Options, such price shall be not less than eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the Grant
Date. The number of shares of Common Stock subject to each Option granted to
each Participant, the terms of each Option, and any other terms and conditions
of an Option granted hereunder shall be determined by the Board Committee, in
its sole discretion, effective on the Grant Date; PROVIDED, HOWEVER, that no
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<PAGE>
Incentive Stock Option shall be exercisable any later than ten (10) years from
the Grant Date. Each Option shall be evidenced by a Stock Option Agreement
between the Participant and the Company which shall specify the type of Option
granted, the Option Price, the term of the Option, the number of shares of
Common Stock to which the Option pertains, the conditions upon which the Option
becomes exercisable and such other terms and conditions as the Board Committee
shall determine.
5.2 Payment of Option Price. No shares of Common Stock shall be issued
upon exercise of an Option until full payment of the Option Price therefor by
the Participant. Upon exercise, the Option Price may be paid in cash, in shares
of Common Stock having a Fair Market Value equal to the Option Price, or in any
combination thereof, or in any other manner approved by the Board Committee.
5.3 Rights as Shareholders. Participants shall not have any of the rights
of a shareholder with respect to any shares subject to an Option until such
shares have been issued upon the proper exercise of such Option.
5.4 Transferability of Options. Options granted under the Plan may not be
sold, transferred, pledged, assigned, hypothecated or otherwise disposed of
except by will or by the laws of descent and distribution; PROVIDED, HOWEVER,
that, if authorized in the applicable Award agreement, a Participant may make
one or more gifts of Options granted hereunder to members of the Participant's
immediate family or trusts or partnerships for the benefit of such family
members. All Options granted to a Participant under the Plan shall be
exercisable during the lifetime of such Participant only by such Participant,
his agent, guardian or attorney-in-fact.
5.5 Termination of Employment. If a Participant ceases to be an employee
of either the Company or of any of its affiliates, the Options granted hereunder
shall be exercisable in accordance with the Stock Option Agreement between the
Participant and the Company.
5.6 Designation of Incentive Stock Options. Except as otherwise expressly
provided in the Plan, the Board Committee may, at the time of the grant of an
Option, designate such Option as an Incentive Stock Option under Section 422 of
the Code.
5.7 Certain Incentive Stock Option Terms. In the case of any grant of an
Incentive Stock Option, whenever possible, each provision in the Plan and in any
related agreement shall be interpreted in such a manner as to entitle the Option
holder to the tax treatment afforded by Section 422 of the Code, and if any
provision of this Plan or such agreement shall be held not to comply with
requirements necessary to entitle such Option to such tax treatment, then (i)
such provision shall be deemed to have contained from the outset such language
as shall be necessary to entitle the Option to the tax treatment afforded under
Section 422 of the Code, and (ii) all other provisions of this Plan and the
agreement relating to such Option shall remain in full force and effect. If any
agreement covering an Option designated by the Board Committee to be an
Incentive Stock Option under this Plan
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<PAGE>
shall not explicitly include any terms required to entitle such Incentive Stock
Option to the tax treatment afforded by Section 422 of the Code, all such terms
shall be deemed implicit in the designation of such Option and the Option shall
be deemed to have been granted subject to all such terms.
6. STOCK APPRECIATION RIGHTS
6.1 Grants. Stock Appreciation Rights may be granted, from time to time,
to such salaried employees of the Company and its affiliates as may be selected
by the Board Committee. SARs may be granted at the discretion of the Board
Committee either (i) in connection with an Option or (ii) independent of an
Option. The price from which appreciation shall be computed shall be established
by the Board Committee at the Grant Date; PROVIDED, HOWEVER, that such price
shall not be less than one-hundred percent (100%) of the Fair Market Value of
the number of shares of Common Stock subject of the grant on the Grant Date. In
the event the SAR is granted in connection with an Option, the fixed price from
which appreciation shall be computed shall be the Option Price. Each grant of a
SAR shall be evidenced by a Stock Appreciation Rights Agreement between the
Participant and the Company which shall specify the type of SAR granted, the
number of SARs, the conditions upon which the SARs vest and such other terms and
conditions as the Board Committee shall determine.
6.2 Exercise of SARs. SARs may be exercised upon such terms and
conditions as the Board Committee shall determine; PROVIDED, HOWEVER, that SARs
granted in connection with Options may be exercised only to the extent the
related Options are then exercisable. Notwithstanding Section 3.1 hereof, upon
exercise of a SAR granted in connection with an Option as to all or some of the
shares subject of such Award, the related Option shall be automatically canceled
to the extent of the number of shares subject of the exercise, and such shares
shall no longer be available for grant hereunder. Conversely, if the related
Option is exercised as to some or all of the shares subject of such Award, the
related SAR shall automatically be canceled to the extent of the number of
shares of the exercise, and such shares shall no longer be available for grant
hereunder.
6.3 Payment of Exercise. Upon exercise of a SAR, the holder shall be paid
in cash the excess of the Fair Market Value of the number of shares subject of
the exercise over the fixed price, which in the case of a SAR granted in
connection with an Option shall be the Option Price for such, shares.
6.4 Rights of Shareholders. Participants shall not have any of the rights
of a shareholder with respect to any Options granted in connection with a SAR
until shares have been issued upon the proper exercise of an Option.
6.5 Transferability of SARs. SARs granted under the Plan may not be sold,
transferred, pledged, assigned, hypothecated or otherwise disposed of except by
will or by the laws of descent and distribution. All SARs granted to a
Participant under the Plan shall
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<PAGE>
be exercisable during the lifetime of such Participant only by such Participant,
his agent, guardian, or attorney-in-fact.
6.6 Termination of Employment. If a Participant ceases to be an employee
of either the Company or of any of its affiliates, SARs granted hereunder shall
be exercisable in accordance with the Stock Appreciation Rights Agreement
between the Participant and the Company.
7. PERFORMANCE AWARDS
7.1 Awards. Awards of shares of Common Stock may be made, from time to
time, to such Participants as may be selected by the Board Committee. Such
shares shall be delivered to the Participant only upon (i) achievement of such
corporate, sector, division, individual or any other objectives or criteria
during the Performance Period as shall be established by the Board Committee and
(ii) the expiration of the Restriction Period. Except as provided in the
Performance Share Award Agreement between the Participant and the Company,
shares subject to such Awards under this Section 7.1 shall be released to the
Participant only after the expiration of the relevant Restriction Period. Each
Award under this Section 7.1 shall be evidenced by a Performance Share Award
Agreement between the Participant and the Company which shall specify the
applicable performance objectives, the Performance Period, the Restriction
Period, any forfeiture conditions and such other terms and conditions as the
Board Committee shall determine.
7.2 Stock Certificates. Upon an Award of shares of Common Stock under
Section 7.1 of the Plan, the Company shall issue a certificate registered in the
name of the Participant bearing the following legend and any other legend
required by any federal or state securities laws or by the Delaware Business
Trust Act:
"The sale or other transfer of the shares of stock
represented by this certificate is subject to certain
restrictions set forth in the Federated Investors, Inc.
Stock Incentive Plan, administrative rules adopted
pursuant to such Plan and a Performance Share Award
Agreement between the registered owner and Federated
Investors, Inc. A copy of the Plan, such rules and such
Agreement may be obtained from the Secretary of
Federated Investors, Inc."
Unless otherwise provided in the Performance Share Award Agreement between the
Participant and the Company, such certificates shall be retained by the Company
until the expiration of the Restriction Period. Upon the expiration of the
Restriction Period, the Company shall (i) cause the removal of the legend from
the certificates for such shares as to which a Participant is entitled in
accordance with the Performance Share Award Agreement between the Participant
and the Company and (ii) release such shares to the custody of the Participant.
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<PAGE>
7.3 Rights as Shareholders. Subject to the provisions of the Performance
Share Award Agreement between the Participant and the Company, during the
Performance Period, dividends and other distributions paid with respect to all
shares awarded thereto under Section 7.1 hereof shall, in the discretion of the
Board Committee, either be paid to Participants or held in escrow by the Company
and paid to Participants only at such time and to such extent as the related
Performance Award is earned. During the period between the completion of the
Performance Period and the expiration of the Restriction Period, Participants
shall be entitled to receive dividends and other distributions only as to the
number of shares determined in accordance with the Performance Share Award
Agreement between the Participant and the Company.
7.4 Transferability of Shares. Certificates evidencing the shares of
Common Stock awarded under the Plan shall not be sold, exchanged, assigned,
transferred, pledged, hypothecated or otherwise disposed of until the expiration
of the Restriction Period.
7.5 Termination of Employment. If a Participant ceases to be an employee
of either the Company or of one of its affiliates, the number of shares subject
of the Award, if any, to which the Participant shall be entitled shall be
determined in accordance with the Performance Share Award Agreement between the
Participant and the Company.
7.6 Transfer of Employment. If a Participant transfers employment from one
business unit of the Company or any of its affiliates to another business unit
during a Performance Period, such Participant shall be eligible to receive such
number of shares of Common Stock as the Board Committee may determine based upon
such factors as the Board Committee in its sole discretion may deem appropriate.
8. RESTRICTED STOCK AWARDS
8.1 Awards. Awards of shares of Common Stock subject to such restrictions
as to vesting and otherwise as the Board Committee shall determine, may be made,
from time to time, to Participants as may be selected by the Board Committee.
The Board Committee may in its sole discretion at the time of the Award or at
any time thereafter provide for the early vesting of such Award prior to the
expiration of the Restriction Period. Each Award under this Section 8.1 shall be
evidenced by a Restricted Stock Award Agreement between the Participant and the
Company which shall specify the vesting schedule, any rights of acceleration,
any forfeiture conditions, and such other terms and conditions as the Board
Committee shall determine.
8.2 Stock Certificates. Upon an Award of shares of Common Stock under
Section 8.1 of the Plan, the Company shall issue a certificate registered in the
name of the Participant bearing the following legend and any other legend
required by any federal or state securities laws or by the Delaware Business
Trust Act.
"The sale or other transfer of the shares of stock in
represented by this certificate is subject to certain
restrictions set forth
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<PAGE>
the Federated Investors, Inc. Stock Incentive Plan,
administrative rules adopted pursuant to such Plan and
a Restricted Stock Award Agreement between the
registered owner and Federated Investors, Inc. A copy
of the Plan, such rules and such agreement may be
obtained form the Secretary of Federated Investors,
Inc."
Unless otherwise provided in the Restricted Stock Award Agreement between the
Participant and the Company, such certificates shall be retained in custody by
the Company until the expiration of the Restriction Period. Upon the expiration
of the Restriction Period, the Company shall (i) cause the removal of the legend
from the certificates for such shares as to which a Participant is entitled in
accordance with the Restricted Stock Award Agreement between the Participant and
the Company and (ii) release such shares to the custody of the Participant.
8.3 Rights as Shareholders. During the Restriction Period, Participants
shall be entitled to receive dividends and other distributions paid with respect
to all shares awarded thereto under Section 8.1 hereof.
8.4 Transferability of Shares. Certificates evidencing the shares of
Common Stock awarded under the Plan shall not be sold, exchanged, assigned,
transferred, pledged, hypothecated or otherwise disposed of until the expiration
of the Restriction Period.
8.5 Termination of Employment. If a Participant ceases to be an employee
of either the Company or of any of its affiliates, the number of shares subject
of the Award, if any, to which the Participant shall be entitled shall be
determined in accordance with the Restricted Stock Award Agreement between the
Participant and the Company. All remaining shares as to which restrictions apply
at the date of termination of employment shall be forfeited subject to such
exceptions, if any, authorized by the Board Committee.
9. OTHER STOCK-BASED AWARDS
Awards of shares of Common Stock and other awards that are valued in whole
or in part by reference to, or are otherwise based on, Common Stock, may be
made, from time to time, to salaried employees of the Company and its affiliates
as may be selected by the Board Committee. Such Awards may be made alone or in
addition to or in connection with any other Award hereunder. The Board Committee
may in its sole discretion determine the terms and conditions of any such Award.
Each such Award shall be evidenced by an agreement between the Participant and
the Company which shall specify the number of shares of Common Stock subject of
the Award, any consideration therefor, any vesting or performance requirements
and such other terms and conditions as the Board Committee shall determine.
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<PAGE>
10. OUTSIDE DIRECTORS' OPTIONS
10.1 Initial Grants. Effective on the dates set forth below, each
category of Outside Director of the Company described below shall be
automatically granted an Option to purchase 3,000 shares of Common Stock:
(i) for any Outside Director serving on the Board at the effective date
of the Offering, the effective date of the Offering;
(ii) for any Outside Director elected by the shareholders of the Company
subsequent to the effective time of the Offering, the date of such
Outside Director's initial election to the Board; and
(iii) for any Outside Director appointed by the Board subsequent to the
effective time of the Offering, the date such Outside Director's
appointment to the Board becomes effective.
All such Options shall be Non-Statutory Stock Options. The Option Price for all
Options granted pursuant to this Section 10 shall be one hundred percent (100%)
of the Fair Market Value of the shares of Common Stock on the date at which the
Options are effective as set forth in this Section 10.1.
10.2 Annual Grants. Effective on a date established by the Board at or
prior to any Offering, and annually on such date thereafter, each Outside
Director shall automatically be granted an Option to purchase 1,000 shares of
Common Stock. All such Options shall be Non-Statutory Stock Options. The Option
Price shall be one-hundred percent (100%) of the Fair Market Value of the shares
of Common Stock on the date of grant.
1.03 Exercise of Options. One third (1/3) of the initial Options granted
pursuant to Section 10.1 shall vest in an Outside Director on each anniversary
of such grant until such Options are fully vested at the end of three years. All
Options granted pursuant to Section 10.2 shall vest immediately. All vested
Options shall be immediately exercisable and may be exercised by the Outside
Director for a period of ten (10) years from the date of grant PROVIDED,
HOWEVER, that in the event of the death of an Outside Director, the Option shall
be exercisable only within the twelve (12) months next succeeding the date of
death, and then only (i) by the executor or administrator of the Outside
Director's estate or by the person or persons to whom the Outside Director's
rights under the Option shall pass by the Outside Director's will or the laws of
descent and distribution, and (ii) if and to the extent that the Outside
Director was entitled to exercise the Option at the date of the Outside
Director's death, provided that in no event shall the Option be exercisable more
than ten (10) years after the date of grant.
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<PAGE>
10.4 Payment of Option Price. An Option granted to an Outside Director
shall be exercisable only upon payment to the Company of the Option Price.
Payment for the shares shall be in United States dollars, payable in cash or by
check.
10.5 Adjustments. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, thereafter the number of
shares subject to outstanding Options granted to Outside Directors and the
number of shares subject to Options to be granted to Outside Directors pursuant
to the provisions of this Section 10 shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of
shares of Common Stock by reason of such change in corporate structure, provided
that the number of shares shall always be a whole number, and the purchase price
per share of any outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the case of a decrease in
the number of shares, shall be proportionately increased.
11. AMENDMENT OR TERMINATION OF PLAN
The Board may amend, suspend or terminate the Plan or any part thereof from
time to time, provided that no change may be made which would impair the rights
of a Participant to whom shares of Common Stock have theretofore been awarded
without the consent of said Participant.
12. MISCELLANEOUS
12.1 Rights of Employees. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any affiliate to terminate any
Participant's employment at any time, nor confer upon any Participant any right
to continued employment with the Company or any affiliate.
12.2 Tax Withholding. The Company shall have the authority to withhold,
or to require a Participant to remit to the Company, prior to issuance or
delivery of any shares or cash hereunder, an amount sufficient to satisfy
federal, state and a local tax withholding requirements associated with any
Award. In addition, the Company may, in its sole discretion, permit a
Participant to satisfy any tax withholding requirements, in whole or in part, by
(i) delivering to the Company shares of Common Stock held by such Participant
having a Fair Market Value equal to the amount of the tax or (ii) directing the
Company to retain shares of Common stock otherwise issuable to the Participant
under the Plan.
12.3 Status of Awards. Awards hereunder shall not be deemed compensation
for purposes of computing benefits under any retirement plan of the Company or
affiliate and shall not affect any benefits under any other benefit plan now or
hereafter in effect under which the availability or amount of benefits is
related to the level of compensation.
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<PAGE>
12.4 Waiver of Restrictions. The Board Committee may, in its sole
discretion, based on such factors as the Board Committee may deem appropriate,
waive in whole or in part, any remaining restrictions or vesting requirements in
connection with any Award hereunder.
12.5 Adjustment of Awards. Subject to Section 11, the Board Committee
shall be authorized to make adjustments in performance award criteria or in the
terms and conditions of other Awards (except Options granted pursuant to Section
10 hereof) in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles; PROVIDED HOWEVER, that no such adjustment shall impair
the rights of any Participant without his consent. The Board Committee may also
make Awards hereunder in replacement of, or as alternatives to, Awards
previously granted to Participants, including without limitation, previously
granted Options having higher Option Prices and grants or rights under any other
plan of the Company or of any acquired entity. The Board Committee may correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award in the manner and to the extent it shall deem desirable to carry it
into effect. In the event the Company shall assume outstanding employee benefit
awards or the right or obligation to make future such awards in connection with
the acquisition of another corporation or business entity, the Board Committee
may, in its discretion, make such adjustments in the terms of Awards under the
Plan as it shall deem appropriate. Notwithstanding the above, only the full
Board (and not the Board Committee) shall have the right to make any adjustments
in the terms or conditions of Options granted pursuant to Section 10.
12.6 Consideration for Awards. Except as otherwise required in any
applicable agreement or by the terms of the Plan, Participants under the Plan
shall not be required to make any payment or provide consideration for an Award
other than the rendering of services.
12.7 Special Forfeiture Rule. Notwithstanding any other provision of this
Plan to the contrary, the Board Committee shall be authorized to impose
additional forfeiture restrictions with respect to Awards granted under the
Plan, other than Awards pursuant to Section 10 hereof, including, without
limitation, provisions for forfeiture in the event the Participant shall engage
in competition with the Company or in any other circumstance the Board Committee
may determine.
12.8 Effective Date and Term of Plan. The Plan shall be effective as of
the date it is approved by the Board, subject to the approval thereof by the
shareholders of the Company. Unless terminated under the provisions of Section
11 hereof, the Plan shall continue in effect indefinitely; PROVIDED, HOWEVER,
that no Incentive Stock Options shall be granted after the tenth anniversary of
the effective date of the Plan.
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<PAGE>
FEDERATED INVESTORS, INC.
EXECUTIVE ANNUAL INCENTIVE COMPENSATION PLAN
--------------------------------------------
1. Purpose. The purposes of the Executive Annual Incentive Compensation
Plan ("Plan") are to provide a performance incentive to certain executive
officers and other key employees of Federated Investors, Inc. and its
subsidiaries, to encourage such executives and employees to remain in the employ
of Federated Investors, Inc. and its subsidiaries, and to qualify the
compensation paid under the Plan for tax deductibility under Internal Revenue
Code ("IRC") Section 162(m).
2. Definition. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Award" shall mean a portion of the Incentive Pool payable to a
Participant as determined pursuant to Section 4. Awards shall be paid
in cash.
(b) "Board" shall mean the Board of Directors of Federated.
(c) "CEO" shall mean the Chief Executive Officer of Federated.
(d) "Federated" shall mean Federated Investors, Inc. and shall include any
corporation that is or hereafter becomes a subsidiary corporation of
Federated Investors, Inc. within the meaning of IRC Section 424(f).
(e) "Incentive Pool" shall mean a pool of funds specified by the CEO in
accordance with Section 4, out of which Awards may be made to
Participants.
(f) "Operating Profits" shall mean Federated's (i) annual total revenues,
less (ii) distributions to minority interests, and less (iii) total
expenses excluding amortization of intangibles (including write-offs
from revaluations) and debt expenses (including, without limitation,
interest and loan fees), as reflected in Federated's audited annual
financial statements.
(g) "Participant" shall mean the CEO and any executive officer of
Federated who qualifies as a "covered person" for purposes of IRC
Section 162(m), and who the CEO designates to participate in the Plan
for a specific fiscal year.
3. Administration. The Plan shall be administered by the CEO. The CEO
is authorized, subject to the provisions of the Plan, in his discretion, from
time to time to
<PAGE>
select Participants; to grant Awards under the Plan; to establish, modify, or
rescind such rules and regulations as it deems necessary for the proper
administration of the Plan; and to make such determinations and interpretations
and to take such steps in connection with the Plan or the Awards granted
thereunder as he deems necessary or advisable. All such actions by the CEO under
the Plan or with respect to the Awards granted thereunder shall be final and
binding on all persons. The CEO shall not be liable for any action taken, or
determination made in good faith.
4. Awards.
(a) Creation of Incentive Pool. The Incentive Pool for each fiscal year
shall equal 7.5% of Operating Profits.
(b) Allocation of Incentive Pool. On or before on or before the 90th day
of the fiscal year to which the Incentive Pool relates, the CEO shall
allocate in writing on behalf of each Participant, a portion of the
Incentive Pool (not to exceed 40% on behalf of any Participant) to be
paid for each fiscal year.
(c) Adjustments. The CEO is authorized at any time during or after the
fiscal year and prior to the payment of the Awards for such fiscal
year in his sole and absolute discretion, to reduce or eliminate the
Incentive Pool or the portion of the Incentive Pool allocated to any
Participant, for any reason, including without limitation changes in
the position or duties of any Participant with Federated during the
year, whether due to any termination of employment (including death,
disability, retirement or termination with or without cause) or
otherwise.
(d) Payment of Awards.
(i) Following the completion of each fiscal year, the CEO shall
certify in writing the amount of the Incentive Pool and Awards
payable to Participants.
(ii) In the event a Participant terminates employment for any reason
during a fiscal year or prior to an Award payment, he or she
(or his or her beneficiary, in the case of death) shall not be
entitled to receive any Award for such year unless the CEO, in
his sole and absolute discretion, elects to pay an Award to
such Participant.
(iii) In the event of the death of a Participant, any payments
hereunder due to such Participants shall be paid to his or her
beneficiary as designated in writing to the CEO or failing such
designation, to his or her estate. No beneficiary designation
shall be effective unless it is in writing and received by the
CEO prior to the date of death of the Participant.
<PAGE>
5. General Provisions.
(a) Taxes. Federated is authorized to withhold from any payment relating
to an Award under the Plan, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due in connection
with such Award or payment, and to take such other action as the CEO
may deem advisable to enable Federated and Participants to satisfy
obligations for the payment of withholding taxes and other tax
obligations relating to any Award.
(b) Limitation on Rights Conferred under Plan and Beneficiaries. Status as
Participants shall not be construed as a commitment that any Award
will be payable under the Plan. Nothing contained in the Plan or in
any documents related to the Plan or to any Award shall confer upon
any Participant any right to continue in the employ of Federated or
constitute any contract or agreement of employment, or interfere in
any way with the right of Federated or a subsidiary to reduce such
person's compensation, to change the position held by such person or
to terminate the employment of such Participant, with or without
cause, but nothing contained in this Plan or any document related
thereto shall effect any other contractual right or any Participant.
No benefit payable under, or interest in, this Plan shall be
transferable by a Participant except by will or the laws of descent
and distribution or otherwise be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge.
(c) Changes to the Plan and Awards. Notwithstanding anything herein to the
contrary, the Board may, at any time, terminate or, from time to time,
amend, modify or suspend the Plan and the terms and provisions of any
Award theretofore granted to any Participant which has not been paid.
No award may be granted during any suspension of the Plan or after the
termination. Any such amendment may be made without stockholder
approval.
(d) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any amounts payable to a Participant pursuant to an
Award, nothing contained in the Plan (or in any documents related
thereto), nor the creation or adoption of the Plan, the grant of any
Award, or the taking of any other action pursuant to the Plan shall
give any such Participants any rights that are greater than those of a
general creditor of Federated, except the CEO may authorize the
creation of trusts and deposit therein cash, stock, or other property
or make other arrangements to meet Federated's obligations under the
Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the CEO otherwise determines with
the consent of each affected Participant. The trustee of such trusts
may be authorized to dispose of trust assets and
<PAGE>
reinvest the proceeds in alternative investments, subject to such
terms and conditions as the Committee may specify in accordance with
applicable law.
(e) Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of Federated for approval
shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem
necessary.
(f) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan, and any Award shall be
determined in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to principles of conflicts of laws,
and applicable federal law.
(g) Effective Date. The Plan shall become effective on approval by the
Board and the vote of a majority of the outstanding voting stock of
Federated.
<PAGE>
EXHIBIT 10.05
CENTRE CITY TOWER
OFFICE LEASE
CENTRE CITY PARTNERS, L.P., Landlord
A
N
D
FEDERATED INVESTORS BUILDING CORPORATION, Tenant
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TABLE OF CONTENTS
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1. BASIC LEASE PROVISIONS 1
2. LEASING AGREEMENT; TERM 2
3. USE 2
4. FIXED RENT 3
5. ESCALATION CHARGES 4
6. SERVICES 8
7. LANDLORD'S TITLE 11
8. SECURITY DEPOSIT 11
9. MORTGAGE BY LANDLORD 11
10. CERTAIN RIGHTS RESERVED TO LANDLORD 11
11. WAIVER AND INDEMNITY 13
12. TENANT'S INSURANCE 14
13. SURRENDER OF PREMISES 14
14. ALTERATIONS 15
15. CONSTRUCTION OF PREMISES 17
16. REPAIRS 19
17. RULES AND REGULATIONS 20
18. FIRE AND OTHER HAZARD 20
19. HOLDING OVER 21
20. DEFAULT 21
21. LANDLORD'S REMEDIES 22
22. CONDITION OF PREMISES 24
23. ASSIGNMENT AND SUBLETTING 24
24. ASSIGNMENT BY LANDLORD 26
25. NOTICES 26
</TABLE>
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<TABLE>
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26. QUIET POSSESSION 27
27. MOVING ALLOWANCE 27
28. EXPANSION OPTION 27
29. RIGHT OF FIRST REFUSAL 28
30. OPTION TO TERMINATE 29
31. OPTION TO RENEW 29
32. CANCELLATION OF EXISTING LEASES 30
33. MISCELLANEOUS 30
</TABLE>
EXHIBIT A-1 Plan of Premises
EXHIBIT B Rules and Regulations
EXHIBIT C Commencement Agreement
EXHIBIT D Workletter
EXHIBIT E Amortization Schedule
EXHIBIT F Tenant's Plans
<PAGE>
1. BASIC LEASE PROVISIONS.
A. Building Address: 650 Smithfield Street
Pittsburgh, PA 15222
B. Landlord and Address: Centre City Partners,
L.P.
C. Tenant and Federated Investors
Current Address: Building Corporation
Federated Investors Tower
Pittsburgh, PA 15222
D. Date of Lease: Dated as of July 23, 1992
E. Lease Term: Five Years
F. Anticipated Commencement Date: September 15, 1992
G. Expiration Date: September 30, 1997
H. Annual Fixed Rent: See Section 4 of Lease
Agreement
I. Rentable Area of Premises: 24,406 Square Feet
J. Rentable Area of Building: 275,000 Square Feet
K. Tenant's Proportionate Share: 8.87%
L. Base Year: 1992
M. Security Deposit: None
N. Location of Premises: l9th and 20th Floors
as shown on Exhibit A-1
0. Broker: Oliver Realty/Grubb &
Ellis
2800 Oliver Plaza
Pittsburgh, PA 15222
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2. LEASING AGREEMENT; TERM.
A. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the premises (the "Premises ") outlined on the plan attached hereto as
Exhibit A-I, which Premises are contained in the building (the "building")
located at 650 Smithfield Street, Pittsburgh, Pennsylvania and known as Centre
City Tower.
B. The term of this Lease (the "Term") shall be for a period of five
(5) years and shall commence on the date (the "Commencement Date") which is the
earlier to occur of: (a) the date on which the Premises are Substantially
Completed (AS the same is hereinafter defined) but in no event later than
October 15, 1992 ("Outside Date") unless Landlord fails to complete the Base
Building Work (as defined in Exhibit '1D'1) on or before August 26, 1992. After
Landlord completes the Base Building Work, Tenant shall have forty five (45)
days to complete Tenant's Work. In the event that Landlord fails to complete the
Base Building Work on or before August 26, 1992, then the Outside Date shall be
extended by one (1) day for each day after August 26, 1992, until the Base
Building Work is completed; or (b) the date Tenant first occupies (as verified
by Exhibit C) all or part of the Premises for the conduct of business. In the
event that Tenant occupies either the nineteenth floor or the twentieth floor of
the Building for the conduct of Tenant's business prior to the Substantial
Completion or occupancy of the entire Premises, Tenant shall pay Fixed Rent on a
pro-rata basis with respect to the amount of the Premises so occupied. If
Landlord fails to tender possession of the Premises on the date stated in clause
F for any reason other than an omission, delay or default caused by Tenant, then
the Commencement Date shall be delayed for each day of the delay not caused by
Tenant. Tenant hereby accepts such delay in full settlement of any and all
claims Tenant may have against Landlord arising from Landlord's failure to
tender possession on the date stated in clause F.
C. Tenant shall, upon taking possession of the Premises, execute and
deliver to Landlord a written statement in the form attached hereto as Exhibit
C. Tenant's failure to deliver such statement within ten (10) days after the
earlier of (i) the date it takes possession of the Premises or (ii) the date
Landlord advises the Tenant that the Premises are Substantially Completed, shall
be conclusive upon Tenant that the Commencement Date shall be the date
established by Landlord in accordance with Subparagraph B above, which date will
be communicated to Tenant.
3. USE. The Premises shall be occupied and used by Tenant only for
general office purposes. Tenant shall not occupy or use the Premises (or permit
the occupancy or use of the Premises) for any purpose or in any manner which (a)
is unlawful or in violation of any applicable legal, governmental or quasi-
governmental statute,
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ordinance, rule or requirement (b) may be dangerous to persons or property, (c)
may invalidate or increase the amount of premiums for any policy of insurance
affecting the Building and, if any additional amounts of insurance premiums are
so incurred, Tenant shall pay to Landlord the additional amounts on demand, or
(d) may create a nuisance, disturb any other tenant of the Building or the
occupants 0 neighboring property or injure the reputation of the Building.
4. FIXED RENT. Tenant shall pay to Landlord at the office of the
Building, or to such other person or such other place as directed from time to
time by notice to Tenant from Landlord, without demand, notice, offset or
deduction (except as provided herein), fixed rent ("Fixed Rent") in the annual
amounts as follows:
(a) For the portion of the Term beginning as the C Commencement Date
and ending on the last day of the twenty fourth month of the Term, Tenant shall
pay to Landlord Fixed Rent of Thirteen Dollars ($13.00) per square foot of
rentable area, being Three Hundred Seventeen Thousand Two Hundred Seventy Eight
Dollars ($317,278.00) per year, payable in the amount of Twenty Six Thousand
Four Hundred Thirty Nine and 83/100 Dollars ($26,439.83) per month.
(b) For the portion of the Term beginning on the first day of the
twenty fifth month and ending on the last day of the forty eighth month of the
Term, Tenant shall pay to Landlord Fixed Rent of Fourteen Dollars ($14.00) per
square foot of rentable area, being Three Hundred Forty One Thousand Six Hundred
Eighty Four Dollars ($341,684.00) per year, payable in the amount of Twenty
Eight Thousand Four Hundred Seventy Three and 661100 Dollars ($28,473.66) per
month.
(c) For the portion of the Term beginning first day of the forty
ninth month and ending on the last day of the sixtieth month of the Term, Tenant
shall pay to Landlord Fixed Rent of Fifteen Dollars ($15.00) per square foot of
rentable area, being Three Hundred Sixty Six Thousand Ninety Dollars
($366,090.00) per year, payable in the amount of Thirty Thousand Five Hundred
Seven and 50/100 Dollars ($30,507.50) per month.
All charges, costs and sums required to be paid by Tenant to Landlord
under this Lease in addition to Fixed Rent shall be deemed "Additional Rent",
and Fixed Rent and Additional Rent shall hereinafter be collectively called
"Rent". If Tenant shall fail to pay Fixed Rent within five (5) days after the
same is due and payable, Tenant agrees to pay to Landlord, as and for a
reasonable late charge as a result thereof and without further notice or demand
by Landlord, a sum equal to five cents ($.05) for every unpaid dollar thereof.
Notwithstanding the preceeding sentence, Landlord will not enforce the late
charge for one occurrence of late payment of Rent by Tenant during each Lease
Year. All delinquent Rent shall bear interest at a rate equal to
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the prime rate of interest from time to time in effect at Mellon Bank, N.A. but
in no event less than ten percent (10%) per annum from the date due until paid.
Tenant's covenant to pay Rent shall be independent of every other covenant in
this Lease.
For the purposes of this Lease, the term "Lease Year" shall mean each
calendar year during the Term except that (a) the first Lease Year is the period
from the Commencement Date to the next December 31st, both inclusive, and (b)
the last Lease Year is the period from January 1 of the year in which the Term
expires to the date upon which the Term expires, both inclusive.
Fixed Rent shall be payable in equal monthly installments in advance
on the first day of each calendar month during the Term except that Fixed Rent
shall be prorated for the first partial month within the Term.
5. ESCALATION CHARGES.
A. Definitions.
For the purposes of this Lease, the following words and phrases shall
have the following meanings:
(1) "Adjustment Date" shall mean each January 1 occurring within the
term.
(2) "Adjustment Year" shall mean each calendar year during which an
Adjustment Date occurs.
(3) "Base Year" shall mean the year set forth in clause L of
Paragraph l.
(4) "Operating Expenses" shall mean (i) all costs, expenses and
disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the management, operation, maintenance,
replacement or repair of the Building, the land upon which the Building is
situated (the "Land"), or the personal property, fixtures, machinery, equipment,
systems and apparatus located in, on or used primarily in connection with the
Building or Land, plus (ii) those additional amounts of the items enumerated in
(i) above which Landlord reasonably determines it would have so incurred had the
Building been 90% occupied, including 1992 Base Year expense calculations. (It
is the understanding of Landlord and Tenant that said additional operating
expenses referred to in (ii) are included in this definition of Operating
Expenses in order that the portion of Operating Expenses added to Tenant's Fixed
Rent by operation of this Paragraph 4 will be no more or less than such amount
would be if the Building were 90% occupied.) Operating Expenses shall include
without limitation utility expenses, labor, contracted labor, insurance,
materials, fees and licenses, management fees for Building management and
operations, sales and
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use taxes and the costs of for capital improvements and acquisitions for the
Building amortized over the useful life of such improvements or acquisitions if
such capital expenses are directly related to future reductions in the cost of
operating the Building, are incurred to replace existing improvements or
equipment, or are required by any federal, state or municipal statute or
regulation not in effect when this Lease was executed. At the date of execution
of this Lease, Landlord has no known additional expenditures for capital
improvements for the year 1992. Operating Expenses shall not include real estate
brokerage and leasing commissions, advertising costs, salaries of executives of
Landlord's managing agent senior to the person managing the Building, interest
and principal payments on mortgages, ground rental payments, depreciation, real
estate taxes, assessments or charges, the cost of capital improvements other
than those described in the preceding sentence, any costs reimbursed by
insurance or any other third party, or the cost of any special service rendered
to a tenant which is not rendered generally to tenants of the Building.
Operating Expenses shall also not include costs expended by Landlord for the
abatement of asbestos and/or other hazardous materials, for the demolition of
tenant premises in the Building, or to comply with the Americans With
Disabilities Act and any other applicable government regulations or laws
pertaining to the legal occupancy of the Premises other than for Tenant's
particular business purpose, unless such costs are directly related to future
reductions in the cost of operating the Building.
(5) "Taxes" shall mean all federal, state and local governmental
taxes, assessments and charges (including general real estate taxes or
assessments) of every kind or nature, which Landlord shall pay or become
obligated to pay because of or in connection with the ownership, leasing,
management, control or operation of the Building or Land, or of the personal
property, fixtures, machinery, equipment, systems or apparatus located therein
or used in connection therewith (including any rental or similar taxes,
including the Pittsburgh Business Privilege Tax, and license, building,
occupancy, permit or similar fees levied in lieu of or in addition to general
real or personal property taxes). In the event that a component of taxes has
been calculated from an assessment of the Building by a taxing authority which
assessment is based on the Building being less than 100% occupied such component
shall be increased to reflect the Landlord's reasonable estimate of said
assessment had the building been 100% occupied. For purposes hereof, Taxes for
any year shall be Taxes which are due for payment or paid in that year rather
than Taxes which are assessed or become a lien during such year. There shall be
included in Taxes for any year the amount of all reasonable and necessary fees,
costs and expenses (including reasonable attorneys' fees) paid by Landlord
during such year in seeking or obtaining any refund or reduction of Taxes. Taxes
in any year shall be reduced by the net amount of any tax refund received by
Landlord during such year. Taxes shall not include any federal, state or local
sales, use, franchise, capital stock, inheritance, general income, gift or
estate taxes, except that if a change occurs in the method of taxation
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<PAGE>
resulting in whole or in part in the substitution of any such taxes, or any
other assessment, for any Taxes as above defined, such substituted taxes or
assessments shall be included in Taxes. Landlord shall pay any real estate taxes
within the applicable discount period, and Tenant shall benefit from the
reduction of the payment 9f such real estate tax by having only the net amount
of real estate tax included in the Escalation Charges.
(6) "Tenant's Proportionate Share" shall mean the percentage set
forth in clause K of Paragraph 1 of this Lease. Tenant's Proportionate Share is
calculated by dividing the number of rentable square feet of the Premises as set
forth in clause I of Paragraph 1 by the number of rentable square feet of the
Building as set forth in clause J of Paragraph l.
B. Tenant shall pay, as Additional Rent, "Escalation Charges"
effective on and after each Adjustment Date in an amount equal to the sum of:
(1) Tenant's Proportionate Share of the excess, if any, of Operating
Expenses for the Adjustment Year during which such Adjustment Date occurs over
Operating Expenses for the Base Year; plus
(2) Tenant's Proportionate Share of the excess, if any, of Taxes for
the Adjustment Year during which such Adjustment Date occurs over Taxes for the
Base Year.
Notwithstanding anything to the contrary contained herein, Landlord
agrees that the maximum increase to be paid by Tenant for increases in Operating
Expenses which are "controllable" Operating Expenses (as hereinafter defined)
shall be four percent (4%) per annum. Controllable Operating Expenses shall
mean all Operating Expenses other than Taxes, utilities and insurance expenses.
Subject to Paragraph C below, the Escalation Charges for each
Adjustment Year shall be paid in equal monthly installments in advance on or
before the first day of each month during such Adjustment Year.
C. For purposes of calculating Taxes and Operating Expenses for any
Adjustment Year, Landlord may make reasonable estimates not to exceed four
percent (4%) per annum for Controllable Operating Expenses, forecasts or
projections (collectively, the "Projections") of Taxes and Operating Expenses
for such Adjustment Year. Within a reasonable time after each Adjustment Date,
Landlord shall deliver to Tenant a written statement setting forth the
Projections of Operating Expenses and Taxes for the Adjustment Year in which
such Adjustment Date occurs and providing a calculation of the Escalation
Charges due; provided, however, that the failure of Landlord to provide any such
statement within said period shall not relieve Tenant from its obligation to
continue to pay Escalation Charges at the rate in effect during the immediately
preceding Adjustment Year. On
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the first day of the calendar month following the date on which Landlord
delivers such statement and on the first day of each calendar month thereafter
to and including the date upon which Landlord delivers a subsequent statement
hereunder, Tenant shall pay the monthly Escalation Charges specified in such
statement.
D. Within a reasonable period after the end of each Adjustment Year,
or at such later date as Landlord shall be able to determine the actual amounts
of Operating Expenses and Taxes for the Adjustment Year last ended, Landlord
shall notify Tenant in writing of such actual amounts. If such actual amounts
exceed the Projections for such Adjustment Year, then Tenant shall, within
thirty (30) days after the date of such notice from Landlord, pay to Landlord an
amount equal to the excess of the Escalation Charges payable for the Adjustment
Year last ended based upon actual Operating Expenses and Taxes over the total
Escalation Charges actually paid by Tenant for such Adjustment Year. The
obligation to make such payments shall survive the expiration or earlier
termination of this Lease. If the total Escalation Charges paid by Tenant for
such Adjustment Year exceeds the amount of Escalation Charges payable for such
Year based upon actual Operating Expenses and Taxes, then Landlord shall either
refund such excess to Tenant or credit such excess against Escalation Charges
next due from Tenant. No interest or penalties shall accrue on any amounts which
Landlord is obligated to credit or pay to Tenant by reason of this Paragraph. No
failure by Landlord to notify Tenant of' the actual amounts of Operating
Expenses and Taxes shall relieve Tenant or Landlord of the obligation to pay any
excess of such actual amounts over the Projections.
Unless Tenant shall, by notice to Landlord given on or before thirty
(30) days following the furnishing by Landlord to Tenant of the statement of
actual Operating Expenses, dispute any or all items in such statement,
Landlord's statement of Operating Expenses shall be final and binding. If
Tenant timely gives notice of its dispute and request for examination of such
Operating Expenses, then Landlord shall provide Tenant with documentation to
establish such charges within fifteen (15) days of its receipt of Tenant's
notice. Thereafter, the parties shall promptly endeavor to resolve such
dispute. In the event that the parties are unable to resolve such dispute
within a period of ninety (90) days following Landlord's delivery to Tenant of
all supporting documentation regarding such Operating Expenses, then the matter
shall be submitted to arbitration with the American Arbitration Association in
Pittsburgh, Pennsylvania Judgment upon such award may be entered of record in
any court of competent jurisdiction.
E. Landlord shall maintain books and records of Operating Expenses
and Taxes in accordance with sound accounting and management practices. Provided
that all Rent (including Escalation Charges) then due has been paid by Tenant in
full, the books and records shall be available to Tenant for inspection at any
time prior to the date which is two years after the expiration of the Adjustment
Year to which such books and records
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pertain, upon prior reasonable notice from Tenant to Landlord. Such inspection
shall take place, at Landlord's election, either at the office of the Building
or such other location in the Pittsburgh, Pennsylvania metropolitan area as
Landlord may designate.
F. In no event shall the Fixed Rent be reduced or Landlord be liable
to Tenant for any sum on account of a net annual decrease in the amount of
Operating Expenses and Taxes; provided, however, that Tenant shall receive
credit against Escalation Charges if there is a subsequent reduction in
Operating Expenses and/or Taxes below a prior Adjustment Year.
6. SERVICES.
A. Landlord shall provide the following services:
(1) Customary janitor and cleaning service in the Premises,
Saturdays, Sundays and holidays excepted; provided Tenant complies with such
reasonable rules and regulations regarding medical waste and separation of
different kinds of trash as Landlord may deem desirable or necessary to comply
with local, state or federal laws or regulations.
(2) Heat and air-conditioning in the Premises in accordance with
applicable laws during normal9rmal office hours, Sundays and holidays excepted,
to the extent necessary for the comfortable occupancy of the Premises under
normal business operations and in the absence of the use of machines or
equipment or excessive personnel which affect the temperature otherwise
maintained in the Premises. In the event that Landlord determines that Tenant's
use of machines or equipment or excessive personnel requires the installation of
supplementary air-conditioning equipment, Landlord may install such equipment
and any equipment auxiliary to such equipment and the charge for such
installation shall be paid by Tenant to Landlord within ten days of being billed
therefor. Normal office hours shall be 8:00 A.M. to 6:00 P.M. Monday through
Friday and 8:00 A.M. to 2:00 P.M. on Saturday. During such normal office hours,
heating and
air conditioning shall meet the following performance standards, subject to any
governmental regulations or other causes beyond Landlord's control: (a) fan
discharge temperature 550 during cooling season and 650 during heating season;
and (b) average temperature of 720, plus or minus 50 all year. Notwithstanding
the foregoing, Landlord shall provide heating and air conditioning service to
Tenant from 6:00 A.M. to 7:00 P.M. Monday through Friday and from 8:00 A.M. to
4:00 P.M. on Saturday. Tenant acknowledges, however, that with respect to
heating and air conditioning services provided to Tenant outside of normal
Building office hours as set forth above, Landlord shall not be required to meet
the performance standards set forth hereinabove for the period from 6:00 A.M. to
8:00 A.M. In the event that Tenant requires heating or air conditioning
services after Tenant's extended operating hours as set forth herein, Tenant
shall pay Landlord's actual cost for providing such services
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within fifteen (15) days after the date of Landlord's invoice for such
additional service.
(3) Water from City mains for drinking, lavatory and toilet purposes
as customary for office use, drawn through fixtures installed by Landlord.
Water shall be available for Tenant's coffee fee service provided any plumbing
connections necessary for such service are made by the Landlord's plumber.
(4) Adequate passenger elevator service in common with other tenants
of the Building and freight elevator service, subject to scheduling by Landlord.
B. The following subparagraphs shall, to the extent permitted by
applicable laws and regulations, govern the furnishing of electrical service for
the Premises.
(1) Landlord will furnish or cause to be furnished electricity for
the Premises as herein provided. The Fixed Rent includes a charge for
consumption of electricity during normal office hours by the Building standard
lighting fixtures installed in the Premises and by normal small office machines
and fixtures connected to the Building standard 110-volt, single phase outlets.
Tenant shall pay monthly to Landlord, as additional rent, charges for any
electricity used in the Premises for a total connected. load in excess of a
total of 3 watts per square foot of rentable area of the Premises at a rate
equal to Landlord's average cost per kilowatt hour. The amount of electrical
consumption in the Premises for a total connected load in excess of 3 watts
shall be determined by Landlord's reasonable estimate, or, at either Landlord's
option or Tenant's request, by an engineering analysis by a consultant retained
by Landlord at Tenant's sole cost.
(2) At any time hereafter and to the extent permitted by applicable
laws and regulations, Landlord, at Landlord's sole option, may elect to install
or cause to be installed separate meters or submeters to measure Tenant's
consumption of
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electricity in the Premises or to measure Tenant's consumption of electricity
for any special uses (such as computer centers). If either meters or sub-meters
are installed at any time to measure electricity furnished to the Premises.,
Tenant shall pay all charges for the installation thereof and for the
installation of any other electrical equipment required in connection therewith.
(3) Tenant shall pay for all electricity required for the operation
of any special air-conditioning or ventilating system and for any office
machinery or equipment requiring special or extra current. Tenant shall pay for
the maintenance and replacement of all Tenant installed, non-Building standard
light fixtures, electrical switches, electrical outlets and lamps located in the
Premises as shown on Exhibit "F" or on subsequent plans of Tenant, and for all
Building standard and non-Building standard bulbs, tubes, ballasts and starters
utilized in the Premises.
(4) Tenant's use of electrical energy shall never exceed the capacity
of the then existing feeders to the Building or the then existing risers or
wiring installations. Any riser or risers needed to supply Tenant's electrical
requirements and all other equipment proper and necessary in connection
therewith upon request of Tenant, will be installed by Landlord, at Tenant's
sole cost and expense, if, in Landlord's reasonable judgment, the same are
necessary and will not cause or create a hazardous condition or entail
excessive or unreasonable alterations, repairs or expenses or interfere with or
disturb other tenants. Tenant shall not, without the prior consent of Landlord,
make or perform or permit any alteration to wiring installations or other
electrical facilities in or serving the Premises.
C. Landlord shall in no event be obligated to furnish any services
or utilities other than those specified in Paragraphs A and B above. If Landlord
elects to furnish services or utilities requested by Tenant in addition to those
specified in Paragraphs A and B above (including utility services at times other
than those specified in said sections), Tenant shall pay Landlord's then
prevailing rates for such services and utilities, within fifteen (15) days after
receipt of Landlord's invoices therefor.
D. Tenant agrees that Landlord shall not be liable for damages for
failure to furnish or delay in furnishing any service, which failure or delay is
caused in whole or in part, by any one or more of the force majeure causes
specified in Paragraph 33J hereof. No such failure or delay shall be deemed to
be an eviction of Tenant or relieve Tenant of its obligations to pay all Rent
when due or from any other obligations of Tenant under this Lease.
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7. LANDLORD'S TITLE. Nothing contained in this Lease shall empower
Tenant to do any act which can, shall or may encumber the interest or title of
Landlord in and to the Building or the Land. Tenant may not record this LEASE,
any memorandum of this Lease or any instrument affecting the Building or the
Land without the prior written consent of Landlord.
8. SECURITY DEPOSIT. This Section has been intentionally deleted.
9. MORTGAGE BY LANDLORD. This Lease is expressly subject and
subordinate at all times to (i) any ground, underlying or operating lease of the
Building or the Land now or hereafter existing and all amendments, renewals and
modifications thereof, and (ii) the lien of any mortgage or trust deed
encumbering the Building, the Land or any such ground, underlying or operating
lease, and to all advances made or to be made upon the security thereof. Prior
to the execution of this Lease Agreement, Landlord shall obtain from any
Mortgagee a Non-Disturbance and Attornment Agreement which shall be in the form
commonly utilized by such Mortgagee, and which shall be acceptable to Tenant in
its reasonable discretion. Tenant agrees:
(a) if requested by the holder of any such mortgage or trust deed or
the lessor under any such lease (any such holder or lessor is hereinafter
referred to as a "Mortgagee"), Tenant will execute such agreement or agreements
evidencing such subordination as may be reasonably required by any Mortgagee;
and
(b) in the event of any default by Landlord under this Lease, Tenant
will not exercise any such right (i) until it has notified in writing any
Mortgagee, the name and address of which shall previously have been furnished by
written notice to Tenant, of such default, and (ii) until a reasonable period,
not exceeding thirty (30) days, for commencing the remedying of such default
shall have lapsed following the giving of such notice, and (iii) such Mortgagee
shall not have so commenced and continued with reasonable diligence to remedy
such default or to cause such default to be remedied; and
(c) to attorn to any Mortgagee succeeding to Landlord's interest in
the Building or to any purchaser of said interest at a sheriff's sale and will
execute such instruments as may be necessary or appropriate to evidence such
attornment.
10. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves the
following rights:
(a) Occupancy. During the last one hundred twenty (120) days of
the Term, if during that period Tenant vacates the
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Premises, to decorate, remodel, repair, alter or otherwise prepare the Premises
for reoccupancy.
(b) Pass Keys. To have pass keys to the Premises.
(c) Access for Repairs. To have access for repairs, alterations,
additions and improvements to the Premises or to the Building upon twenty-four
(24) hour prior written notice to the Tenant at the Premises only (except in the
case of an emergency) as further set forth in Paragraph 16.
(d) Show Premises. To show the Premises to prospective tenants or
brokers during the last year of the Term, and to prospective purchasers at all
reasonable times provided prior notice is given to Tenant at the Premises only
in each case and Tenant's use and occupancy of the Premises shall not be
materially inconvenienced by any such action of Landlord.
(e) Service Contracts. To reasonably approve all sources furnishing
sign painting, ice, drinking water, beverages, foods, towels or toilet supplies
or extra cleaning services used or consumed in the Building or on the Premises.
(f) Heavy Equipment. To approve the weight, size and location of
safes or heavy equipment or articles placed in the Premises by Tenant, which
items may be moved, in, about, or out of the Building or the Premises only at
such times and in such manner as Landlord shall direct, provided such movement
shall be at Tenant's sole risk.
(g) Close Building. To close the Building after regular working hours
and on legal holidays subject, however, to Tenant's right to admittance under
such regulations as Landlord may prescribe from time to time, which may include
by way of example but not of limitation, that persons entering or leaving the
Building identify themselves to a watchman by registration, photo identification
cards or otherwise and that said persons establish their right to enter or leave
the Building. Landlord shall also have the right to prohibit or restrict access
to the Building in the event of an emergency or, upon five (5) days prior notice
to Tenant, for the purpose of testing the Building's life, safety and emergency
systems.
(h) Building Identification and Appearance. To change the Building's
name or street address; to install and maintain all signs on the exterior or
interior of the Building; to approve prior to installation, all signs, shades,
blinds, drapes and internal lighting; and to change the arrangement of
entrances, doors, corridors, stairs and other public service portions of the
Building.
(i) Exclusives. To grant to any party the exclusive
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right to conduct any business or service in the Building, provided such
exclusive right shall not operate to prohibit Tenant from using the Premises for
the purposes permitted hereunder.
Landlord may enter upon the Premises and may exercise any or all of
the foregoing rights hereby reserved without being deemed guilty of an eviction
or disturbance of Tenant's use or possession and without being liable in any
manner to Tenant. The foregoing rights of Landlord shall not operate to
restrict Tenant's ability to engage a vendor of its choice to supply Tenant's
coffee service.
11. WAIVER AND INDEMNITY.
A. Tenant waives all claims it may have against Landlord, its agents
or employees, for injury or damage to person, property or business sustained by
Tenant, its agents, employees or invitees resulting from the Premises or any
part of the Premises becoming out of repair or resulting from any accident
within the Premises or resulting directly or indirectly from any act of Tenant
or any occupant of the Building, except if caused by the negligence of Landlord,
its agents or employees and then only after (i) notice to Landlord of the
condition claimed to constitute negligence and (ii) the expiration of a
reasonable time after such notice has been received by Landlord without Landlord
having taken reasonable steps to cure or correct such condition. Pending such
cure or correction by Landlord, Tenant shall take all reasonably prudent
temporary measures and safeguards to prevent any injury, loss or damage to
persons or property. In no event shall Landlord be liable for any loss the risk
of which is covered by Tenant's insurance nor shall Landlord be liable for any
damage caused by other tenants or persons in the Building; nor shall Landlord be
liable on account of any latent defect in the Premises or Building. The
foregoing waiver shall also apply to any damage caused by water, snow, frost,
steam, gas, sewer gas or odors, or by the bursting or leaking of pipes or
plumbing works or the failure of any equipment.
B. Tenant agrees to indemnify and hold harmless Landlord, its
agents and employees against any and all claims, demands, costs and expenses of
every kind and nature (including attorneys' fees), including those arising from
any injury or damage to any person, property or business (a) sustained in or
about the Premises except if caused by the negligence of Landlord, its agents or
employees, or (b) resulting from the negligence of Tenant, its employees,
agents, subtenants or licensees, or (c) resulting from the failure of Tenant to
perform its obligations under this Lease. If any proceeding based on such a
claim is instituted against Landlord, its agents or
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employees, Tenant covenants to defend such proceeding at its sole cost by legal
counsel reasonably satisfactory to Landlord, if requested by Landlord.
C. Landlord and Tenant each hereby waive any rights of action
against the other party for loss or damage covered by the waiving party's
insurance. All policies held by Landlord with respect to the Building and by
Tenant with respect to the Premises shall permit such waiver.
12. TENANT'S INSURANCE.
A. Tenant shall maintain at all times during the Term standard
hazard insurance against all risks of physical loss insuring the leasehold
improvements and personal property of Tenant in the Premises.
B. Tenant shall maintain at all times during the Term, commercial
general liability insurance naming Tenant, Landlord and their respective agents
and employees as the insureds with financially responsible insurance companies
covering the Premises and adjacent ways with such limits as may be reasonably
required by Landlord from time to time. Landlord presently requires a minimum
overall policy aggregate limit of $2,000,000.00. Such insurance shall provide
that it is the primary insurance of Landlord, its agents and employees.
C. Certificates evidencing all insurance required under this
Paragraph 12 shall be furnished to Landlord prior to the Commencement Date and
prior to the expiration of each applicable insurance policy. Such insurance
certificates shall provide that Landlord shall receive thirty (30) days advance
notice by certified mail of the cancellation or revocation of any such
insurance.
D. Landlord and Tenant hereby waive to the fullest extent permitted
by law any right of subrogation that any of Landlord's or Tenant's insurance
carriers may have from time to time against the other party hereto, and such
party's directors, officers, employees and agents, and their respective heirs,
personal representatives and assigns. Tenant shall cause to be delivered to
Landlord certificates issued by Tenant's insurance carriers acknowledging the
foregoing waiver by Tenant of such right of subrogation.
13. SURRENDER OF PREMISES. Tenant shall maintain the Premises during
the Term in as good condition as when Tenant was first entitled to possession
thereof, ordinary wear and fire and other casualty not resulting from Tenant's
negligence excepted, failing which Landlord may restore the Premises to such
condition and Tenant shall pay Landlord the cost thereof. Upon the
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expiration or termination of this Lease or termination of Tenant's right of
possession of the Premises, Tenant shall return the Premises to Landlord in the
condition described in the preceding sentence, provided, however, Tenant may
remove any removable trade fixtures (other than light fixtures) and other
personal property installed by Tenant. Such removals shall be done in a good
and workmanlike manner and Tenant shall restore the Premises to a tenantable
condition. All Tenant's Work and all additional alterations and improvements to
the Premises (excluding trade fixtures other than light f fixtures) shall become
Landlord's property and, unless Landlord directs Tenant to remove such items
pursuant to the terms of Section 14(B)(3) hereof, all such alterations and
improvements shall remain upon the Premises at the expiration or earlier
termination of this Lease. In the event possession of the Premises is not
immediately delivered to Landlord, or if Tenant shall fail to remove all of
Tenant's removable fixtures (other than light fixtures) and other personal
property, as aforesaid, Landlord may remove any of such property therefrom
without any liability to Tenant. All such property which may be removed from
the Premises by Landlord shall be conclusively presumed to have been abandoned
by Tenant and title thereto shall pass to Landlord without any cost or credit
therefor and Landlord may, at its option and at Tenant's expense, store or
dispose of such property.
14. ALTERATIONS.
A. Except for the alterations and improvements as set forth in
Exhibit D which is attached hereto and made a part hereof, Tenant shall not make
any alterations, installations, additions, improvements or decorations to the
Premises ("Alterations") without Landlord's prior written consent. In the case
of Alterations not affecting the structure or the electrical, plumbing, heating,
ventilating, air conditioning, communication, life, safety or any other systems
of the Building, such consent shall not be unreasonably denied, delayed or
conditioned.
B. If Tenant makes any Alterations, the following conditions shall
apply:
(1) Tenant, at a reasonable time prior to commencement of work or
delivery of materials to the Premises or Building, shall furnish to Landlord
plans and specifications, necessary approvals and permits, names and addresses
of all contractors and subcontractors, and liability insurance from all
contractors performing labor or furnishing materials insuring Landlord against
any and all liabilities which may arise out of such work.
(2) Tenant shall perform or cause such work to be performed in a
manner which will not interfere with or impair the use and enjoyment of any
other portion of the Building by
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Landlord and/or other tenants.
(3) At such time as Landlord approves Tenant's plans for any
alterations, additions or improvements, Landlord shall also advise Tenant
whether all or part of the work must be removed by Tenant at the expiration or
earlier termination of this Lease; provided, however, that any such items
designated by Landlord as items to be removed from the Premises shall be limited
to special installations, equipment, alterations or improvements and/or other
non-Building standard items. Landlord reserves the right to direct, by written
notice to Tenant given prior to the expiration of the Term or any Renewal Term,
that items which Landlord had designated as items to be removed by Tenant may be
redesignated as items which will not be removed by Tenant. With respect to items
which are to be removed by Tenant, Tenant shall repair any damage caused by such
removal and, in default thereof, Landlord may effect such removals and repairs
at Tenant's expense.
(4) Tenant shall hold Landlord harmless from any and all costs,
claims and liabilities of every kind and description which may arise out of or
be connected in any way with any Alterations.
(5) Tenant shall pay the cost of all such Alterations and the costs
of decorating or redecorating g the Premises and the Building occasioned by such
Alterations.
(6) Upon completing any Alterations, Tenant shall use its best
efforts to furnish Landlord with contractors' affidavits and full and final
waivers of lien and receipted bills covering all labor and materials expended
and used.
(7) All Alterations shall comply with all insurance requirements and
with all laws, ordinances, rules and regulations of all governmental
authorities, and shall be constructed in good and workmanlike manner, and only
good grades of materials shall be used.
(8) If any work done pursuant to this Paragraph results in a change
in the heating, cooling or ventilating load in the Premises, Tenant shall, at
its expense but at Landlord's option either modify the existing systems or
provide supplementary systems necessary to accommodate such changed loads.
(9) Tenant shall permit Landlord to inspect and review all
construction operations in connection with such work.
(10) Under no circumstances shall Tenant or its contractors disturb
the ceiling tiles or enter the area above the ceiling tiles without Landlord's
written consent and supervision.
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15. CONSTRUCTION OF PREMISES.
Tenant shall prepare and furnish for Landlord's prior written approval
the drawings and specifications designated as the "Space Plane" in accordance
with the terms of the "Work Letteree attached hereto as Exhibit D. Landlord
shall reimburse Tenant, in an amount not to exceed One Dollar ($1.00) per square
foot of rentable area, for its cost to produce such Space& Plan. Landlord shall
also produce, at its cost and expense, the mechanical drawings, if necessary,
for Tenant's construction work in the Premises. Such reimbursement shall be
paid to Tenant when Tenant's Work has been completed and approved by Landlord
and Tenant. Landlord will not impose a charge to Tenant for the Landlord's
review and approval of Tenant's plans. A copy of the approved Tenant's Plans
is attached hereto and made a part hereof as Exhibit "F"
Landlord shall, without cost to Tenant, do that portion of the
construction and other work in the Premises designated as ""Base Building Work"
in Exhibit D Landlord shall also, without cost to Tenant, perform such
hazardous material abatement of the Premises as required to prepare the same for
the construction of Tenant's improvements. Tenant shall be responsible for the
cost of construction of the ""Tenant's Work" as described in Exhibit D. Such
Tenant's Work may, at Tenant's election, be constructed by Landlord's general
contractor or by a general contractor and subcontractors selected by Tenant and
approved by Landlord, which approval shall not be unreasonably withheld. Any
contractor selected by Tenant shall comply with the terms and conditions as set
forth in Exhibit D. Landlord shall have the right, at no cost to Tenant, to
coordinate, supervise and inspect Tenant's Work.
Landlord shall provide to Tenant a construction improvement allowance,
in an amount not to exceed Fifteen Dollars ($15.00) per square foot of rentable
area, to be applied towards the cost of Tenant's Work as shown on Exhibit D.
Upon the completion of Tenant's Work, Tenant shall furnish Landlord
with contractor's affidavits and full and final waivers of lien and receipted
bills covering all labor and materials expended and used. Within thirty (30)
days following its receipt of all such documentation, Landlord shall pay such
sums, up to the maximum amount the aforesaid construction improvement allowance,
to Tenant. All such work shall comply with all insurance requirements, and with
all laws, regulations and ordinances of any governmental body or agency having
or claiming jurisdiction. Tenant shall indemnify and hold harmless Landlord,
its agents and employees, from and against any and all liabilities of every kind
and description which may arise out of or be connected in any way with such
Tenant's Work. Tenant shall furnish Landlord with certificates of insurance
from all
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contractors performing labor or furnishing materials in the Premises insuring
Landlord in such amounts as Landlord reasonably deems appropriate against any
and all liabilities which may arise out of or be connected in any way with such
Tenant's Work.
Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier or any other lien to be filed against the Landlord, the
Building or the Land. If any such lien or claim for lien is filed, Tenant shall
immediately either: (i) have such lien or claim for lien released of record, or
(ii) deliver to Landlord a bond in form, content and amount satisfactory to
Landlord and issued by a surety reasonably satisfactory to Landlord,
indemnifying Landlord and anyone else designated by Landlord against all costs
and liabilities resulting from such lien or claim for lien. If Tenant fails to
immediately take such action, then Landlord may, without determining the
validity of such lien, pay or discharge the same and Tenant shall reimburse
Landlord on demand, as additional rent, for the amount so paid by Landlord,
including reasonable costs and attorney's fees.
If Tenant does not utilize the full amount of such construction
allowance, then Tenant may apply any unused portion as a credit against Fixed
Rent due under the terms of this Lease. Landlord shall notify Tenant of the
amount of such credit after a review of all paid bills and invoices for such
construction, and shall notify Tenant of the month to which the credit is to be
applied (which shall be the first month(s) following completion of construction
and Landlord's verification of the credit amount), and the balance of Fixed Rent
due, if any, for such month.
The Premises shall be deemed to be Substantially Completed when the
""Base Building Work"" and "Tenant's Work" shown on Exhibit D attached hereto
and made a part hereof has been completed (but in no event later than the
Outside Date) except for:
(i) such items of finishing and construction of a nature which are
not necessary to make the Premises reasonably tenantable for Tenant's use as
stated herein; and
(ii) items not then completed because of:
(a) delay by Tenant in furnishing any drawings or approvals
which are not attached as part of Exhibit D on the date of execution of this
Lease or within the time set forth in any agreement between Landlord and Tenant;
or
(b) changes in the work to be performed by Landlord which are
requested by Tenant after Landlord's approval of Tenant's plans; or
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(c) delays, not caused by Landlord, in furnishing materials or
procuring labor required for installations or work in the Premises, provided
that Tenant shall be notified of Landlord's good faith estimate of the
anticipated delay promptly after discovery thereof by Landlord, and shall be
given an opportunity to specify alternative materials or requirements; or
(d) the performance of any work or activity in the Premises by
Tenant or any of its employees, agents or contractors which delays Landlord's
completion of the Base Building Work.
16. REPAIRS.
A. Landlord shall make all repairs necessary to maintain the
plumbing, air conditioning and electrical systems, windows, floor slabs
(excluding floor coverings) and all other items which constitute a part of the
Premises and are installed or furnished by Landlord; provided, however, that
Landlord shall' not be obligated for any of such repairs until the expiration of
a reasonable period of time aft;after receipt of written notice from Tenant that
such repair is needed. In no event shall Landlord be obligated to repair any
damage caused by any act, omission or negligence of Tenant or its employees,
agents, invitees, licensees, sub-tenants or contractors.
B. Except as Landlord is obligated for repairs as provided
hereinabove, Tenant shall make, at its sole cost and expense, all repairs
necessary to maintain the Premises and shall keep the Premises and the fixtures
therein neat and in orderly condition. If Tenant refuses or neglects to make
such repairs, or fails to diligently prosecute the same to completion, after
written notice from Landlord of the need therefor, Landlord may make such
repairs at the expense of Tenant and such expense shall be collectible as
Additional Rent.
C. Landlord shall not be liable by reason of any injury to, or
interference with, Tenant's business arising from the making of any repairs,
alterations, additions or improvements in or to the Premises or the Building or
to any appurtenances or equipment therein. There shall be no abatement of rent
because of such repairs, alterations, additions or improvements, except as
provided in Paragraph 18 and Paragraph 33(R) hereof.
D Landlord may make any repairs, alterations or improvements in or
to the Building, the Premises or any part thereof and during the performance of
such work, may close entrances, doors, corridors, elevators and other facilities
and may have access to and open the ceilings, walls and floors, all without any
liability to Tenant by reason of interference, inconvenience or annoyance.
Landlord shall endeavor to perform
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such work in a manner which will minimize any such interference, inconvenience
or annoyance to Tenant.
E. Any repairs made by Landlord of damage to the Premises or the
Building caused by Tenant's negligence or willful misconduct shall be at
Tenant's sole cost and expense.
17. RULES AND REGULATIONS. Tenant shall abide&by all reasonable rules
and regulations adopted by Landlord from time to time for the operation and
management of the Building. If any rules and regulations are contrary to the
provisions of this Lease, the provisions of this Lease shall govern. Attached to
this Lease as Exhibit B are the current rules and regulations for the Building.
Landlord shall not be responsible for the violation of any rules or regulations
of the Building by other tenants of the Building and Landlord shall have no
obligation to enforce the same against other tenants.
18. FIRE AND OTHER HAZARD.
A. If the Premises shall be partially damaged by fire or other cause
without the fault or neglect of Tenant, Tenant's servants, employees, agents,
visitors or licensees, the damage shall be repaired, and at the expense of,
Landlord, and until such repairs shall be made the Rent shall be apportioned
according to the part of the Premises which is usable by Tenant. No penalty
shall accrue for reasonable delay in the completion of repairs which may arise
by reason of adjustment of fire insurance on the part of Landlord and/or Tenant,
and for reasonable delay on account of ""labor troubles"", or any other cause
beyond Landlord's control. No such repair shall be required to be performed by
Landlord if such casualty shall occur within the last year of the Term, in which
case Landlord will give Tenant written notice within sixty (60) days of casualty
as to its determination to make repairs or not to repair. Tenant agrees to
repair and replace its own fixtures, furniture, furnishings, records and
equipment at its sole cost and expense.
B. If the Premises are totally damaged or are rendered wholly
untenantable by fire or other casualty, then Landlord shall have the option to
not rebuild the Premises, or if the Building shall be so damaged that Landlord
shall decide to demolish it or not to rebuild it, then or in any of such
events.Landlord shall, within one hundred twenty (120) days after such fire or
other casualty, give Tenant written notice of such decision, and thereupon the
term of this Lease shall expire by lapse of time upon the third (3rd) day after
such notice is given, and Tenant shall vacate the Premises and surrender the
same to Landlord arid Tenant's' liability for Rent shall cease as of the day
following such casualty.
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19. HOLDING OVER. If Tenant retains possession of the Premises, or
any part thereof, after the expiration or termination of this Lease, Tenant
shall pay Landlord Fixed Rent at an annual rate equal to double the Fixed Rent
payable for the year immediately preceding said holdover computed on a per month
basis, together with all other sums due hereunder as Additional Rent, for the
period Tenant thus remains in possession, and Tenant shall also pay Landlord all
damages sustained by Landlord by reason of such retention of possession. If
Tenant retains possession of the Premises, or any part thereof, for thirty (30)
days after the expiration or termination of this Lease, then at the sole option
of Landlord expressed by written notice to Tenant, but not otherwise, such
holding over shall constitute a renewal of this Lease for a period of one year
on the same terms and conditions, except that the annual Fixed Rent for such
period shall be the greater of the fair annual rental value of the Premises, as
determined by Landlord, or one and a half times the annual Fixed Rent in effect
during the last year of the Term The provisions of this Paragraph do not waive
the Landlord's right of reentry or any other right hereunder.
TENANT EXPRESSLY WAIVES TO LANDLORD THE BENEFIT TO TENANT OF 68 P.S.
(S) 250.501, AS APPROVED APRIL 6, 1951, ENTITLED ""LANDLORD AND TENANT ACT OF
1951"", AS MAY BE AMENDED FROM TIME TO TIME, REQUIRING NOTICE TO QUIT UPON THE
EXPIRATION OF THE TERM OF THIS LEASE OR AT THE EXPIRATION OF ANY EXTENSION OR
RENEWAL THEREOF, Oft UPON ANY EARLIER TERMINATION OF THIS LEASE, AS HEREIN
PROVIDED. TENANT COVENANTS AND AGREES TO VACATE, REMOVE FROM AND DELIVER UP AND
SURRENDER THE POSSESSION OF THE PREMISES TO LANDLORD UPON THE EXPIRATION OF THE
TERM OR UPON THE EXPIRATION OF ANY EXTENSION OR RENEWAL THEREOF OR UPON ANY
EARLIER TERMINATION OF THIS LEASE, AS HEREIN PROVIDED WITHOUT SUCH NOTICE.
20. DEFAULT. Any one or more of the following events shall
constitute an "Event of Default":
(a) The failure of Tenant to pay any Rent or other sum of money due
Landlord within ten (10) days after written notice from Landlord that the same
is past due; provided, however, that in the event Tenant fails to pay the Fixed
Rent payment to Landlord on or before the fifth day of each month, then Tenant
shall be assessed the late charge as set forth in Section 4 hereof.
(b) The failure by Tenant in the performance or observance of any
covenant or agreement of this Lease (other than a failure involving the payment
of money), which failure is not cured within thirty (30) days after the giving
of notice thereof by Landlord, unless (i) such failure is of such nature that it
cannot be cured within such thirty (30) day period, in which case Landlord shall
not exercise the remedies described below so long
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as Tenant shall commence the curing of the default within such thirty (30) day
period and shall thereafter diligently prosecute the curing of same, or (ii)
such failure is of such a nature as to cause a hazardous situation, a nuisance
to Landlord, other tenants or other persons or businesses or may result in civil
or criminal penalties against Landlord or Tenant, in which case Tenant shall
cure such default within the shortest time reasonable which in no event shall be
more than forty-eight (48) hours after the giving of notice thereof.
(c) Tenant should default in performance of any other particular
covenant of this Lease more than three (3) times in any period of twelve (12)
months, then, notwithstanding that such defaults shall have each been cured
within the period after notice as above provided, any further similar default
shall be deemed to be deliberate and Landlord thereafter may serve a written
seven (7) day notice of termination without affording to Tenant an opportunity
to cure such further default.
21. LANDLORD'S REMEDIES.
A. Upon the occurrence and continuance of an Event of Default,
Landlord, without notice to Tenant in any instance (except where expressly
provided for below) may do any one or more of the following:
(1) Declare all rents, charges and any other sums due to Landlord by
Tenant to become accelerated and immediately due and payable.
(2) Perform, on behalf and at the expense of Tenant, any obligation
of Tenant under this Lease which Tenant has failed to perform and of which
Landlord shall have given Tenant notice, the cost of which performance by
Landlord, together with interest thereon at the Default Rate from the date of
such expenditure, shall be deemed Additional Rent and shall be payable by Tenant
to Landlord upon demand.
(3) Elect to terminate this Lease and the tenancy created hereby by
giving notice of such election to Tenant, re-enter the Premises, by proceedings
or otherwise, remove Tenant and all other persons and property from the
Premises, and store such property in a public warehouse or elsewhere at the cost
of and for the account of Tenant without resort to legal process and without
Landlord being deemed guilty of trespass or becoming liable for any loss or
damage occasioned thereby.
(4) Exercise any other legal or equitable right or remedy which
Landlord may have.
Notwithstanding the provisions of clause (2) above and regardless of
whether an Event of Default shall have occurred,
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Landlord may exercise the remedy described in clause (2) without any notice to
Tenant if Landlord, in its good faith judgment, believes that the unperformed
obligation of Tenant constitutes an emergency.
B. If this Lease is terminated by Landlord pursuant to Subparagraph
21A, Tenant nevertheless shall remain liable for any Rent and damages which may
be due or sustained prior to such termination, and all reasonable costs, fees
and expenses incurred by Landlord in pursuit of its remedies hereunder, or in
renting the Premises to others from time to time (all such Rent, damages, costs,
fees and expenses being referred to herein as "Termination Damages") and
additional damages (the "Liquidated Damages") equal to the Rent which, but for
termination of this Lease, would have become due during the remainder of the
Term, less the amount of Rent, if any, which Landlord may receive during such
period from others to whom the Premises may be rented (other than any Additional
Rent received by Landlord as a result of any failure of such other person to
perform any of its obligations to Landlord). Termination Damages shall be due
and payable immediately upon demand by Landlord following any termination of
this Lease pursuant to Subparagraph 21A. Liquidated Damages shall be computed
and payable in monthly installments, in advance, on the first day of each
calendar month following termination of the Lease and continuing until the date
on which the Term would have expired but for such termination. Any suit or
action brought to collect any Liquidated Damages for any month shall not in any
manner prejudice the right of Landlord to collect any Liquidated Damages for any
subsequent month by a similar proceeding.
C. If this Lease is terminated pursuant to Subparagraph 21A, Landlord
may relet the Premises or any part thereof, alone or together with other
premises, for such term or terms (which may be greater or less than the period
which otherwise would have constituted the balance of the Term) and on such
terms and conditions (which may include concessions or free rent and alterations
of the Premises) as Landlord, in its uncontrolled discretion, may determine, but
Landlord shall not be liable for, nor shall Tenant's obligations hereunder be
diminished by reason of, any failure by Landlord to relet the Premises or any
failure of Landlord to collect any rent due upon such reletting.
D. FOR VALUE RECEIVED, IN ADDITION TO ANY AND ALL REMEDIES PROVIDED
HEREUNDER OR BY LAW, UPON ANY DEFAULT BY TENANT HEREUNDER, TENANT HEREBY
EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE COMMONWEALTH OF
PENNSYLVANIA TO APPEAR FOR TENANT, AND FOR ANY OTHER PERSONS CLAIMING UNDER, BY
OR THROUGH TENANT, AND, WITH OR WITHOUT COMPLAINT FILED, CONFESS JUDGMENT
FORTHWITH AGAINST TENANT AND SUCH OTHER PERSONS AND IN FAVOR OF LANDLORD, IN AN
AMICABLE ACTION OF EJECTMENT FOR THE PREMISES, OR WRITS OF EXECUTION FOR
POSSESSION OF THE PREMISES AND, AT
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LANDLORD'S OPTION, FOR THE AMOUNT OF ALL COSTS, WITHOUT LEAVE OF COURT, AND
LANDLORD MAY, BY LEGAL PROCESS, UPON TWENTY-FOUR (24) HOURS' NOTICE POSTED AT
THE PREMISES, RE-ENTER AND EXPEL TENANT FROM THE PREMISES, AND ALSO ANY PERSONS
HOLDING UNDER TENANT.
E. No reference to any specific right or remedy shall preclude
Landlord from exercising any other right, or from having any other remedy or
from maintaining any action to which it may otherwise be entitled by law or in
equity. No failure by Landlord to insist upon the strict performance of any
agreement, term, covenant or condition hereof, or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of any
such breach, agreement, term, covenant or condition. No waiver by Landlord of
any breach by Tenant under this Lease or of any breach by any other tenant under
any other lease of any portion of the Building shall affect or alter this Lease
in any way whatsoever.
22. CONDITION OF PREMISES. It is agreed that Tenant has examined the
Premises prior to the execution of this Lease and is satisfied with the physical
condition thereof and further agrees that, except as set forth in Section 15 of
this Lease and Exhibit D which is attached hereto and made a part hereof, no
representation has been made by Landlord, or Landlord's agent as to the
condition, construction or repair of the Premises.
23. ASSIGNMENT AND SUBLETTING.
A. Without the prior written consent of Landlord, Tenant shall not
sublease, assign, mortgage, pledge, hypothecate or otherwise transfer or permit
the transfer of this Lease or the interest of Tenant in this Lease, in whole or
in part, by operation of law or otherwise. Notwithstanding the foregoing
sentence, Tenant may assign or sublease the Premises in accordance with the
terms and conditions hereinafter set forth upon obtaining the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed. If Tenant desires to enter into any assignment of this Lease or
sublease of the Premises, Tenant shall deliver written notice thereof to
Landlord, together with a copy of the proposed assignment or sublease agreement
at least thirty (30) days prior to the effective date of the proposed assignment
or sublease. In making its determination of whether to consent to any proposed
assignment or sublease (which consent shall not be unreasonably withheld),
Landlord may take into consideration the business reputation and character,
financial responsibility and credit worthiness of the proposed assignee or
subtenant; the intended use of the Premises by the proposed assignee or
subtenant; the estimated pedestrian traffic to the Premises and to the Building
which would be generated by the proposed assignee or subtenant; and any other
factors which Landlord shall deem relevant;
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provided, that Landlord shall in no event be obligated to consent to any
proposed assignment or sublease of the Premises and Landlord's withholding of
consent to any proposed sublease of the Premises will not be deemed unreasonable
if (1) the proposed assignee or subtenant is or has been a tenant in the
Building, or (2) Tenant is then in default under this Lease. Any approved
sublease shall be expressly subject to the terms and conditions of this Lease,
and Tenant shall pay Landlord on the first day of each month during the term of
the sublease, the excess of all rent and other consideration due from the
subtenant for such month over that portion of the Fixed Rent due under this
Lease for said month allocable to the space sublet on a square footage basis.
Tenant shall reimburse Landlord for all reasonable attorneys' fees incurred by
Landlord in reviewing any proposed assignment or sublease or other transfer of
Tenant's interest in this Lease, which reimbursement shall be made
notwithstanding that Landlord may withhold its consent to any such document or
transfer of interest.
B. In the event Tenant desires to enter into any sublease of the
Premises, Landlord shall have the option to exclude from the Premises covered by
this Lease the space proposed to be sublet by Tenant, effective as of the
proposed commencement date of sublease of said space by Tenant. Landlord may
exercise said option by giving Tenant written notice thereof within twenty (20)
days after receipt by Landlord of Tenant's notice of the proposed sublease;
provided, however, Tenant may rescind the exercise of such option and retract
its proposed sublease by giving Landlord written notice thereof within ten (10)
days after Landlord exercises such option. In the event Landlord exercises said
option (and such option is not rescinded by Tenant as aforesaid), Tenant shall
surrender possession of the proposed sublease space to Landlord on the effective
date of exclusion of said space from the Premises covered by this Lease, and
neither party hereto shall have any further rights or liabilities with respect
to said space under this Lease. Effective as of the date of exclusion of any
portion of the Premises covered by this Lease pursuant to this Paragraph, (1)
the Fixed Rent specified in clause H of Paragraph 1 shall be reduced in the same
proportion as the number of square feet of rentable area contained in the
portion of the Premises so excluded bears to the number of square feet of
rentable area contained in the Premises prior to such exclusion, and (2) the
rentable area of the Premises specified in clause I of Paragraph 1 shall be
decreased by the number of square feet of rentable area contained in the portion
of the Premises so excluded, for all purposes under this Lease, and (3) Tenant's
Proportionate Share shall be recalculated in accordance with the formula
specified in Subparagraph 5A(6).
C. In the event of any approved sublease or assignment, Tenant shall
not be released or discharged from any liability,
25
<PAGE>
whether past, present or future, under this Lease, including any renewal term of
this Lease and any expansion space included in the Premises.
D. Notwithstanding the foregoing, it is hereby expressly understood
and agreed that the assignment, sublease or transfer of this Lease, and ??? erm
and estate hereby granted, to (a) any corporation into which Tenant is merged or
with which Tenant is consolidated or with Tenant has sold all or substantially
all of its. (Pounds)5 having a net worth equal to that of Tenant upon the
execution of this Lease, or (b) any corporation which is Tenant's parent
corporation or a wholly owned subsidiary of Tenant's parent corporation (any
such corporation being hereinafter called "Assignee"), shall not require
Landlord's consent; provided that the corporation to which this Lease is
assigned has a credit worthiness and net worth at least equal to those of Tenant
at the time of the execution of this Lease; and further provided that Assignee
and Tenant shall promptly execute, acknowledge and deliver to Landlord an
assignment agreement in form and substance satisfactory to Landlord. In the
event that Tenant subleases all or part of the Premises to an Assignee of Tenant
for Rent and/or other consideration (which shall include the assumption by the
Assignee of the obligation of Tenant to pay Rent hereunder) which in the
aggregate is in excess of the Rent payable (calculated on a square footage
basis) by Tenant hereunder, then such excess Rent shall be split equally between
Landlord and Tenant.
24. ASSIGNMENT BY LANDLORD. Landlord may sell the Building or
Landlord's interest therein or assign its interest in this Lease, or any part
thereof, in the exercise of its sole discretion, and upon the written request of
Landlord, Tenant shall acknowledge and consent to any such assignment in
writing. In the event of any such sale or assignment, Landlord shall be entirely
freed and relieved of all agreements and obligations of Landlord hereunder
accruing or to be performed after the date of such sale or assignment.
Additionally, upon the written request of Landlord, Tenant shall provide any
information or certification of the status of this Lease reasonably requested by
Landlord and Tenant shall execute any memoranda, certificate, attornment or
other document in recordable form or otherwise as required by Landlord or to
undertake any action reasonably requested by Landlord to evidence the existence
of this Lease or to effectuate any such sale or assignment.
25. NOTICES. All notices and approvals to be given by one party to
the other party under this Lease shall be given in writing, mailed or delivered
as follows:
(a) To Landlord c/o J.S. Karlton Management Company, 444 Brickell
Avenue, Miami, FL 33131, with a copy to Building Manager, 650 Smithfield Street,
Pittsburgh, PA 15222, or to such
26
<PAGE>
other address designated by notice to Tenant.
(b) Except as otherwise provided in this Lease, to Tenant at
Federated Investors Tower, 1000 Liberty Avenue, Pittsburgh, PA 15222, attention
Edward Myers, with a copy to John Cummings, Esquire, at the same address, or to
such other address designated by notice to Landlord.
Notices shall be delivered by hand, by Federal Express or other
overnight carrier service, or by United States certified or registered mail,
postage prepaid, return receipt requested. Notices shall be deemed to have been
given upon personal delivery thereof or upon posting in the United States mails.
26. QUIET POSSESSION. So long as Tenant shall observe and perform the
covenants and agreements binding on it hereunder, Tenant shall at all times
during the Term peacefully and quietly have and enjoy the possession of the
Premises without any encumbrance or hindrance by, from or through Landlord, its
successors or assigns, subject to the provisions of this Lease. So long as
Tenant is not in default in the payment of Rent, or in the performance of any of
the terms, covenants or conditions of the Lease, Tenant shall not, by reason of
foreclosure of any mortgage, acceptance of a deed in lieu of foreclosure, or the
exercise of any remedy provided in any mortgage, be disturbed in Tenant's
occupancy of the Premises during the term of the Lease or any extension thereof
set forth in the Lease.
27. MOVING ALLOWANCE. Landlord shall pay to Tenant a moving allowance
in the amount of One Dollar ($1.00) per square foot of rental area. Said
allowance is intended to offset or decrease Tenant's cost to relocate furniture
and equipment to the Premises, to purchase stationery, and/or its other costs
associated with Tenant's moving to the Premises. This allowance will be paid
within ten (10) days after Commencement Date of the Term.
28. EXPANSION OPTION. So long as Tenant is not in default under the
terms of this Lease, Tenant shall have the option to lease all, but not less
than all, of each of the Twenty First (21st), Twenty Second (22nd), Twenty Third
(23rd) and Twenty Fourth (24th) floors of the Building (the "Option Space").
Tenant acknowledges that the availability of the Option Space on the 22nd, 23rd
and 24th floors of the Building is subject to Landlord's ability to obtain
appropriate releases for such Option Space from The Prudential Insurance Company
of America. The Tenant's option for leasing the Option Space located on the 24th
floor shall expire on March 31, 1993, and Tenant shall notify Landlord, in
writing, of its exercise of such option for the 24th floor no later than March
31, 1993. The Tenant's option for leasing the Option Space located on the
twenty-first floor shall expire on April 30, 1993, and Tenant shall notify
Landlord, in
27
<PAGE>
writing, of its exercise of such option for the twenty-first floor no later than
April 30, 1993. If Tenant elects to exercise its option for Expansion Space on
either the twenty-first or twenty-fourth floors, then Landlord and Tenant will
immediately proceed to fulfill all requirements and conditions as set forth in
this Lease and in the Work Letter as soon as possible following Tenant's
exercise of its option. If Tenant desires to exercise its option to lease the
Option Space consisting of each of the 22nd and/or 23rd floors of the Building,
then Tenant shall so notify Landlord, in writing, no later than January 1, 1994,
with such lease to be commenced no later than January 1, 1995.
The annual Rent for the Option Space shall be calculated at Tenant's
current escalated Rent for its Premises as set forth in this Lease. Landlord
shall provide Tenant with an improvement allowance for the Option Space in an
amount not to exceed the unamortized improvement allowance for the Premises
initially leased to Tenant (such amortization to be calculated by prorating the
$15.00 RSF allowance for Tenant's Work on a monthly basis based on the remaining
Term of the Lease). Tenant's obligation to pay Rent with respect to the Option
Space shall commence upon the Substantial Completion of the Option Space.
29. RIGHT OF FIRST REFUSAL. So long as Tenant is not in default under
the terms of this Lease, effective as of May 1, 1993 and continuing until the
expiration of the Term, Tenant shall have a right of first refusal to lease all,
but not less than all, of the twenty first (21st) floor of the Building.
Commencing on January 1, 1995 and continuing until the end of the Term, Tenant
shall have a right of first refusal to lease all, but not less than all, of each
of the twenty second (22nd) and twenty third (23rd) floors of the Building.
Commencing on April 1, 1993 and continuing until the expiration of the Term,
Tenant shall have a right of first refusal to lease all, but not less thatn all,
of the twenty fourth (24th) floor of the Building. The individual 21st, 22nd,
23rd and 24th floors of the Building shall each be designated as "Refusal Space"
for the purposes of this Section 29. In the event, at any time during the
pendency of Tenant's right of first refusal for the Refusal Space as set forth
hereinabove, Landlord receives a bona fide offer to lease all or part of any of
the Refusal Space, Landlord shall give written notice to Tenant of such offer
and Landlord's intent to accept the same. Tenant shall have the right for
fifteen (15) business days following receipt of such notice to accept, in
writing, the entire portion of the Refusal Space which is specified in
Landlord's notice. If Tenant rejects such terms or does not respond, in writing,
within the aforesaid fifteen (15) business day period, Landlord shall then be
permitted to lease all or part of such Refusal Space as set forth in the notice
on the terms as set forth in the notice to Tenant, and Tenant's right of first
refusal hereunder shall terminate as to the floor of the Building on which
Landlord has leased such space.
28
<PAGE>
30. OPTION TO TERMINATE. Tenant shall have the right, to be exercised
by Tenant by written notice to Landlord given no later than three hundred sixty-
five (365) days prior to the expiration of the third (3rd) and fourth (4th)
years of the Term, to terminate its Lease of the entire Premises, including any
Option Space. If Tenant elects to so terminate this Lease, Tenant shall pay to
Landlord, at or prior to the effective date of such termination, a sum equal to
the total of all unamortized construction costs, including design costs, moving
costs, demolition costs and commissions expended by Landlord, and all allowances
previously given by Landlord to Tenant, for the construction, leasing and
improvement of Tenant's Premises. Such costs shall be amortized by Landlord
under a level amortization period of twenty percent (20%) per year. A copy of
such amortization schedule is attached hereto and made a part hereof as Exhibit
"E".
In the event that Tenant exercises its option to terminate this Lease
with such termination to be effective on the third anniversary date of the Term,
then Tenant may extend the effective date of termination, at its option, for a
period of six (6) months by giving written notice to Landlord of its intention
to extend the effective date of such termination. Such notice of extension of
time shall be given by Tenant on or before such time as the Tenant's notice of
early termination is required to be given under the terms of Section 30 of the
Lease. The terms and conditions of this Lease shall continue to apply to
Tenant's occupancy of the Premises during the six month extension period.
31. OPTIONS TO RENEW.
A. Renewal Term I. So long as Tenant is not in default under the
--------------
terms of this Lease, Tenant shall have the Option to extend the original Term
hereof for a renewal term of three (3) years ("Renewal Term I"). Renewal Term I
shall commence upon the expiration of the initial Term and shall be upon the
same terms and conditions as in this Lease, except for the Rent, and improvement
and other allowances. Tenant shall notify Landlord, in writing, of its intention
to exercise its renewal option for Renewal Term I no later than three hundred
sixty five (365) days prior to the expiration of the Term. The Fixed Rent for
Renewal Term I shall be calculated as follows:
Year 1: $15.00 per rentable square foot per annum
Year 2: $16.00 per rentable square foot per annum
Year 3: $16.00 per rentable square foot per annum
The Base Year shall be 1992; provided, however, that Tenant will
receive a credit in the amount of ten percent (10%)
29
<PAGE>
per annum against Escalation Charges due in each of the years for Renewal Term
I.
Upon commencement of Renewal Term I, Landlord shall contribute an
allowance (to be calculated as hereinafter set forth) to be utilized by Tenant
for the cost of repainting, recarpeting or replacing wall coverings within
Tenant's Premises. In the event that Tenant elects to exercise its Option to
Renew for Renewal Term I, then Landlord shall provide such an allowance in an
amount not to exceed Five Dollars ($5.00) per rentable square foot of area.
B. Renewal Term II. So long as Tenant is not in default under the
---------------
terms of this Lease, Tenant shall have the Option to extend this Lease for an
additional renewal term of three (3) years ("Renewal Term II"). Renewal Term II
shall commence upon the expiration of Renewal Term I and shall be upon the same
terms and conditions as in this Lease, except for the Rent, and improvement and
other allowances. Tenant shall notify Landlord in writing, of its intention to
exercise its renewal option no later than three hundred sixty five (365) days
prior to the expiration of Renewal Term I. The Fixed Rent for Renewal Term II
shall be calculated as follows:
Year 1: $17.00 per rentable square foot per annum
Year 2: $17.00 per rentable square foot per annum
Year 3: $17.00 per rentable square foot per annum
The Base Year shall be 1992; provided, however, that Tenant will
receive a credit in the amount of ten percent (10%) per annum against Escalation
Charges due in each of the years for Renewal Term II.
Upon commencement of Renewal Term II, Landlord shall contribute an
allowance (to be calculated as hereinafter set forth) to be utilized by Tenant
for the cost of repainting, recarpeting or replacing wall coverings within
Tenant's Premises. In the event that Tenant elects to exercise its Option to
Renew for Renewal Term II, then Landlord shall provide such an allowance in an
amount not to exceed Three Dollars ($3.00) per rentable square foot of area.
32. CANCELLATION OF EXISTING LEASES. Tenant's existing Lease for
premises situate on the third floor of the Building shall expire on the
Commencement Date of this Lease.
33. MISCELLANEOUS.
A. This Lease shall be binding upon and inure to the benefit of
Landlord and Tenant and their respective heirs, legal representatives,
successors and permitted assigns.
30
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B. All amounts owed to Landlord hereunder, for which the date of
payment is not expressly fixed herein, shall be paid within thirty (30) days
from the date Landlord renders statements of account therefor or and after the
end of such thirty (30) day period shall bear interest at a rate equal to the
prime rate of interest from time to time in effect at Mellon Bank, N.A., but in
no event less than ten percent (10%) per annum, until paid.
C. Tenant shall deliver to Landlord or to its mortgagee, auditors or
to a prospective purchaser of the Building, when requested by Landlord an
estoppel certificate certifying (i) that this Lease is unmodified and in full
force and effect, (ii) the amount of Fixed Rent and Escalation Charges then
payable under this Lease and the date to which such Rent has been paid, (iii)
the amount of the security deposit, if any, deposited by Tenant with Landlord
hereunder, (iv) that Tenant is or is not in possession of the Premises, as the
case may be, and (v) that Landlord is not in default hereunder, or if in
default, stating specifically any such defaults. Failure to give such a
statement within fifteen (15) days after written request shall be conclusive
evidence that the Lease is unmodified and in full force and effect and Landlord
is not in default and Tenant shall be estopped from asserting any defaults known
to Tenant at that time.
D. In the event that all or a substantial portion of the Premises or
the Building are taken by eminent domain so that the Premises cannot be
reasonably used by Tenant for the purposes for which they are demised, then
either party may terminate this Lease by giving written notice of termination to
the other party within thirty (30) days after such taking. In the event of any
taking by eminent domain, Landlord shall be entitled to receive the entire award
arising from the condemnation proceeding without deduction therefrom for any
estate vested in Tenant by this Lease; provided that Tenant shall be entitled to
claim, prove and receive such award as may be made which represents the value to
Tenant's personal property lost as a result of the taking or the relocation
expenses suffered by Tenant.
E. Landlord shall have the option to relocate the Premises at any
time or times during the Term to a different location in the Building (herein
referred to as "the New Premises"). Landlord may exercise such option by giving
Tenant written notice thereof not less than thirty (30) days prior to the
proposed effective date of relocation.
(i) The New Premises shall contain not less than ninety percent (90%)
nor more than one hundred ten percent (110%) of the Rentable Area contained in
the Premises;
(ii) Landlord shall pay the direct physical moving expenses (including
telephone and telephone equipment relocation
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costs) incurred by Tenant in relocating from the Premises to the New Premises
and for improving the New Premises so that they are substantially similar to the
Premises, but in no event shall Landlord pay any indirect expenses incurred by
Tenant in relocating from the Premises to the New Premises (including salaries
of employees of Tenant for time allocated to such relocation, legal fees, or
loss of business or profit);
(iii) The Fixed Rent specified in clause H of Paragraph, 1 then in
effect under this Lease shall be decreased to the sum obtained by multiplying
each such amount by a fraction, the numerator of which the rentable area
contained in the New Premises and the denominator of which is the rentable area
contained in the Premises;
(iv) The rentable area of the Premises specified in clause I of
Paragraph 1 shall be increased or decreased, as the case may be, by the
difference in the rentable area contained in the Premises and the rentable area
contained in the New Premises; and
(v) Tenant's Proportionate Share shall be recalculated in
accordance with the formula specified in subparagraph 5A(6).
F. This Lease and the Exhibits attached hereto contain the entire
Agreement between Landlord and Tenant concerning the Premises and there are no
other agreements, either oral or written.
G. The execution of this Lease by Tenant and delivery of same to
Landlord or its agent does not constitute a reservation of or option for the
Premises or an agreement to enter into a lease. This Lease shall become
effective only if and when Landlord executes and delivers same to Tenant;
provided, however, the execution and delivery by Tenant of this Lease to
Landlord or its agent shall constitute an irrevocable offer by Tenant to lease
the Premises on the terms and conditions herein contained, which offer may not
be withdrawn or revoked for forty-five (45) days after such execution and
delivery.
H. No payment by Tenant or receipt by Landlord of a lesser amount
than any installment or payment of Rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or any
letter accompanying any check or payment of Rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of Rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term or
Tenant's right of possession.
32
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I. Tenant represents that, except for the broker if any, specified
in clause O of Paragraph 1, Tenant has not dealt with any real estate broker,
sales person, or finder in connection with this Lease, and no such person
initiated or participated in tie negotiation of this Lease, or showed the
Premises to Tenant. Tenant hereby agrees to indemnify and hold harmless
Landlord, its agents and employees, from and against any and all liabilities and
claims for commissions and fees arising out of a breach of the foregoing
representation. Unless otherwise agreed by the parties, Landlord shall be
responsible for the payment of all commissions to the broker, if any, specified
in clause O of Paragraph 1, based upon the leasing commission policy of Landlord
applicable to the Building and in effect as of the date of this Lease.
J. Landlord shall not be deemed in default with respect to any of
the terms, covenants and conditions of this Lease on Landlord's part to be
performed, if Landlord fails to timely perform same and such failure is due in
whole or in part to any strike, lockout, labor trouble (whether legal or
illegal), civil disorder, inability to procure materials, power failure,
restrictive governmental laws and regulations, riots, insurrections, war, fuel
shortages, accidents, casualties, Acts of God, acts caused directly or
indirectly by Tenant (or Tenant's agents, employees or invitees) or any other
cause beyond the reasonable control of Landlord.
K. Paragraph captions in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe or describe the scope or
intent of such Paragraphs.
L. This Lease shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
M. Time is of the essence of this Lease and the performance of all
obligations hereunder.
N. Notwithstanding anything in this Lease to the contrary, the
liability of Landlord under this Lease shall be limited to its interest in the
Building and Tenant agrees that no judgment against Landlord under this Lease
may be satisfied against any property or assets of Landlord other than the
interest of Landlord in the Building.
O. If Tenant fails timely to perform any of its duties under this
Lease, Landlord shall have the right (but not the obligation) to perform such
duty on behalf and at the expense of Tenant without further prior notice to
Tenant, and all sums expended or expenses incurred by Landlord in performing
such duty shall be deemed to be Additional Rent under this Lease and shall be
due and payable upon demand by Landlord.
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P. If any provision of this Lease shall be held to be invalid, void
or unenforceable, the remaining provisions hereof shall in no way be affected or
impaired and such remaining provisions shall remain in full force and effect.
Q. Landlord, at Landlord's sole option, may record this Lease or a
memorandum of this Lease in the Office of the Recorder of Deeds of Allegheny
County, Pennsylvania.
R. If Landlord fails timely to perform any of its duties under this
Lease, Tenant shall have the right to perform such duty on behalf and at the
expense of Landlord. Provided, however, before performing such duty on
Landlord's behalf, Tenant shall give Landlord written notice of such failure and
Landlord will have ten (10) business days to cure such failure or where such
cure will require greater than ten (10) business days, Landlord shall have such
longer time as reasonably necessary as long as Landlord has commenced and
continued to effect a cure with reasonable diligence until completed. If
Landlord does not take such action, Tenant may perform such duty and all sums
expended or incurred by Tenant in performing such duty may be immediately
deducted from rent due to Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on
the ______day of August, 1992.
ATTEST: LANDLORD:
CENTRE CITY PARTNERS, L.P.
by: J.S. Karlton Management
Company
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
-------------------------- -----------------------------
ATTEST: TENANT:
FEDERATED INVESTORS BUILDING
CORPORATION
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
-------------------------- -----------------------------
34
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EXHIBITS TO LEASE
-----------------
A-1 Plan of Premises
B Rules and Regulations
C Commencement Agreement
D Workletter
E Amortization Schedule
F Tenant's Plans
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. Any sign, lettering, picture, notice or advertisement installed
within the Premises which is visible from the public corridors within the
Building shall be installed in such manner and be of such character and style as
Landlord shall approve in writing. No sign, lettering, picture, notice or
advertisement shall be placed on any outside window or door or in a position to
be visible from the outside of the Building.
2. Sidewalks, entrances, passages, courts, corridors, halls,
elevators and stairways in and about the Premises shall not be obstructed nor
shall objects be placed against glass partitions, doors or windows which would
be unsightly from the Building's corridors or from the exterior of the Building.
3. No animals, pets, bicycles or other vehicles shall be brought or
permitted to be in the Building or the Premises.
4. Room to room canvasses to solicit business from other tenants of
the Building are not permitted.
5. Tenant shall not waste electricity, water or air conditioning
services. All controls shall be adjusted only by authorized Building personnel.
Tenant shall not utilize the Premises in any manner which would overload the
standard heating, ventilating or air conditioning systems of the Building.
Tenant shall not open or permit to be opened any windows in the Premises. Tenant
shall not utilize any electronic, radiowave, microwave or other transmitting,
receiving, amplification or magnetic device which would disturb or interfere
with any other tenant of the Building or the operation of the Building
generally.
6. All corridor doors shall remain closed at all times.
7. No locks or similar devices shall be attached to any door except
by Landlord and Landlord shall have the right to retain a key to all such locks.
8. Tenant assumes full responsibility of protecting the Premises from
theft, robbery and pilferage. Except during Tenant's normal business hours,
Tenant shall keep all doors to the Premises locked and other means of entry to
the Premises closed and secured.
B-1
<PAGE>
9. Only machinery or mechanical devices of a nature directly
related to Tenant's ordinary use of the Premises shall be installed, place or
used in the Premises and the installation and use of all such machinery and
mechanical devices is subject to the other rules contained herein and the other
portions of this Lease.
10. Except with the prior approval of Landlord, all cleaning,
repairing, janitorial, decorating, painting or other services and work in and
about the Premises shall be done only by authorized Building personnel.
11. Safes, furniture, equipment, machines and other large or bulky
articles shall be brought to the Building and into and out of the premises at
such times and in such manner as Landlord shall direct (including the
designation of elevator) and at Tenant's sole risk and cost. Prior to Tenant's
removal of such articles from the building, Tenant shall obtain written
authorization of the office of the Building and shall present such authorization
to a designated employee of Landlord.
12. Tenant shall not in any manner deface or damage the Building.
13. Inflammables such as gasoline, kerosine, naphtha and benzene, or
explosives or any other articles of an intrinsically dangerous nature are not
permitted in the Building or the Premises.
14. Tenant shall ascertain from Landlord the maximum amount of
electrical current which can safely be used in the Premises, taking into account
the electric wiring of the Building and the Premises and the needs of other
tenants, and shall not use more than such capacity. Landlord's consent to the
installation of electrical equipment shall not relieve Tenant from the
obligation not to use more electricity than such safe capacity.
15. To the extent permitted by law, Tenant shall not permit picketing
or other union activity involving its employees in the Building, except in those
locations and subject to time and other limitations as to which Landlord may
give prior written consent.
16. Tenant shall not enter into or upon the roof or basement of the
Building or any storage, heating, ventilation, air conditioning, mechanical or
elevator machinery housing areas.
17. Tenant shall not distribute literature, flyers, handouts or
pamphlets of any type in any of the common areas of the Building, without the
prior written consent of Landlord.
B-2
<PAGE>
18. Tenant shall not cook, otherwise prepare or sell any food or
beverages in or from the Premises.
19. Tenant shall not permit the use of any apparatus for sound
production or transmission in such manner that the sound so transmitted or
produced shall be audible or vibrations therefrom shall be detectable beyond the
Premises.
20. Tenant shall keep all electrical and mechanical apparatus free of
vibration, noise and air waves which may be transmitted beyond the Premises.
21. Tenant shall not permit objectionable odors or vapors to emanate
from the Premises.
22. Tenant shall not place a load upon any floor of the Premises
exceeding the floor load' capacity for which such floor was designed or allowed
by law to carry.
23. Except as shown on Tenant's Plans or on other plans as approved
by Landlord, no floor covering shall be affixed to any floor in the Premises by
means of glue or other adhesive without Landlord's prior written consent.
B-3
<PAGE>
EXHIBIT "C":
COMMENCEMENT DATE AGREEMENT
---------------------------
This Commencement Date Agreement ("Agreement") is made as of
______________, 19______, by Centre City Partners, L.P. with address at 650
Smithfield Street, Pittsburgh, PA 15222 ("Landlord") and Federated Investors
Building Corporation having an office at 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222 ("Tenant").
Landlord and Tenant agree to and acknowledge the following matters':
1. Landlord and Tenant have entered into a Lease dated as of July 23,
1992 (the "Lease"), covering office space in the Centre City Tower Building,
650 Smithfield Street, Pittsburgh, Pennsylvania 15222 as more particularly
described in the Lease.
2. All terms defined in the Lease shall have the same meaning when
used in this Agreement.
3. The nineteenth floor of the Premises was delivered to Tenant on
September 21, 1992, and Tenant's obligation to pay Fixed Rent for the nineteenth
floor commenced as of that date. The twentieth floor of the Premises, being the
remaining portion of the Premises, was delivered to Tenant on
____________________, 1992.
4. The Commencement Date is __________________
5. The Expiration Date is ___________________
6. The rentable area of the Premises is _______ square feet.
7. The initial annual Fixed Rent is $_____________
8. The Tenant hereby certifies that it is in possession and occupancy
of the Premises; that the Lease is in full force and effect; that all of the
obligations on the part of Landlord under the Lease to be performed prior to the
Commencement Date have been performed satisfactorily, including any obligation
for the performance of any work or installment of any equipment; and that there
are no offsets or defenses against the enforcement of the Lease by Landlord.
C-1
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement
as of the day and year first above written.
LANDLORD:
CENTRE CITY PARTNERS, L.P.
by: J.S. Karlton Management Company
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Title: [TITLE ILLEGIBLE]
-----------------------------------
TENANT:
FEDERATED INVESTORS BUILDING
CORPORATION
By:______________________________________
Title:___________________________________
C-2
<PAGE>
EXHIBIT "D"
----------
WORK LETTER
ATTACHED TO AND MADE PART OF LEASE DATED
SEPTEMBER _____, 1992
BETWEEN
CENTER CITY PARTNERS, L.P., LANDLORD
AND
FEDERATED INVESTORS BUILDING CORPORATION
TENANT
This Work Letter supplements the "Lease" dated September _____, 1992
between Centre City Partners, L.P., as Landlord ("Landlord"), and Federated
Investors Building Corporation as Tenant ("Tenant").
1.0. DEFINITIONS
-----------
1.1. Code: The term "Code" as used in this Work Letter, means all
applicable electrical, building, zoning, health, safety, seismic, fire, energy
and other codes, ordinances, regulations, rulings, interpretations, requirements
and relevant provisions of law issued or adopted by the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania, the government of the United
States or any department or agency thereof or other governmental authority
having jurisdiction over the Building.
1.2. Tenant Finish Work: "Tenant Finish Work" shall mean Tenant's Work set
forth in Section 3 of this Work Letter and Section 15 of the Lease.
1.3. Tenant's Architect: The Tenant's Architect is Gardner and Pope.
1.4. Construction Manager: The Construction Manager for Base Base Building
Work is the Building Manager of the Building. The Construction Manager for
Tenant's Work is P.W. Campbell Contracting Company.
1.5. Tenant's Contractor: The Tenant's Contractor is P.W. Campbell
Contracting Company.
1
<PAGE>
1.6. General: Capitalized words shall be defined as they are defined
in the Lease unless otherwise required by their context or otherwise defined
herein.
2.0. BASE BUILDING WORK
------------------
The Landlord shall construct the "Base Building Work" at Landlord's
expense. Base Building Work shall be as follows:
A. Heating, Ventilating and Air Conditioning: As part of the "Base
Building Work", the Landlord will provide HVAC to service the Premises,
including duct work, diffusers, VAV box, and balancing and servicing of such
system.
B. Life Safety System: As part of the "Base Building Work", Landlord
shall provide a life safety system as required to obtain a Certificate of
Occupancy for the Tenant's Premises.
C. Ceilings in all Tenant Space, in elevator lobbies, and typical
floor corridors on Tenant floors will be exposed suspended grid system in 2' x
2' 1/2" mineral fiber lay-in acoustical tile. Tile and grid system will be
Teqular Cortega Minatone ceiling, or equal. Tile shall be fissured minaboard and
the suspended ceiling grid system shall be electrogalvanized steel finished on
exposed surfaces with off-white enamel.
D. Lighting Fixtures: Standard overhead lighting fixtures shall be
2' x 4' recessed parabolic fluorescent fixtures and shall be provided at one (1)
fixture for each 100 square feet of Rentable Area. Landlord and Tenant
acknowledge that Tenant intends to install lighting fixtures and switching in
excess of those provided with Building standard lighting. Landlord shall
provide a lighting allowance to Tenant in the amount of twenty two thousand nine
hundred fifty ($22,950.00) dollars for all lighting, including the installation
of Building standard lighting, for each of the nineteenth and twentieth floors
of the Building. Landlord's contractor shall bill Tenant directly for all costs
and expenses incurred in the purchase and installation of lighting, switching
and related items which exceeds the sum of $22,950.00 per floor. Tenant shall be
responsible, and shall promptly pay Landlord's contractor directly, for the
payment of all amounts in excess of the above described lighting allowance.
3.0. TENANT'S WORK
-------------
Except for the "Base Building Work", all other work and improvements to be
constructed in the Premises in order to prepare the Premises for occupancy by
Tenant ("Tenant's Work")
2
<PAGE>
will be performed at Tenant's sole cost and expense. Such Tenant's Work may,
at Tenant's election, be constructed by Landlord's Contractor or by Tenant's
Contractor. Any contractor selected by Tenant shall comply with the terms and
conditions of the Lease and this Workletter
All Tenant's Work is subject to the approval of the Landlord. Tenant shall
be responsible for the design function and maintenance of all Tenant's Work.
Tenant shall not specify uses or materials that are subject to an insurance
hazard rate different from the rate assigned to the Building as a whole.
4.0. TENANT'S PLANS
--------------
4.1. Tenant shall have Tenant's Architect prepare architectural plans and
specifications for the Tenant's improvements and Tenant's Work ("Tenant's
Plans"), all in such form and detail as required by Landlord. The Tenant's
Plans shall be in form and content sufficient to secure Code and all required
governmental approvals, and shall consist of at least two (2) preliminary
layouts of Tenant's proposed offices; and one (1) set of construction drawings
as required by Landlord's Contractor and/or Tenant's Contractor for construction
of Tenant's Premises. Landlord hereby approves Tenant's Plans for the
construction of Tenant's Work on the nineteenth and twentieth floors of the
Building as the same are attached to the Lease as Exhibit "F". Landlord shall
reimburse Tenant for all of the fees and charges of Tenant's Architect for the
preparation of Tenant's plans, up to a maximum of $1.00 per square foot of
rentable area for the preparation of Tenant's Plans; provided, however, that if
Tenant desires supplemental drawings, the same shall be prepared at Tenant's
cost and expense. Landlord shall provide Tenant with the above described
reimbursement when the Tenant's Plans are completed and approved by Tenant and
Landlord. Tenant's Architect, if any, shall coordinate with the Landlord's
Architect or Construction Manager to assure the consistency of Tenant's Plans
with the plans and specifications for the Base Building Work. "Tenant's Plans"
include the following:.
4.1.1. Space Plan: The "Space Plan" shall be a schematic design of
the Premises, including a full and accurate description of the size and location
of all partitions, doors, furniture and equipment. The Space Plan shall be
reviewed and approved for compliance by the appropriate public officials
enforcing Code and shall be on file with the proper departments.
4.1.2. Tenant Improvement Drawings: The "Tenant Improvement Drawings"
shall include all information necessary for purchasing Tenant's improvements and
all information necessary for Landlord's contractors to complete mechanical and
electrical working drawings.
4.1.3. Final Plans: The Tenant's "Final Plans" shall consist of all
plans and specifications necessary to
3
<PAGE>
construct Tenant's improvements and Tenant's Work, including mechanical and
electrical working drawings.
4.1.4. Mechanical and Electrical Information: Tenant's Plans shall
contain all information required for the preparation of mechanical and
electrical working drawings.
4.2. Mechanical and electrical working drawings, if necessary, shall be
prepared at Landlord's expense. Tenant's Architect and/or Tenant's Contractor
shall be responsible for coordination with Landlord's Construction Manager
regarding of all engineering work with respect to Tenant's Plans.
4.3. Approval by Tenant: The Tenant's Plans shall be subject to Landlord's
approval, which approval shall be given within ten (10) business days following
receipt of the Tenant's Plans by Landlord. Landlord will not impose a charge for
its review and approval of Tenant's Plans. If Landlord reasonably disapproves of
any of Tenant's Plans, Landlord shall advise Tenant in writing of any requested
revisions to Tenant's Plans within the aforesaid ten (10) business day period.
After being so advised of such revisions by Landlord, Tenant shall submit a
redesign, incorporating the revisions reasonably requested by Landlord for
Landlord's approval. If Landlord fails to advise Tenant in writing of its
requested revisions to Tenant's Plans within ten (10) business days following
Landlord's receipt of Tenant's Plans, then such Tenant Plans shall be deemed to
have been approved by Landlord.
4.4. Permits: Tenant's Construction Manager shall be responsible for
submission of the Tenant's Plans for plan check by the government authorities
for compliance with Codes. Any changes required by the government authorities
shall be submitted to Tenant for Tenant's review and approval, which approval
shall be provided by Tenant within ten (10) business days. Tenant shall be
responsible for and shall pay all fees and expenses for securing the Building
Permit and all other permits (except for any permit required for the Building
life safety systems, which permit shall be at Landlord's cost) necessary for
construction of the Tenant's Work.
5.0. COST OF TENANT'S WORK
---------------------
5.1. Tenant shall pay the entire cost for Tenant's Work. Landlord shall
provide Tenant with a construction improvement allowance, in an amount not to
exceed fifteen dollars ($15.00) per square foot of rentable area, to be applied
towards the cost of Tenant's Work. The terms and conditions as set forth in
Section 15 of the Lease shall be controlling as to the procedure for the payment
of this amount by Landlord.
6.0. CHANGES, ADDITIONS OR ALTERATIONS
---------------------------------
4
<PAGE>
If Tenant shall request any change, addition or alteration in the Tenant's
Final Plans as approved by Landlord ("Change Order"), Tenant shall prepare and
submit to Landlord, plans and specifications with respect to such Change Order.
Any such Change Order shall be subject to Landlord's approval, which approval
shall not be unreasonably withheld.
7.0. DELAY
-----
7.1. Tenant's Delays: Tenant shall be responsible for and pay all direct
out of pocket costs and actual additional expenses incurred by Landlord relating
to any delay ("Tenant's Delay") in the commencement or completion of the Base
Building Work or any increase in the cost of any such work as caused by (i)
construction of the Base Building Work out of the normal sequence in order to
accommodate Tenant's improvements or Tenant's Work; or (ii) any Change Order
requested by Tenant after Landlord's final approval of the Tenant's Final Plans;
(iii) delays caused by shortages, unavailability or extraordinary procurement
times of materials required for Tenant's Work. Landlord shall also be excused
from any delay in the completion of the Premises which is caused by Tenant's
Delays.
7.2. Force Majeure: Neither party hereunder shall be deemed to have caused
a delay hereunder if such delay is caused by reason of any act of God, fire,
explosion, flood, strikes, civil disorder, riots, future valid orders of any
government, court or regulatory body having jurisdiction, war or inability to
obtain material by reason of any regulatory or order of any governmental body or
by reason of failure of the other party to perform ("Force Majeure"), and the
party whose performance is so delayed shall have the same additional time for
performance as the delay resulting from such Force Majeure; provided the party
claiming that any delay is due to a Force Majeure shall promptly notify the
other in writing of such claimed cause for delay.
7.3. Measure of Damages: The damages incurred hereunder shall be limited
to direct identifiable damage and not consequential damages, unless (i) any such
delay shall exceed fifteen days and (ii) the party claiming consequential
damages notifies the other in writing after such fifteen day period that
consequential damages may be claimed.
8.0. TENANT'S CONTRACTORS
--------------------
Tenant may at its sole expense select and employ its own contractors
("Tenant's Contractors") for Tenant's Work in the Leased Premises which is not
to be performed by Landlord and which is reflected as such in Tenant's Plans,
subject to the following qualifications:
5
<PAGE>
Tenant shall first obtain the approval of Landlord, in writing, of the
specific work it proposes to perform (such approval not to be unreasonably
withheld); and
Tenant shall directly contract with Tenant's Contractors and a mover or
movers. Any such contracts shall be subject to the terms and conditions of
this Workletter and the Lease.
8.1. Labor Harmony: Landlord will permit Tenant's Contractors to have
access to the Premises to perform their work in the proper sequence. The
foregoing, however, is conditioned upon the workers and mechanics of Tenant's
Contractors working in accordance with scheduling under the general direction of
Landlord and in harmony therewith so as not to cause any interference or dispute
with the labor employed by Landlord, Landlord's mechanics or contractors or by
any other tenant or its contractors. If at any time such entry shall cause any
such disharmony or interference, such license to Tenant may be withdrawn by
Landlord upon forty-eight hours written notice to Tenant if any such disharmony
interference or dispute might result in a delay in carrying out the work for
Landlord or other tenants. In such event, Landlord and Tenant shall cooperate
in attempting to resolve any such situation so as to permit reentry by Tenant's
Contractors. Landlord shall not be liable in any way for any injury, loss or
damage which may occur to any of Tenant's supplies, materials, decorations or
installations made or stored in the Premises prior to the completion of the Base
Building Work and the removal from the Premises of Landlord's contractors and
equipment relating thereto, the same being solely at Tenant's risk. Following
the completion of such Base Building Work and the removal from the Premises of
Landlord's contractors and equipment relating thereto, Landlord shall reimburse
Tenant for its actual costs for any damage to Tenant's decorations, supplies,
materials or installations in the Premises which are directly caused by the
negligence or intentional acts of Landlord's employees or agents prior to the
completion of Tenant's Work in the Premises. Tenant will be directly responsible
to Landlord for the performance of Tenant's Contractors, and Tenant shall hold
Landlord harmless from any claim, demand or action arising from the performance
of any activities of Tenant's Contractors. Landlord and Tenant agree to
cooperate in good faith and not in an arbitrary manner in connection with
Tenant's Contractors entry into the Building and the Premises and installations
by the Tenant. Under no circumstance shall Landlord be held responsible or
liable for any "Delay" whatsoever in the construction of the Tenant's Work.
8.2. Scheduling: Tenant's Contractors shall coordinate the scheduling of
the arrival of Tenant's property with the Landlord, and such scheduling shall be
subject to Landlord's reasonable approval. In the event that Landlord
reasonably determines that a delivery of Tenant's property during Business Hours
would cause substantial disruption to the normal operation of the Building,
Landlord may require that such delivery be made at a time other than during
Business Hours.
6
<PAGE>
8.3. Insurance: Throughout the performance of Tenant's Contractors work,
Tenant, at its expense, shall carry, or cause to be carried, workers'
compensation insurance as required by law and general public liability insurance
for any occurrence in or about the Building, in such coverage limits as Landlord
may require, with insurers meeting the requirements of the Lease and otherwise
satisfactory to Landlord. Landlord and the persons specified in the Lease shall
be designated as additional insured parties on the insurance policies. Tenant
shall furnish Landlord with evidence satisfactory to Landlord that such
insurance is in effect before the commencement of Tenant's Contractors Work. On
request of Landlord, Tenant shall provide evidence satisfactory to Landlord that
the insurance remains in effect.
8.4. Indemnity: Tenant will indemnify, save harmless, and defend
Landlord from and against any and all claims and demands in connection with any
accident, injury or damage whatsoever caused to any person or property by Tenant
or Tenant's Contractors, their representatives, agents and employees.
8.5. Liens and Violations: Prior to the commencement of any work by any
Tenant's Contractor, such Contractor shall furnish a no-lien agreement waiving
its rights and all subcontractors and suppliers' rights to file mechanics liens.
Tenant, at its expense, and with diligence and dispatch, shall procure the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Tenant's Contractors Work, or any other work, labor, services or
materials done for or supplied to Tenant, or any person claiming through or
under Tenant, which shall be issued by the Public Safety Department of the City
or any other public authority. Tenant shall not utilize materials in Tenant's
Contractors Work (except with respect to Tenant's property) that are subject to
security interests or liens. Tenant shall defend, indemnify and hold Landlord
harmless from and against any and all mechanic's liens, stop notices and other
liens and encumbrances or claims of liens or encumbrances filed in connection
with Tenant's Contractor's Work, or any other work, labor, services or materials
done for or applied to Tenant (excepting only Landlord's Work and for such
Tenant's Special Work for which Landlord has been paid in full), or any person
claiming through or under Tenant, including without limitation, security
interests in any materials, fixtures or articles installed in the Premises; and
against all costs, expenses and liabilities incurred in connection with any such
lien or encumbrance, or claim of lien or encumbrance, its removal or any related
action or proceeding. Tenant, at its expense shall satisfy or discharge of
record each stop notice, lien or encumbrance within fifteen days after it is
filed. If Tenant after fifteen days' notice from Landlord (a) continues to fail
to satisfy or discharge such matters, and (b) fails to provide Landlord with
adequate assurance that such claim will be satisfied, Landlord shall have the
right to satisfy or discharge the stop notice, lien or encumbrance by payment to
the claimant on whose behalf it was filed. Tenant shall reimburse Landlord on
demand for the costs and expenses so incurred by Landlord and
7
<PAGE>
without regard for any defense or offset that Tenant may have had against the
claimant.
8.6. Inspection by Landlord: Landlord shall have the right to inspect
Tenant's Contractors Work at any time, and may reject work that does not
substantially conform to both Code and to Tenant's Plans.
8.7. Code Requirements: Tenant shall bear all costs and expenses of
constructing Tenant's Work in compliance with Code.
8.8. If, pursuant to paragraph 14 of the Lease, Landlord approves Tenant's
request to make alterations, additions and improvements to the Leased Premises,
all work performed by or on behalf of Tenant shall comply with the provisions of
this Section 8 of Exhibit "D"
8
<PAGE>
EXHIBIT "E"
AMORTIZATION SCHEDULE
In the event that Tenant elects to terminate the Lease pursuant to the
terms of Section 30 of said Lease, Tenant shall pay to Landlord, at or prior to
the effective date of such termination, a sum equal to a total of all
unamortized construction costs, including but not limited to design costs,
moving costs, demolition costs and commissions expended by Landlord, and all
allowances previously given to Tenant for the construction, leasing, and
improvement of the Premises. Such costs shall be amoritized by Landlord under a
level amortization (calculated over the Lease Term of five years) of twenty
percent (20%) per year.
For example, in the event that Tenant exercises its option to expand its
Premises to include the twenty-second floor as set forth in Section 28 of the
Lease (with such occupancy to commence on January 1, 1995), then Tenant would
receive a construction improvement allowance equal to 33/60 of the original
construction improvement allowance of $15.00 per rentable square foot.
Subsequently, if Tenant elected to terminate the Lease at the expiration of the
fourth year of the Term, Tenant would reimburse Landlord for a sum equal to 1/5
of Landlord's construction costs, including but not limited to design costs;
moving costs, demolition costs and commissions expended by Landlord, and 1/5 of
the total construction improvement allowances previously provided to Tenant for
each floor leased.
9
<PAGE>
CENTRE CITY TOWER
FIFTH AMENDMENT TO LEASE
------------------------
THIS FIFTH AMENDMENT TO LEASE ("Fifth Amendment") made this 24th
----
day of January, 1996, by and between Centre City Partners, L.P. ("Landlord") and
-------
Federated Investors Building Corporation ("Tenant").
WITNESSETH:
----------
WHEREAS, by Lease dated as of July 23, 1992 (the "Lease"), Landlord leased
to Tenant and Tenant leased from Landlord that certain premises (the "Premises")
consisting of all of the 19th and 20th floors, comprising a total rentable area
of 24,406 square feet, of Centre City Tower, 650 Smithfield Street, Pittsburgh,
Pennsylvania 15222 (the "Building") and
WHEREAS, by a First Amendment to Lease dated June 11, 1993 (the "First
Amendment"), Tenant exercised its option to lease all of the 21st, 22nd and 24th
floors of the Building (being an additional 36,609 rentable square feet) in
accordance with the terms and conditions of Section 28 of the Lease and the
terms of the First Amendment; and
WHEREAS, by a Second Amendment to Lease dated August 5, 1993 (the "Second
Amendment"), Tenant expanded its Premises in the Building to include the entire
3rd floor, and the entire 5th floor and Suite 1553 (being an additional 26,406
rentable square feet) in accordance with the terms and conditions set forth
therein; and
WHEREAS, by a Third Amendment to Lease dated November 23, 1993 (the "Third
Amendment"), Tenant expanded its Premises in the Building to include an
additional 9,987 rentable square feet located on the 4th floor of the Building
in accordance with the terms and conditions set forth therein; and
WHEREAS, by a Fourth Amendment to Lease dated May 6, 1994 (the "Fourth
Amendment"), Tenant expanded its Premises in the Building to include the entire
ninth floor of the Building (being an additional 12,203 square feet of rentable
square feet of area) such that Tenant's Premises in the Building is now a total
of 109,611 rentable square feet of area; and
WHEREAS, pursuant to the terms of the Lease, as amended, the Term expires
on September 30, 1997, Tenant desires to: 1) amend the Lease so as to extend the
Term of the Lease, as amended, for an additional period of one year commencing
on October 1, 1997, and terminating on September 30, 1998; and 2) have the
------------------------------------------------------
option to extend the Term for an additional year, commencing October 1, 1998,
and terminating on September 30, 1999, with notice of the taking of such option
to be given to Landlord no later than twelve (12) months prior to the start of
the option term, i.e. September 30, 1997.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt of which is hereby acknowledged, and intending to be legally bound
hereby, do covenant and agree as follows:
<PAGE>
1. The foregoing recitals are hereby incorporated by reference as if set
forth herein.
2. Landlord and Tenant hereby agree to: 1) extend the Term of the Lease,
as amended, for an additional period of one year commencing on October 1,
1997, and terminating on September 30, 1998 (the "Extension Term"); and 2) have
the option to extend the Term for an additional year, commencing October 1,
1998, and terminating on September 30, 1999, with notice of the taking of such
option to be given to Landlord no later than twelve (12) months prior to the
start of the option term, i.e. September 30, 1997 (the "Option Term"). Tenant's
leasing of the Premises during the Extension Term and Option Term shall be under
and pursuant to all of the terms and conditions of the Lease, as amended.
3. During the Extension Term and Option Term, the annual Fixed Rent for
the Premises shall be in the amount of Fifteen and 25/100 Dollars ($15.25) per
square foot of rentable area per year, being the sum of One Million Six Hundred
Seventy One Thousand Five Hundred Sixty Seven and 75/100 Dollars ($1,671,567.75)
per annum, payable in the amount of One Hundred Thirty Nine Thousand Two Hundred
Seventy Nine and 31/100 ($139,297.31) per month.
4. During the Extension Term and Option Term, the Base Years currently
applicable to various portions of the Tenant's Premises shall remain unchanged.
5. Paragraph 1G of the Lease, "Expiration Date", is hereby amended to read
"September 30, 1998" or "September 30, 1999" if the Option Term is exercised.
6. Except as otherwise provided herein, and to the extent necessary to
allow for the operation of this Fifth Amendment and the Lease, the Fourth
Amendment, the Third Amendment, the Second Amendment, the First Amendment and
the Lease shall continue to remain in full force and effect in accordance with
the terms thereof. Neither the Lease nor the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, or this Fifth Amendment
may be further amended except in writing signed by the parties hereto. This
Fifth Amendment sets forth the entire understanding of the parties with respect
to the matters set forth herein.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Fifth Amendment to Lease on the day and year first
above written.
ATTEST: CENTRE CITY PARTNERS, L.P.
BY: CONTINENTAL ASSET
MANAGEMENT COMPANY MANAGER
BY: [SIGNATURE ILLEGIBLE] BY: [SIGNATURE ILLEGIBLE]
-------------------------- ---------------------------------
<PAGE>
ATTEST: FEDERATED INVESTORS BUILDING
CORPORATION
BY: [SIGNATURE ILLEGIBLE] BY: [SIGNATURE ILLEGIBLE]
-------------------------- ---------------------------------
<PAGE>
EXHIBIT 21.01
SIGNIFICANT SUBSIDIARIES OF FEDERATED INVESTORS, INC.:
Federated Investors Building Corporation, a Pennsylvania corporation
Federated Securities Corp., a Pennsylvania corporation
Federated Investors Management Company, a Pennsylvania corporation
FII Holdings, Inc., a Delaware corporation
Federated Advisers, a Delaware business trust
Federated Research Corp., a Maryland corporation
Federated Management, a Delaware business trust
Federated Research, a Delaware business trust
Federated Investment Counseling, a Delaware business trust
Federated Global Research Corp., a Delaware corporation
Federated International Management, Ltd., an Ireland company
Federated Shareholder Services, a Delaware business trust
FFSI Insurance Agency Inc., a Massachusetts corporation
Federated Financial Services, Inc., a Pennsylvania corporation
Federated Investors Insurance Inc., a Pennsylvania corporation
Passport Research Ltd., a Pennsylvania limited partnership
Federated Services Company, a Pennsylvania corporation
Federated Funding 1997-1, Inc.
FS Holdings, Inc., a Delaware corporation
Advanced Information Systems, a Delaware business trust
Federated Bank & Trust, a New Jersey bank
Federated Administrative Services, a Delaware business trust
Federated Shareholder Services Company, a Delaware business trust
Retirement Plan Services Company of America, a Delaware business trust,
doing business as "Federated Retirement Plan Services Company"
Edgewood Services, Inc., a New York corporation
Federated Administrative Services, Inc., a Pennsylvania corporation
<PAGE>
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 20, 1998, in the Registration Statement
(Form S-4) and related prospectus of Federated Investors, Inc. dated March 20,
1998.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 19, 1998
<PAGE>
EXHIBIT 23.03
CONSENT OF KPMG PEAT MARWICK, LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated January 25, 1996 included in this
registration statement on Form S-4 of Federated Investors, Inc., with respect
to the consolidated financial statements of Federated Investors for the year
ended December 31, 1995 and to the reference to our firm under the heading
"Experts" in the registration statement.
/s/ KPMG PEAT MARWICK, LLP
Pittsburgh, Pennsylvania
March 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM *INCOME
STATEMENT & BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
*Identify the financial statement(s) to be reference in the legend:
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 22,912
<SECURITIES> 8,945
<RECEIVABLES> 35,344
<ALLOWANCES> 3,266
<INVENTORY> 0
<CURRENT-ASSETS> 76,122
<PP&E> 63,534
<DEPRECIATION> 41,371
<TOTAL-ASSETS> 274,072
<CURRENT-LIABILITIES> 64,053
<BONDS> 221,254
0
0
<COMMON> 627
<OTHER-SE> (41,737)
<TOTAL-LIABILITY-AND-EQUITY> 274,072
<SALES> 0
<TOTAL-REVENUES> 403,719
<CGS> 0
<TOTAL-COSTS> 294,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,130
<INTEREST-EXPENSE> 20,060
<INCOME-PRETAX> 81,983
<INCOME-TAX> 30,957
<INCOME-CONTINUING> 51,026
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 50,577
<EPS-PRIMARY> 0.93
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</TABLE>
