SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
November 18, 1994
U.S. Trust Corporation
(Exact name of registrant as specified in Charter)
New York 0-8709 13-29227955
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
114 West 47th Street, New York, New York 10036
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number,
including area code: (212) 852-1000
Page 1 of 185 pages.
Exhibit Index is on page 5
<PAGE>2
Item 5. Other Events
On November 18, 1994, U.S. Trust Corporation
("U.S. Trust") and The Chase Manhattan Corporation ("Chase")
entered into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Chase will acquire U.S.
Trust's institutional custody, mutual funds servicing and
unit trust businesses (collectively, the "Processing
Businesses") for $363.5 million in Chase common stock.
U.S. Trust will effect the sale of the Processing
Businesses in a two-step transaction. First, U.S. Trust
will spin-off (the "Spin-off") to its shareholders its asset
management, private banking, special fiduciary and corporate
trust businesses (collectively, the "Core Businesses") to a
new holding company ("New Holdings") to be named U.S. Trust
Corporation, with a new bank subsidiary ("New Trustco") to
be named United States Trust Company of New York. In the
Spin-off, U.S. Trust shareholders will receive shares in New
Holdings on a share-for-share basis. The Spin-off will be
effected pursuant to an Agreement and Plan of Distribution
(the "Distribution Agreement") to be entered into between
U.S. Trust and New Holdings and a Contribution and
Assumption Agreement (the "Contribution Agreement") to be
entered into between United States Trust Company of New York
and New Trustco. Immediately after the Spin-off, U.S.
Trust, then holding only the Processing Businesses, will be
merged with and into Chase.
In the Merger, U.S. Trust shareholders will
receive, assuming approximately 9.7 million shares of U.S.
Trust common stock are outstanding at the time of the
merger, approximately $37.47 in Chase common stock for each
share of U.S. Trust. In the event the price of Chase common
stock is below $31 per share at the time of the merger, the
number of shares that Chase will issue in the merger will be
limited to 11,725,806. There is no minimum number of shares
to be issued by Chase in the merger.
In connection with executing the Merger Agreement,
U.S. Trust and Chase executed a term sheet (the "Services
Agreement Term Sheet") setting forth the principal terms
upon which Chase will provide operational services to U.S.
Trust's Core Businesses. Prior to the merger, U.S. Trust
and Chase will enter into a definitive services agreement
incorporating the terms of the Services Agreement Term
Sheet.
<PAGE>3
In addition, immediately prior to the merger, U.S.
Trust and Chase will execute a Tax Allocation Agreement (the
"Tax Allocation Agreement"), providing for certain tax
indemnities, and a Post Closing Covenants Agreement (the
"Post Closing Covenants Agreement"), providing for
indemnities relating to the Processing Businesses and a non-
compete agreement by U.S. Trust with respect to conducting
operations in competition with the Processing Businesses.
The Spin-off and the merger are each subject to
approval by U.S. Trust's shareholders, as well as receipt of
certain regulatory approvals, including approval by the
Federal Reserve Board and state banking authorities and
receipt by U.S. Trust of a favorable Internal Revenue
Service ruling regarding the tax-free nature of the
transaction.
Copies of the Merger Agreement, the Distribution
Agreement, the Contribution Agreement, the Post Closing
Covenants Agreement, the Tax Allocation Agreement and the
Services Agreement Term Sheet are attached hereto as
Exhibit 2, Exhibit 3, Exhibit 4, Exhibit 5, Exhibit 6 and
Exhibit 7, respectively, and are incorporated herein by
reference.
<PAGE>4
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned,
hereunto duly authorized.
U.S. TRUST CORPORATION
(Registrant)
/s/ Richard E. Brinkmann
-------------------------
Richard E. Brinkmann
Senior Vice President and
Comptroller
Dated: November 22, 1994
<PAGE>5
EXHIBIT INDEX
Exhibit
Number Description
1 Press release dated November 18,
1994
2 Agreement and Plan of Merger, dated
as of November 18, 1994, by and
between The Chase Manhattan
Corporation and U.S. Trust
Corporation
3 Form of Agreement and Plan
Distribution
4 Form of Contribution and Assumption
Agreement
5 Form of Post Closing Covenants
Agreement
6 Form of Tax Allocation Agreement
7 Services Agreement Term Sheet
Contact: Allison Cooke Kellogg U.S. TRUST (212) 852-1127
For Release: IMMEDIATE NEWS
RELEASE
U.S. TRUST AGREES TO SELL SECURITIES PROCESSING BUSINESSES
TO CHASE MANHATTAN
New York, N.Y., Nov. 18, 1994-U.S. Trust Corporation and The
Chase Manhattan Corporation have entered into an agreement
under which Chase will purchase U.S. Trust's institutional
custody, mutual funds servicing and unit trust businesses
for $363.5 million in Chase common stock, it was announced
today by H. Marshall Schwarz, U.S. Trust's chairman and
chief executive officer. The transaction, which has been
approved by the boards of directors of both companies, is
subject to approval by the Federal Reserve and state banking
authorities, as well as U.S. Trust's shareholders. The
transaction is expected to be tax-free, subject to a
favorable Internal Revenue Service ruling, Mr. Schwarz
added. U.S. Trust anticipates that the transaction will be
consummated during the second quarter of 1995.
U.S. Trust will effect the sale of the securities processing
businesses in two virtually simultaneous steps, Mr. Schwarz
explained. First, U.S. Trust will spin off to its
shareholders the assets not included in the sale -- its
asset management, private banking, special fiduciary and
corporate trust businesses and related subsidiaries -- in
the form of a new holding company to be named U.S. Trust
Corporation, with a new bank subsidiary to be named United
States Trust Company of New York. U.S. Trust shareholders
will receive shares in the new holding company on a share-
for-share basis.
Immediately following the spin-off, the old holding company
and its principal subsidiary, including only the assets and
liabilities of the securities processing businesses, will be
merged with Chase. In the
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<PAGE>2
merger, U.S. Trust shareholders would receive approximately
$37.47 in Chase common stock for each share of U.S. Trust.
This assumes that there are outstanding at the time of the
merger approximately 9.7 million shares of U.S. Trust, which
includes the exercise of certain employee stock options. At
the current price per share of Chase common stock,
shareholders would receive approximately one share of Chase
stock for each share of U.S. Trust. In the event that the
price of Chase common stock is below $31 per share at the
time of the merger, the number of shares that Chase will
issue will be limited to 11,725,806. There is no minimum
number of shares required to be issued.
Mr. Schwarz noted he anticipates that at the time of the
merger, the new U.S. Trust Corporation will establish an
initial annual dividend of approximately $1.00 per share,
subject to approval of its board of directors.
In conjunction with the merger, Chase and U.S. Trust will
sign an agreement, under which Chase will provide
operational services to U.S. Trust's asset management,
private banking and corporate trust businesses after
completion of the merger.
"The sale of our securities processing businesses and the
outsourcing of our operational services will enable U.S.
Trust to concentrate all of its resources on its core
businesses--asset management services for individuals,
institutions and mutual funds, private banking, special
fiduciary services and corporate trust--where we have
expanded nationally in recent years and where our growth
prospects are very bright," Mr. Schwarz said. "These are
important strategic moves for U.S. Trust, and we're pleased
that the transaction also immediately benefits our
shareholders."
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<PAGE>3
"We're very confident that all our clients will be well
served as Chase acquires our securities processing
businesses and becomes our operational services provider.
Chase is a recognized leader in global custody and related
securities services and embraces our strong commitment to
the highest levels of service," Mr. Schwarz added.
For the nine months ended Sept. 30, 1994, U.S. Trust's
processing businesses accounted for approximately 37% of
U.S. Trust's total revenues and approximately 34% of U.S.
Trust's total operating income before corporate overhead and
taxes, according to Mr. Schwarz.
Of U.S. Trust's total workforce of almost 2,700 people,
approximately 1,150 employees currently working in the
company's securities processing businesses, including
computer services and securities operations, will become
employees of Chase Manhattan as a result of the merger and
outsourcing agreement, said Mr. Schwarz. Up to an
additional 200 U.S. Trust employees in those businesses and
in staff and support areas will be outplaced in the
downsizing that will accompany the transaction.
U.S. trust expects to incur charges of up to $110 million
(after-tax) associated with various downsizing costs and
other expenses related to the transaction, Mr. Schwarz
noted.
U.S. Trust is a financial services company specializing in
asset management, private banking, fiduciary and securities
services, with over $32 billion in assets under management
and more than $419 billion in total assets under
administration. Through its principal subsidiary, United
States Trust Company of New York, and selected offices
nationwide, U.S. Trust serves affluent individuals, families
and institutions.
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<PAGE>1
============================================================
AGREEMENT AND PLAN OF MERGER
Dated as of November 18, 1994,
Between
THE CHASE MANHATTAN CORPORATION,
and
U.S. TRUST CORPORATION
============================================================
<PAGE>2
TABLE OF CONTENTS
Page
Parties and Recitals . . . . . . . . . . . . . . . . . 1
ARTICLE I
The Merger
SECTION 1.1. The Merger . . . . . . . . . . . . 2
SECTION 1.2. Closing . . . . . . . . . . . . . . 2
SECTION 1.3. Effective Time . . . . . . . . . . 2
SECTION 1.4. Effects of the Merger . . . . . . . 3
SECTION 1.5. Certificate of Incorporation
and By-laws . . . . . . . . . 3
SECTION 1.6. Directors . . . . . . . . . . . . . 3
SECTION 1.7. Officers . . . . . . . . . . . . . 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.1. Effect on Capital Stock . . . . . . 3
SECTION 2.2. Exchange of Certificates . . . . . 5
ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties
of the Company . . . . . . . . 7
SECTION 3.2. Representations and Warranties
of CMC . . . . . . . . . . . . 28
ARTICLE IV
Covenants
SECTION 4.1. Covenants of the Company with
Respect to the Retained
Business . . . . . . . . . . . 33
SECTION 4.2. Covenants of the Company . . . . . 37
SECTION 4.3. Covenants of CMC . . . . . . . . . 39
SECTION 4.4. Mutual Covenants . . . . . . . . . 39
<PAGE>3
ARTICLE V
Additional Agreements
SECTION 5.1. Preparation of Form S-4, Form
S-1, Form 10 and the
Proxy Statement;
Stockholder Meeting . . . . . 40
SECTION 5.2. Letter of the Company's
Accountants . . . . . . . . . 41
SECTION 5.3. Letter of CMC's Accountants . . . . 41
SECTION 5.4. Access to Information;
Confidentiality . . . . . . . 41
SECTION 5.5. Legal Conditions to
Distribution and Merger;
Legal Compliance . . . . . . . 42
SECTION 5.6. Rights Agreement . . . . . . . . . 43
SECTION 5.7. Benefit Plans . . . . . . . . . . . 43
SECTION 5.8. Employment Matters . . . . . . . . 44
SECTION 5.9. Employment Agreements . . . . . . . 46
SECTION 5.10. Fees and Expenses . . . . . . . . . 47
SECTION 5.11. Distribution . . . . . . . . . . . 47
SECTION 5.12. Public Announcements . . . . . . . 47
SECTION 5.13. Private Letter Ruling . . . . . . . 47
SECTION 5.14. Use of Name . . . . . . . . . . . . 47
SECTION 5.15. UST-CA and UST-WY . . . . . . . . . 48
SECTION 5.16. Affiliates . . . . . . . . . . . . 48
SECTION 5.17. Stock Exchange Listing . . . . . . 48
SECTION 5.18. Capital Adequacy . . . . . . . . . 48
ARTICLE VI
Conditions Precedent
SECTION 6.1. Conditions to Each Party's
Obligation To Effect the
Merger . . . . . . . . . . . . 48
SECTION 6.2. Conditions to Obligations of
CMC . . . . . . . . . . . . . 49
SECTION 6.3. Conditions to Obligation of
the Company . . . . . . . . . 53
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.1. Termination . . . . . . . . . . . . 55
SECTION 7.2. Effect of Termination . . . . . . . 56
SECTION 7.3. Amendment . . . . . . . . . . . . . 57
SECTION 7.4. Extension; Waiver . . . . . . . . . 57
<PAGE>4
SECTION 7.5. Procedure for Termination,
Amendment, Extension or
Waiver . . . . . . . . . . . . 57
ARTICLE VIII
General Provisions
SECTION 8.1. Nonsurvival of Representations
and Warranties . . . . . . . . 57
SECTION 8.2. Notices . . . . . . . . . . . . . . 58
SECTION 8.3. Definitions . . . . . . . . . . . . 58
SECTION 8.4. Interpretation . . . . . . . . . . 59
SECTION 8.5. Counterparts . . . . . . . . . . . 59
SECTION 8.6. Entire Agreement; No Third-
Party Beneficiaries . . . . . 59
SECTION 8.7. Governing Law . . . . . . . . . . . 59
SECTION 8.8. Assignment . . . . . . . . . . . . 59
SECTION 8.9. Enforcement . . . . . . . . . . . . 60
<PAGE>5
EXHIBITS
Exhibit I - Form of Distribution Agreement
Exhibit II - Form of Contribution Agreement
Exhibit III - Form of Representation Letters
Exhibit IV - Form of License Agreement
Exhibit V - Form of Tax Allocation Agreement
Exhibit VI - Form of Post Closing Covenants
Agreement
Exhibit VII - Form of Rule 145 Letter
SCHEDULES
Schedule 3.1(b) - Subsidiaries
Schedule 3.1(d) - Consents; Approvals
Schedule 3.1(g) - Certain Changes or Events
Schedule 3.1(h) - Litigation; Claims; Proceedings
Schedule 3.1(l) - Material Contracts; Significant
Customers; Customer Agreements;
Fee Schedules
Schedule 3.1(m) - Changes in Benefit Plans or
Collective Bargaining Agreements
Schedule 3.1(n) - List of Benefit Plans; Compliance
Schedule 3.1(q) - License Agreements; Intellectual
Property
Schedule 3.1(r) - Tax Matters
Schedule 3.1(t) - Financial Statements
Schedule 3.1(w) - Real Property Matters
Schedule 3.1(x) - Investment Company Customer
Accounts
Schedule 3.1(y) - Investment Company Customers;
Changes in Fiscal Year;
Shareholder Approval
Schedule 3.1(z) - Customer Information
Schedule 3.1(aa) - Unit Investment Trusts
Schedule 3.1(ab) - Business Information; Uncollected
Funds
Schedule 4.1(c) - Issuance of Securities
Schedule 4.2(c) - Redemption of Indebtedness of
Company
Schedule 5.7 - Benefit Plans
Schedule 5.8(a) - Employees of Retained Company
Schedule 5.8(c) - Certain Severance and Other
Benefits
Schedule 5.8(e) - Transition Bonus Program
<PAGE>6 1
AGREEMENT AND PLAN OF MERGER dated as of
November 18, 1994 (as amended, supplemented or otherwise
modified from time to time, this "Agreement"), between THE
CHASE MANHATTAN CORPORATION, a Delaware corporation ("CMC"),
and U.S. TRUST CORPORATION, a New York corporation (the
"Company).
WHEREAS, the Board of Directors of the Company has
approved a plan of distribution embodied in the form of
agreements attached hereto as Exhibit I (the "Distribution
Agreement") and Exhibit II (the "Contribution Agreement"),
each of which will be entered into prior to the Effective
Time (as defined in Section 1.3), subject to the issuance of
a private letter ruling from the Internal Revenue Service
(the "Service") as described in Sections 6.2(c) and 6.3(c)
hereof in response to a ruling request to be made by the
Company (the "Ruling Request"), pursuant to which (i) (a)
all the assets and liabilities of United States Trust
Company of New York, a New York State chartered bank and
trust company and a direct wholly owned subsidiary of the
Company ("USTNY"), other than the assets and liabilities of
the Retained Business (as defined in Section 3.1(l)), will
be contributed by USTNY to a wholly owned bank subsidiary of
USTNY to be formed by USTNY (such wholly owned subsidiary of
USTNY is referred to herein as "New Trustco") as provided in
the Contribution Agreement, (b) the capital stock of New
Trustco will be distributed by USTNY to the Company as
provided in the Distribution Agreement and (c) all the
assets and liabilities of the Company (including the capital
stock of its direct subsidiaries at such time (including New
Trustco)), other than the assets and liabilities of the
Retained Business, will be contributed to a wholly owned
subsidiary of the Company to be formed by the Company (such
wholly owned subsidiary of the Company is referred to herein
as "New Holdings") as provided in the Distribution Agreement
(the contributions and distributions referred to in clauses
(a) and (b) above are referred to collectively herein as the
"New Trustco Distribution") and (ii) all the shares of
capital stock of New Holdings will be distributed on a pro
rata basis to the Company's stockholders as provided in the
Distribution Agreement (together with the contribution
referred to in clause (c), the "New Holdings Distribution"
and, together with the New Trustco Distribution, the
"Distribution");
WHEREAS, the respective Boards of Directors of CMC
and the Company have determined that, following the
Distribution, the merger of the Company with and into CMC
(the "Merger") with CMC as the surviving corporation (the
"Surviving Corporation") would be advantageous and
beneficial to their respective corporations and
stockholders;
WHEREAS, for Federal income tax purposes, it is
intended that (a) the Distribution shall qualify as a tax-
free distribution within the meaning of Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code") and
(b) the Merger shall qualify as a reorganization under
Section 368(a) of the Code, and this Agreement is intended
to be and is adopted as a plan of reorganization; and
WHEREAS, immediately following the Merger, it is
contemplated that CMC will cause USTNY to merge with, and
into, The Chase Manhattan Bank (National Association), a
national banking association ("CMB") and a wholly-owned
subsidiary of CMC (the "Bank Merger"), and in the Bank Merger
CMB would issue shares of its capital stock in respect of
<PAGE>7 2
the capital stock of USTNY having a fair market value, in
aggregate, approximately equal to the fair market value of
the capital stock of USTNY immediately before the Bank
Merger.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties hereto agree as
follows:
ARTICLE I
The Merger
SECTION 1.1. The Merger. Upon the terms and
subject to the conditions set forth in this Agreement, and
in accordance with the New York Business Corporation Law
(the "NYBCL") and the Delaware General Corporate Law
("DGCL"), the Company shall be merged with and into CMC at
the Effective Time (as hereinafter defined). Following the
Merger, the separate corporate existence of the Company
shall cease and CMC shall continue as the Surviving
Corporation and shall succeed to and assume all the rights
and obligations of the Company in accordance with the NYBCL
and the DGCL. Notwithstanding the foregoing, CMC may elect
at any time prior to the Merger, instead of merging the
Company into CMC as provided above, to merge a subsidiary of
CMC (including a subsidiary of CMC to be formed after the
date of this Agreement) into the Company; provided, however,
that the Company shall not be deemed to have breached any of
its representations, warranties, covenants or agreements set
forth in this Agreement solely by reason of such election.
In such event, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect the
foregoing and, where appropriate, to provide that the
Company shall be the Surviving Corporation.
SECTION 1.2. Closing. The closing of the Merger
(the "Closing") will take place at 10:00 a.m. (subject to
satisfaction or waiver of the conditions set forth in
Sections 6.2 and 6.3) on the first business day after the
end of the first month ending after April 15, 1995, and more
than two business days after satisfaction of the conditions
set forth in Section 6.1 (the "Closing Date"), at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, N.Y. 10019, unless another date or
place is agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. As soon as practi-
cable following the satisfaction or waiver of the conditions
set forth in Article VI, the parties shall file a certifi-
cate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance
with the relevant provisions of the NYBCL and the DGCL, and
shall make all other filings or recordings required under
the NYBCL and the DGCL. The Merger shall become effective
immediately following the Distribution, upon the filing of
the Certificate of Merger with the New York Secretary of
State and the Delaware Secretary of State or at such other
time as the Company and CMC shall agree should be specified
in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").
<PAGE>8 3
SECTION 1.4. Effects of the Merger. The Merger
shall have the effects set forth in Section 906 of the NYBCL
and Section 259 of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges,
powers and franchises of the Company shall vest in the
Surviving Corporation, and all debts, liabilities,
obligations and duties of the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. Certificate of Incorporation and
By-laws. (a) The Certificate of Incorporation of CMC shall
be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The By-laws of CMC as in effect at the
Effective Time shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.6. Directors. The directors of CMC at
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 1.7. Officers. The officers of CMC at
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
Constituent Corporations; Exchange of Certificates
SECTION 2.1. Effect on Capital Stock. As of the
Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Common
Stock, par value $1.00 per share, of the Company ("Company
Common Stock"):
(a) Cancellation of Treasury Stock and CMC-Owned
Stock. Each share of Company Common Stock that is owned by
the Company or by any subsidiary of the Company (but not any
employee stock ownership plan ("ESOP") or other Benefit Plan
(as defined in Section 3.1(n)) of the Company or any of its
subsidiaries) and each share of Company Common Stock that is
owned by CMC or any other subsidiary of CMC, excluding, in
each case, any such share held by the Company, CMC or any of
their subsidiaries in a fiduciary, custodial or similar
capacity (together, in each case, with the associated Right
(as defined in Section 3.1(c)) shall automatically be
canceled and retired and shall cease to exist, and no common
stock, par value $2.00 per share, of CMC ("CMC Common
Stock") or other consideration shall be delivered in
exchange therefor.
<PAGE>9 4
(b) Conversion of Company Common Stock. Subject
to Section 2.2(e), each issued and outstanding share of
Company Common Stock other than (i) shares to be canceled in
accordance with Section 2.1(a) and (ii) as set forth in
paragraph (c) below, shares that have not been voted in
favor of the approval of this Agreement and with respect to
which appraisal rights shall have been perfected in
accordance with Section 623 of the NYBCL ("Dissenters'
Shares"), together with the associated Right shall be
converted into the right to receive a number of fully paid
and nonassessable shares of CMC Common Stock equal to the
Conversion Number (the "Merger Consideration"). The term
"Conversion Number" shall mean a number, expressed to three
decimal places, equal to the fraction of (a) $363,500,000,
divided by (b) the product of (i) the greater of (A) the
Average Value of CMC Common Stock and (B) $31.00,
multiplied by (ii) the number of shares of Company Common
Stock outstanding immediately before the Effective Time.
The term "Average Value of CMC Common Stock" means the 10-
day average of the daily average of the high and low prices
for CMC Common Stock reported on the New York Stock Exchange
Composite Transaction Tape, as reprinted in The Wall Street
Journal, Eastern Edition (or, if unavailable, another
authoritative source), on each of the 10 trading days
immediately preceding the last business day before the
Effective Date. As of the Effective Time, all such shares
of Company Common Stock (and the associated Rights) shall no
longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common
Stock (and the associated Rights) shall cease to have any
rights with respect thereto, except the right to receive the
shares of CMC Common Stock and any cash in lieu of
fractional shares of CMC Common Stock to be issued or paid
in consideration therefor upon surrender of such certificate
in accordance with Section 2.2, without interest.
(c) Shares of Dissenting Stockholders. Notwith-
standing anything in this Agreement to the contrary, no
Dissenters' Shares shall be converted as described in
Section 2.1(b) but shall become the right to receive such
consideration as may be determined to be due in respect of
such Dissenters' Shares pursuant to the laws of the State of
New York; provided, however, that any Dissenters' Shares
(together with the associated Rights) outstanding
immediately prior to the Effective Time and held by a
stockholder who shall, after the Effective Time, lose his or
her right of appraisal, withdraw his or her demand for
appraisal as a matter of right under NYBCL Section 623, or,
with the consent of CMC, otherwise withdraw his or her
demand for appraisal, in either case pursuant to the NYBCL,
shall be deemed to be converted as of the Effective Time
into the right to receive the Merger Consideration. The
Company shall give CMC (i) prompt notice of any written
demands for appraisal of shares of Company Common Stock
received by the Company and (ii) the opportunity to direct
all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written
consent of CMC, voluntarily make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any
such demands.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time,
CMC shall deposit with CMB or such other bank or trust
company as may be designated by CMC (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance
<PAGE>10 5
with this Article II, through the Exchange Agent,
certificates representing the shares of CMC Common Stock
(such shares of CMC Common Stock, together with any
dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding shares
of Company Common Stock. CMC shall provide to the Exchange
Agent, on a timely basis, funds necessary to pay any cash
payable in lieu of fractional shares of CMC Common Stock.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which
immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right
to receive shares of CMC Common Stock pursuant to Section
2.1 (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form
and have such other provisions as CMC may reasonably
specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates
representing shares of CMC Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by CMC,
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 in exchange therefor a certificate
representing that number of whole shares of CMC Common Stock
which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a
certificate representing the proper number of shares of CMC
Common Stock may be issued to a person other than the person
in whose name the Certificate so surrendered is registered,
if such Certificate shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required
by reason of the issuance of shares of CMC Common Stock to a
person other than the registered holder of such Certificate
or establish to the satisfaction of CMC that such tax has
been paid or is not applicable. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the
certificate representing shares of CMC Common Stock and cash
in lieu of any fractional shares of CMC Common Stock as
contemplated by this Section 2.2. No interest will be paid
or will accrue on any cash payable in lieu of any fractional
shares of CMC Common Stock.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect to
CMC Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of CMC Common Stock represented
thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.2(e)
until the surrender of such Certificate in accordance with
this Article II. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole
shares of CMC Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of
CMC Common Stock
<PAGE>11 6
to which such holder is entitled pursuant to Section 2.2(e)
and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with
respect to such whole shares of CMC Common Stock, and (ii)
at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective
Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such
whole shares of CMC Common Stock.
(d) No Further Ownership Rights in Company Common
Stock. All shares of CMC Common Stock issued upon the
surrender for exchange of Certificates in accordance with
the terms of this Article II and any cash paid pursuant to
Section 2.2(c) or 2.2(e) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to
the shares of Company Common Stock 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 shares of Company Common Stock
which 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.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of CMC Common Stock shall be issued
upon the surrender for exchange of Certificates, and
such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder
of CMC.
(ii) Notwithstanding any other provision of
this Agreement, each holder of shares of Company Common
Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a
share of CMC Common Stock (after taking into account
all Certificates registered to such holder) shall
receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of CMC
Common Stock multiplied by the average of the high and
low prices for CMC Common Stock on the business day
immediately before the Closing Date as reported on the
New York Stock Exchange Composite Transaction Tape, as
reprinted in The Wall Street Journal, Eastern Edition.
(f) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the holders
of the Certificates for six months after the Effective Time
shall be delivered to CMC, upon demand, and any holders of
the Certificates who have not theretofore complied with this
Article II shall thereafter look only to CMC for payment of
their claim for CMC Common Stock, any cash in lieu of
fractional shares of CMC Common Stock and any dividends or
distributions with respect to CMC Common Stock.
(g) No Liability. None of CMC, the Company or
the Exchange Agent shall be liable to any person in respect
of any shares of CMC Common Stock (or dividends or
<PAGE>12 7
distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties of
the Company. The Company represents and warrants to CMC as
follows:
(a) Organization, Standing and Corporate Power.
As used in this Agreement, (i) any reference to the Company
and its subsidiaries means the Company and each of its
subsidiaries, (ii) any reference to the Retained Company and
its subsidiaries means the Company and those of its direct
and indirect subsidiaries included in the Retained Business,
including USTNY, (iii) any reference to the Processing
Entities shall mean the Retained Company and its
subsidiaries, but shall not include that portion of the
assets or liabilities and business of the Retained Company
and its subsidiaries that constitutes Acquired Assets,
Assumed Liabilities, Delayed Assets, or Delayed Liabilities
(each as defined in the Contribution Agreement) (iv) any
references to subsidiaries of the Retained Company means the
direct and indirect subsidiaries included in the Retained
Business, including USTNY, (v) any reference to New Holdings
and its subsidiaries means New Holdings at the time of the
Distribution and those entities that at the Distribution
will be direct or indirect subsidiaries of New Holdings,
including New Trustco, and (vi) references to subsidiaries
of New Holdings means those entities that at or immediately
after the Distribution will be direct or indirect
subsidiaries of New Holdings, including New Trustco. As
used in this Agreement, any reference to any event, change
or effect having a material adverse effect on or with
respect to an entity (or group of entities taken as a whole)
means such event, change or effect is, or could reasonably
be expected to be, materially adverse to the business,
properties, assets, results of operations or financial
condition of such entity (or, if with respect thereto, of
such group of entities taken as a whole) or on the ability
of such entity or group of entities to consummate the
transactions contemplated hereby, including the Distribution
and the Merger. The Company is a bank holding company
registered under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"). USTNY is a wholly
owned subsidiary of the Company and a banking corporation
organized under the laws of the State of New York. Each of
the Retained Company and its subsidiaries is a bank or
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Retained
Company and each of its subsidiaries is duly qualified or
licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on Mutual Funds Service Company, a Delaware
corporation ("MFSC"), or on the Retained Company and its
subsidiaries taken as a whole. True, accurate and complete
copies of the Certificate of Incorporation and By-laws of
the Retained Company and of each of its
<PAGE>13 8
subsidiaries, as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to CMC.
The Company has made available to legal counsel for CMC
true, accurate and complete copies of the minute books of
the Retained Company and each of its subsidiaries as
maintained by the Company or such subsidiary, as the case
may be, as of the date hereof for the period from January 1,
1990 to and including September 30, 1994, and the Company
has no reason to believe that such minute books do not
contain minutes of all meetings of the boards of directors
and shareholders of the Company or the applicable subsidiary
for such period.
(b) Subsidiaries. Schedule 3.1(b) lists each
subsidiary of the Retained Company. All the outstanding
shares of capital stock of each subsidiary of the Retained
Company have been validly issued and are fully paid and
nonassessable and, except for directors' qualifying shares,
if any, or as set forth in Schedule 3.1(b), are owned by the
Retained Company, by another subsidiary of the Retained
Company or by the Retained Company and another such
subsidiary, free and clear of all adverse claims,
restrictions on voting or transfer, pledges, claims, liens,
charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"). Except for the
capital stock of the subsidiaries of the Retained Company
and except for the ownership interests set forth in Schedule
3.1(b), the Retained Business does not include any ownership
interest, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint
venture or other entity. The deposits of each subsidiary of
the Retained Company that accepts deposits are insured by
the Federal Deposit Insurance Corporation ("FDIC"), to the
extent provided by law.
(c) Capital Structure. As of the Business Day
immediately preceding the date of this Agreement, the
authorized capital stock of the Company consists of
40,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $1.00 per share. At
the close of business on September 30, 1994, (i) 9,386,220
shares of Company Common Stock and no shares of preferred
stock were issued and outstanding, (ii) 2,125,530 shares of
Company Common Stock were held by the Company in its
treasury, (iii) 1,790,328 shares of Company Common Stock
were reserved for issuance pursuant to the Benefit Plans (as
defined in 3.1(n)) of the Company and its subsidiaries and
(iv) 300,000 shares of Series A Participating Cumulative
Preferred Stock were reserved for issuance in connection
with the rights (the "Rights") to purchase shares of Series
A Participating Cumulative Preferred Stock issued pursuant
to the Rights Agreement dated as of January 26, 1988, as
amended as of December 12, 1989 (as amended from time to
time, the "Rights Agreement"), between the Company and First
Chicago Trust Company of New York, as Rights Agent (the
"Rights Agent"). Except as set forth above, at the close of
business on September 30, 1994, 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 pursuant to the Benefit Plans will be,
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There
are not any bonds, debentures, notes or other indebtedness
of the Company or any subsidiary of the Retained Company
having the right to vote (or convertible into, or exchange-
able for, securities having the right to vote) on any
matters on which stockholders of the Company or such subsi-
diary, as the case may be, may vote. Except as set forth
above there are not, and except as set forth above or as
<PAGE>14 9
contemplated by Section 4.1(e) immediately prior to the
Effective Time there will not be, any securities, options,
warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the
Retained Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Retained Company
or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Retained
Company or of any of its subsidiaries or obligating the
Retained Company or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or
undertaking. As of the close of business on the Business
Day immediately preceding the date of this Agreement, there
are not any outstanding contractual obligations of the
Retained Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries. The Company has
delivered to CMC a complete and correct copy of the Rights
Agreement as amended and supplemented to the date of this
Agreement.
(d) Authority; Noncontravention. The Company
has, and, in the case of any Documents (as defined in the
Contribution Agreement) executed at a later time, Company,
New Holdings, USTNY and New Trustco will have, the requisite
corporate power and authority (subject to the approvals
described in the next sentence) to enter into this Agreement
and the other Documents and to consummate the transactions
contemplated hereby and thereby. The execution and delivery
of this Agreement and the other Documents and the
consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company (other
than, with respect to the Merger, the approval and adoption
of this Agreement by the affirmative vote of the holders of
Company Common Stock representing 66-2/3% of the shares
entitled to vote (such 66-2/3%, the "Requisite
Stockholders"), formal declaration of the Distribution by
the Company's Board of Directors (which will be obtained
prior to the Distribution) and approval of the Distribution
by the affirmative vote of the Requisite Stockholders).
This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and
binding obligation of CMC, constitutes a valid and binding
obligation of the Company, enforceable against the Company
in accordance with its terms. Each of the other Documents
has been or prior to the Merger or the other transactions
contemplated thereby will be duly executed and delivered by
each of the Company, USTNY, New Trustco and New Holdings, as
the case may be, and constitutes or upon such execution and
delivery will constitute a valid and binding obligation of
each of the Company, USTNY, New Trustco and New Holdings,
enforceable against it in accordance with its terms. None
of the execution and delivery of this Agreement and the
other Documents or the consummation of the transactions
contemplated hereby or thereby and compliance with the
provisions of this Agreement and the other Documents will
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 material obligation or to loss of a
material benefit under, or result in the creation of any
Lien upon any of the material properties or assets of (i)
New Holdings or the Retained Company or any subsidiary of
either under the Certificate of Incorporation or By-laws or
comparable charter or organizational documents of the
Company, New Holdings or any subsidiary of either, (ii) the
Retained Company or any of its subsidiaries under any
Contract (as defined in the Contribution
<PAGE>15 10
Agreement) to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any
of their assets are bound, (iii) subject to the governmental
filings and other matters referred to in the following
sentence, the Retained Company or any of its subsidiaries,
under any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Retained Company, or any
of its subsidiaries or their respective properties or assets,
(other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that
do not relate to Customer Agreements (as defined in the Con-
tribution Agreement) or that individually or in the aggregate
would not (I) have a material adverse effect on MFSC or on the
Processing Entities taken as a whole, (II) materially impair
the ability of the Company or any of its subsidiaries to
perform their obligations under this Agreement or any of the
other Documents to which the Company or such subsidiary is a
party or (III) prevent the consummation of any of the transac-
tions contemplated by this Agreement or any of the other
Documents) or (iv) subject to the governmental filings and
other matters referred to in the following sentence, New
Holdings and its subsidiaries, under any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable
to New Holdings or any of its subsidiaries or their respective
properties or assets or any Contract to which New Holdings or
any of its subsidiaries is a party (other than, in the case of
clause (iv), such conflicts, violations, defaults, rights,
losses or liens that individually or in the aggregate would not
(I) have material adverse effect on New Holdings and its
subsidiaries taken as a whole, (II) materially impair the
ability of New Holdings or any of its subsidiaries to perform
its obligations under any Document to which it or any such
subsidiary is a party or (III) prevent the consummation of any
transaction contemplated by this Agreement). No consent,
approval, order or authorization of, or registration, declar-
ation or filing with, any Federal, state or local government or
any court, administrative agency or commission or other govern-
mental authority or agency, or self-regulatory organization,
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
and any of the other Documents to which it is a party or the
consummation by the Company or such subsidiary, as the case may
be, of the transactions contemplated hereby or thereby, except
for (i) filings pursuant to the Bank Holding Company Act, (ii)
the filing with the Securities and Exchange Commission ("SEC")
of (x) a proxy statement relating to the approval by the
Company's stockholders of this Agreement (as amended or
supplemented from time to time, the "Proxy Statement"), (y)
potentially, a registration statement on Form S-1 relating to
the Distribution and (z) a registration statement on Form 10
(the "Form 10") under, and such reports under Section 13(a) of,
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement,
the other Documents and the transactions contemplated hereby
and thereby, (iii) the filing of the Certificate of Merger with
the New York Secretary of State and the Delaware Secretary of
State and appropriate documents with the relevant authorities
of other states in which the Company or any of its subsidiaries
is qualified to do business, (iv) filings or applications with
(A) the New York State Banking Department in connection with
the organization of New Trustco, (B) FDIC and the Board of
Governors of the Federal Reserve System in connection with
obtaining FDIC insurance for New Trustco and having New Trustco
become a member of the Federal Reserve System and (C) various
State bank regulatory authorities in connection with the
Distribution, (v) such filings as may be required in connection
with the Gains Taxes (as defined in Section 3.2(c)), (vi) such
consents, approvals, orders, authorizations, registrations,
declarations and filings as are set forth
<PAGE>16 11
on Schedule 3.1(d), and (vii) such other consents, approvals,
orders, authorizations, registrations, declarations and filings
the absence of which could not reasonably be expected to have a
material adverse effect on MFSC or on the Processing Entities
taken as a whole.
(e) SEC Documents; Undisclosed Liabilities. The
Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1,
1994 (the "SEC Documents"). As of their respective dates (as
amended), the SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933 (the
"Securities Act"), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Except to the extent that information contained in any SEC
Document has been revised or superseded by a later Filed
Company SEC Document (as defined in Section 3.1(g)), none of
the SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a basis
consistent during the periods involved (except as may be
indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as
set forth in the Filed Company SEC Documents, neither the
Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance
sheet of the Company and its consolidated subsidiaries or in
the notes thereto and which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect
on MFSC or on the Processing Entities taken as a whole.
(f) Information in Disclosure Documents and
Registration Statements. None of the information supplied or
to be supplied by the Company or its representatives for
inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by CMC in
connection with the issuance of shares of CMC Common Stock in
the Merger (the "Form S-4") or in any registration statement on
Form S-1 or any other applicable form to be filed with the SEC
by New Holdings in connection with the distribution of shares
of Common Stock, par value $1.00 per share, of New Holdings
("New Holdings Common Stock") in the Distribution (the "Form
S-1") will, at the time such Registration Statements become
effective under the Securities Act and at the Effective Time,
in the case of the Form S-4, and at the time of the meeting of
stockholders of the Company to be held in connection with the
Merger and the Distribution and at the time of the Distribu-
tion, in the case of the Form S-1, contain any untrue statement
of a material fact or omit to state any material fact required
<PAGE>17 12
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading and (ii) the Proxy Statement will, at the
date mailed to the Company's stockholders and at the time of
the meeting of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and the Form S-1 will comply as to
form in all material respects with the provisions of the
Securities Act or the Exchange Act, as applicable, and the
rules and regulations thereunder, except that no representation
is made by the Company with respect to statements made therein
based on information supplied by CMC for inclusion in the Proxy
Statement or the Form S-1, respectively, or with respect to
information concerning CMC or any of its Subsidiaries
incorporated by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed
Company SEC Documents") or as set forth in Schedule 3.1(g) or,
as of the Closing Date, as disclosed in the Company SEC
Documents filed and publicly available before the Closing Date
or in Schedule 3.1(g) or in the Company Bring Down Certificate
(as defined in Section 6.2(a)), since the date of the most
recent audited financial statements included in the Filed
Company SEC Documents, the Processing Entities have conducted
their business only in the ordinary course, consistent with
past practice, and there has not been (i) any material adverse
change in MFSC or in the Processing Entities taken as a whole
or any event that could reasonably be expected to have a
material adverse effect on MFSC or on the Processing Entities
taken as a whole, (ii) any split, combination or
reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock (other than phantom share units issued under any
Benefit Plan as defined in Section 3.1(n)), (iii) (x) any grant
by the Company or any of its subsidiaries of any general
increase in the compensation payable to employees who are
listed in Schedule 5.8(a) who are Prospective Retained
Employees (as defined in Section 5.8(a)), other than as
provided in Section 5.8(e) of this Agreement, normal increases
in base salary, and annual bonuses consistent with past
practices made in the ordinary course of business and the
payment of bonuses for the period from January 1, 1995 through
the Closing Date under any amendment made after the date of
this Agreement to the 1990 Annual Incentive Plan or to the
Incentive Award Plan maintained by USTNY, or as was required
under employment agreements in effect as of the date of the
most recent audited financial statements included in the Filed
Company SEC Documents, or (y) any entry by any of the
Processing Entities into any employment, severance or
termination agreement with any executive officer who is a
Prospective Retained Employee, other than as provided in
Section 5.8(c), (iv) any damage, destruction or loss, whether
or not covered by insurance, that has had or is likely to have
a material adverse effect on MFSC or on the Processing Entities
taken as a whole, (v) any change in accounting methods,
principles or practices by the Company or any of its
subsidiaries, except insofar as may have been required (in the
opinion of the Company's independent accountants) by a change
in generally accepted accounting principles, (vi) any material
decrease in the assets in the custody of or cash deposits held
by the Processing Entities as a result of terminations of
<PAGE>18 13
Customer (as defined in the Contribution Agreement) accounts or
withdrawals of assets from Customer accounts, other than such
decreases as shall have occurred in the ordinary course or
seasonal fluctuations on a basis consistent with ordinary and
general economic conditions, (vii) any material amendment,
modification, or termination of any Contract, which had it not
been so amended, modified or terminated, would be a Material
Contract (as defined in Section 3.1(l)), (viii) any acquisition
of a material asset whose value upon liquidation would be
materially less than its book value, except for such
acquisitions of assets in the ordinary course of business
consistent with past practice as would not, individually or in
the aggregate, have a material adverse effect on MFSC or on the
Processing Entities taken as a whole, (ix) any sale or
disposition of any material assets or properties by the
Processing Entities, except in the ordinary course of business,
consistent with past practice, (x) any waiver of any material
rights of value by any of the Processing Entities, without
adequate consideration, except for such waivers in the ordinary
course of business consistent with past practice which would
not, individually or in the aggregate, have a material adverse
effect on MFSC or on the Processing Entities taken as a whole
or (xi) any entry into any agreement, arrangement or commitment
to take any of the actions set forth in this Section 3.1(g).
(h) Litigation. On the date of this Agreement,
except as set forth in Schedule 3.1(h), or as disclosed in the
Filed Company SEC Documents, and at the Closing Date, except
for the foregoing and claims, investigations, suits, actions or
proceedings arising, or to the knowledge of the Company first
threatened between date hereof and the Closing Date and
disclosed in the Company Bring Down Certificate (as defined in
Section 6.2(a)), there is no claim, investigation, suit, action
or proceeding pending or, to the knowledge of the Company,
threatened, against any of the Company or its subsidiaries
before or by any Governmental Entity or arbitrator that,
individually or in the aggregate, could reasonably be expected
to (i) have a material adverse effect on MFSC or on the
Processing Entities taken as a whole, (ii) materially impair
the ability of the Retained Company or New Holdings or any
subsidiary of either to perform any obligation under this
Agreement or any of the other Documents, (iii) prevent, delay,
alter or require the payment of damages in excess of $100,000
upon the consummation of any or all of the transactions
contemplated hereby or thereby, or (iv) result in liability of
any or all of the Processing Entities in excess of, with
respect to any individual claim, investigation, suit, action or
proceeding, $100,000 or, with respect to all such claims,
investigations, suits, actions or proceedings, $500,000, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against any of
the Processing Entities having, or which could reasonably be
expected to have, any such effect. Except as set forth in
Schedule 3.1(h), there are no unpaid judgments, injunctions,
orders, arbitration decisions or awards, or other judicial or
administrative mandates outstanding against any of the
Processing Entities. Schedule 3.1(h) also sets forth a brief
summary of all claims, investigations, suits, actions, or
proceedings against any of the Processing Entities that have
been settled or otherwise determined at any time since
January 1, 1994 resulting in liability of the Processing
Entities in excess of, with respect to any individual claim,
investigation, suit, action or proceeding, $100,000 or, with
respect to all such claims, investigations, suits, actions or
proceedings, $500,000.
<PAGE>19 14
(i) Agreements with Regulators. Neither the Company
nor any of its subsidiaries is a party to any written agreement
or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to
any order, decree or directive by, or is a recipient of any
extraordinary supervisory letter from, or since January 1, 1993
has been required to adopt any board resolution by, any Federal
or state Governmental Entity charged with the supervision or
regulation of banks or bank holding companies, or engaged in
the insurance of bank deposits (the "Bank Regulators") or
charged with the supervision or regulation of transfer agents
and securities custodians (together with the Bank Regulators,
the "Regulators"), nor has the Company or any of its
subsidiaries been advised by any Regulator that it is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission or
requiring (or is considering the appropriateness of requiring)
the adoption of any such board resolution.
(j) Compliance with Applicable Laws. On the date of
this Agreement, except as set forth in Schedule 3.1(j), and at
the Closing Date, except for the foregoing and as set forth in
the Company Bring Down Certificate, the Processing Entities
hold all permits, licenses, variances, exemptions, orders and
approvals of, and have made all filings, applications and
registrations with, all Governmental Entities which
individually or in the aggregate are material to the operation
of the business of MFSC or of the Processing Entities taken as
a whole (the "Retained Company Permits"). All Retained Company
Permits are in full force and effect in all material respects.
The Retained Company and its subsidiaries are in compliance
with the terms of the Retained Company Permits, except where
the failure so to comply would not have a material adverse
effect on MFSC or on the Processing Entities taken as a whole.
Except as disclosed in the Filed Company SEC Documents prior to
the date of this Agreement, the business of the Processing
Entities is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for
possible violations that individually or in the aggregate do
not, and could not reasonably be expected to, have a material
adverse effect on MFSC or on the Processing Entities taken as a
whole. Except for routine examinations by Bank Regulators, as
of the date of this Agreement, to the knowledge of the Company,
no investigation by any Governmental Entity with respect to the
Retained Company or any of its subsidiaries is pending or
threatened, other than, in each case, those the outcome of
which could not reasonably be expected to have a material
adverse effect on MFSC or on the Processing Entities taken as a
whole.
(k) Brokers or Finders. No broker, investment
banker, financial advisor or other person, other than CS First
Boston Corporation and S. V. Murphy & Co., Inc., the fees and
expenses of which will be paid by the Company, is entitled to
any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions
contemplated by this Agreement and the other Documents based
upon arrangements made by or on behalf of the Company.
<PAGE>20 15
(l) Retained Business.
(i) The "Retained Business" means the business
conducted with certain assets of the Company and USTNY,
MFSC and U.S. Trust Company of Wyoming, a Wyoming
corporation ("UST-WY"), and the liabilities associated
with such assets, in each case other than the Acquired
Assets, the Assumed Liabilities, the Delayed Assets and
the Delayed Liabilities (each as defined in the
Contribution Agreement) and the Acquired Assets and
Assumed Liabilities (each as defined in the Distribution
Agreement) and consists of (w) the Related Back Office,
(x) the UIT Business (as defined in the Contribution
Agreement), (y) the MFS Business (as defined in the
Contribution Agreement) and (z) the IAS Business (as
defined in the Contribution Agreement, and subject to the
exceptions set forth in such definition).
(ii) At the Effective Time, except for the
Acquired Assets, the Delayed Assets and except as
contemplated by the Distribution Agreement, the
Contribution Agreement, the Services Agreement (as defined
in the Contribution Agreement), and the License Agreement
(as defined in the Contribution Agreement), neither New
Holdings nor any of its subsidiaries will use in the
conduct of its business or own or have rights to use any
assets or property, whether tangible, intangible or mixed,
which are also used in the conduct of the business of the
Retained Business. At the Effective Time neither New
Holdings nor any of its subsidiaries will be a party to
any material agreement, arrangement or understanding with
the Retained Company or any of its subsidiaries (other
than the Documents and agreements specifically
contemplated thereby), including, without limitation, any
Material Contract providing for the furnishing of services
or rental of real or personal property to or from, or
otherwise relating to the business or operations of, any
of the Retained Company or any of its subsidiaries or
pursuant to which the Retained Company or any of its
subsidiaries may have any material obligation or
liability. After the Effective Time, none of the Retained
Company or any of its subsidiaries will have any liability
whatsoever, direct or indirect, contingent or otherwise,
in any way relating to the business, operations,
indebtedness, assets or liabilities of New Holdings or any
of its subsidiaries, except as contemplated by the other
Documents.
(iii) Except as set forth in Schedule 3.1(l)
or, at the Closing Date, as disclosed in the Company Bring
Down Certificate, (w) all Material Contracts, together
with all modifications and amendments thereto, are valid
and binding obligations of the parties thereto and in full
force and effect, (x) none of the Material Contracts
contains a provision described in clause (E), (M) or (O)
of the definition of the term "Material Contracts," (y)
neither the Retained Company nor any of its subsidiaries
is in breach or default under any Customer Agreement,
except for such breaches or defaults in the ordinary
course of business that do not, and will not with the
passage of time, individually or in the aggregate, have a
material adverse effect on MFSC or on the Processing Enti-
ties taken as a whole, or in any material respect under
any other Material Contract and, to the knowledge of the
Company no other party is in material default thereunder
and (z) neither the Retained Company nor any of its subsi-
diaries has received any notice of the intention of any
significant customer listed in Schedule 3.1(l) (each such
<PAGE>21 16
listed customer, a "Significant Customer") to terminate,
or not to renew, any Customer Agreement or to materially
reduce the required level of services under any such
Customer Agreement. Except as set forth in Schedule
3.1(l) and except for the Customer Agreements and all
Computer Leases (as defined in the Contribution Agreement)
or agreements relating solely to Acquired Assets, neither
the Retained Company nor any subsidiary of the Retained
Company is party to any Contract that is a Material
Contract. Except as set forth in Schedule 3.1(l), or, at
the Closing Date, as disclosed in the Company Bring Down
Certificate, none of the Customer Agreements with any
Significant Customer, or any other arrangements or under-
standings relating to the Company or any of its
subsidiaries rendering of Processing Services to any
Significant Customer, contains any undertaking by the
Company or any of its subsidiaries to cap fees at other
than the normal level that is provided for in the relevant
Customer Agreement or reimburse or waive any or all fees
thereunder. True and complete copies of each Material
Contract, including standard terms and a current fee
schedule for each Customer Agreement, have been made
available to the CMC. Schedule 3.1(l) also sets forth the
fee schedules in effect at December 31, 1993 (with respect
to MFSC only) and September 30, 1994 and any fee
adjustments implemented at any time since January 1, 1994
or presently proposed to be implemented, with respect to
the Significant Customers. Except as set forth on
Schedule 3.1(l), as of the date of this Agreement, and, as
of the Closing Date, as disclosed in the Company Bring
Down Certificate, all understandings with Significant
Customers to provide Processing Services for consideration
in excess of $100,000 per annum are incorporated into duly
executed, and to the best of the Company's knowledge,
valid and enforceable written contracts with the
Processing Entities.
As used herein, the term "Material Contract", shall
mean any Contract to which any of the Processing Entities is a
party or by which any of the Processing Entities or any of the
assets of any of the Processing Entities is bound, that is any
of the following: (A) a Contract of employment or a consulting
agreement with any person listed in Schedule 5.8(a) that is
other than "at-will" and contains any term requiring any
termination benefits other than under the Company's generally
applicable severance plan; (B) a Contract with any labor union
or association; (C) a Contract with any affiliate of the
Company; (D) a Contract not made in the ordinary course of
business; (E) a Contract containing a covenant not to compete;
(F) a loan or similar agreement relating to the borrowing of
money or any guarantee of indebtedness of any other person in
excess of $100,000; (G) any lease or sublease relating to real
property; (H) any Contract not fully performed for the purchase
of any commodity, material, services or equipment, including
without limitation fixed assets, for a price in excess of
$100,000 in the aggregate over the life of the Contract; (I)
any license agreement (as licensor or licensee) providing for
future payments in excess of $100,000; (J) any other Contract
which creates future payment obligations in excess of $100,000;
(K) any Customer Agreement; (L) any Contract with a
subcustodian, depositary, or clearing agency; (M) any Contract
that obligates the Retained Company or any of its subsidiaries
to obtain all or a substantial portion of its requirements of
any goods or services from, or supply all or a substantial
portion of the requirements for any goods or services of, any
other person; (N) any Contract that is material to the conduct
of the Retained Business; (O) other than the Broadway Lease (as
defined in the Contribution Agreement), the Tremont Lease (as
defined in the Distribution Agreement) or any Computer
<PAGE>22 17
Lease, a put or option Contract that would obligate the
Retained Company or any of its subsidiaries to sell any asset
other than a Retained Asset or Delayed Asset, to sell any
Retained Asset that is reasonably necessary to the conduct of
the Processing Business and Related Back Office, or to sell any
material asset at a bargain price or to buy any material asset
at a material premium; and (P) other than the Broadway Lease,
the Tremont Lease or any Computer Lease, any Contract that
expressly limits the right of the Retained Company or any of
its subsidiaries to terminate the Contract upon less than six
months' notice or expressly requires it to pay liquidated
damages of more than $100,000 upon early termination.
(m) Absence of Changes in Benefit Plans. Except as
set forth in Schedule 3.1(m) or as disclosed in the Filed
Company SEC Documents, since the date of the most recent
audited financial statements included in the Filed Company SEC
Document there has not been any adoption or amendment in any
material respect by the Company or any of its subsidiaries of
any collective bargaining agreement or any Benefit Plan (as
defined in Section 3.1(n)) other than any adoption or amendment
of a Benefit Plan that is not prohibited under Section 4.1(h).
(n) Benefit Plans, Employment and Labor Relations.
(i) Schedule 3.1(n) contains a list of all
"employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein
as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other plans,
agreements, policies or arrangements relating to stock
options, stock purchases, compensation, deferred
compensation, severance, and other employee benefits, in
each case maintained or contributed to as of the date of
this Agreement by the Company or any of its subsidiaries
or any other person or entity that, together with the
Company, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (a "Commonly
Controlled Entity") for the benefit of any current or
former employees, officers or directors of the Company or
any Commonly Controlled Entity (collectively, the "Benefit
Plans"). The Company has made available to CMC true,
complete and correct copies of (w) each Benefit Plan (or,
in the case of any unwritten Benefit Plans, descriptions
thereof), (x) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to
each Benefit Plan (if any such report was required), (y)
the most recent summary plan description for each Benefit
Plan for which such summary plan description is required
and (z) each trust agreement or group annuity contract
relating to any Benefit Plan.
(ii) Each Benefit Plan has been administered in
all material respects in accordance with its terms and in
compliance in all material respects with the applicable
provisions of ERISA and the Code.
(iii) Neither the Company nor any Commonly
Controlled Entity has incurred a "complete withdrawal"
or a "partial withdrawal" (as such terms are defined in
Section 4203 and Section 4205, respectively, of ERISA)
with respect to any "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA) that has led
<PAGE>23 18
to or could lead to the imposition of a material
withdrawal liability under Section 4201 of ERISA that
remains unpaid as of the date hereof; and neither the
Company nor any Commonly Controlled Entity maintains or
contributes to or is obligated to maintain or contribute
to any such multiemployer plan.
(iv) Neither the Company nor any Commonly
Controlled Entity has incurred any material liability,
and no event has occurred or set of circumstances exists
that could reasonably result in any material liability,
under Title I or Title IV of ERISA (other than to a
Pension Plan for contributions not yet due or to the
Pension Benefit Guaranty Corporation for payment of
premiums not yet due) or under Section 412 or Chapter 43
of the Code that has not been fully paid as of the date
hereof.
(v) As of the most recent valuation date for
any Pension Plan subject to Section 412 of the Code or
Title IV of ERISA, other than any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA, the
fair market value of the assets of such Pension Plan
exceed the present value (determined on the basis of
reasonable assumptions employed by the independent
actuary for such Pension Plan) of the "benefit
liabilities" (within the meaning of Section 4001(a)(16)
of ERISA) of such Pension Plan.
(vi) The Company has heretofore provided CMC
with access to complete and correct copies of each
contract of employment or consulting agreement with any
person listed in Schedule 5.8(a). Neither the Company
nor any of its subsidiaries is a party to, or bound by,
any Contract with any labor union or association,
including, without limitation, any collective
bargaining, labor or similar agreement. The Company and
each of its subsidiaries is in compliance with all
applicable laws respecting employment and employment
practices, terms and conditions of employment and wages
and hours and are not engaged in any unfair labor
practices except where the failure to so comply or the
result of such unfair labor practice, as the case may
be, would not have a material adverse effect on the
Retained Company and its subsidiaries. Except as set
forth in Schedule 3.1(n),
(1) there is no unfair labor practice
charge or complaint against any of the Company
and its subsidiaries pending, or to the
knowledge of the Company, threatened before
the National Labor Relations Board;
(2) there has not occurred nor, to the
knowledge of the Company, has there been
threatened, a labor strike, request for
representation, work stoppage or lockout;
(3) there is no representation claim or
petition pending before the National Labor
Relations Board respecting the employees of
any of the Company and its subsidiaries;
<PAGE>24 19
(4) no grievance or any arbitration
proceeding arising out of any collective
bargaining agreement to which any of the
Company and its subsidiaries is a party is
pending;
(5) no charges with respect to or
relating to any of the Company and its
subsidiaries are pending before the Equal
Employment Opportunity Commission or any
state, local or foreign agency responsible for
the prevention of unlawful employment
practices;
(6) no claims relating to employment or
loss of employment with any of the Company and
its subsidiaries are pending in any federal,
state or local court or in any other
adjudicatory body and, to the knowledge of
Company, no such claims against any of the
Company and its subsidiaries have been
threatened; and
(7) none of the Company and its
subsidiaries has received notice of the intent
of any federal, state, local or foreign agency
responsible for the enforcement of labor or
employment regulations to conduct an
investigation of or relating to any of the
Company and its subsidiaries, and no such
investigation is in progress.
(o) State Takeover Statutes. The Board of
Directors of the Company has approved the Merger, the
Distribution, this Agreement and the other Documents and the
transactions contemplated hereby and thereby and such
approval is sufficient to render inapplicable to the Merger,
the Distribution, this Agreement and the other Documents and
the transactions contemplated by this Agreement and such
other Documents the provisions of Section 912 of the NYBCL.
To the best of the Company's knowledge, no other state
takeover statute or similar statute or regulation (other than
state banking or financial institution laws and regulations)
applies or purports to apply to the Merger, the Distribution,
this Agreement, and the other Documents or any of the
transactions contemplated by this Agreement, or such other
Documents.
(p) Rights Agreement. The Company has taken all
necessary action to (i) render the Rights inapplicable to the
Merger, the Distribution and the other transactions
contemplated by this Agreement and the other Documents and
(ii) ensure that (y) neither CMC nor any of its affiliates is
an "Acquiring Person" (as defined in the Rights Agreement)
and (z) neither a Distribution Date nor a Triggering Event
(each as defined in the Rights Agreement) will occur by
reason of the announcement or consummation of the Merger or
the consummation of any of the other transactions
contemplated by this Agreement and the other Documents.
(q) Intellectual Property. Except for third-party
PC software installed on servers, workstations and personal
computers, Schedule 3.1(q) sets forth a list of all licenses
held by the Processing Entities for all application and
system software utilized in the conduct of the Retained
Business. Except as set forth in Schedule 3.1(q), and
subject to obtaining any required third party consents, the
Retained Company and its subsidiaries own or have, or on the
<PAGE>25 20
delivery of the License Agreement will have, rights to use
all systems and applications software reasonably necessary to
the conduct of the Processing Business and Related Back
Office in the manner currently being conducted and such use
does not, and will not immediately after the Effective Time,
conflict with the rights of others, except for such conflicts
that individually or in the aggregate have not had and are
not reasonably likely to have a material adverse effect on
MFSC or on the Processing Entities taken as a whole.
(r) Taxes. Each of the Company and each of its
subsidiaries has filed all Federal income tax returns and all
other material returns and reports required to be filed by it
and has paid (or the Company has paid on its behalf) all
material taxes required to be paid by it, and the most recent
financial statements contained in the Filed Company SEC
Documents reflect an adequate reserve for all taxes payable
by the Company and its subsidiaries for all taxable periods
and portions thereof through the date of such financial
statements. Except as disclosed in Schedule 3.1(r), no
deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries, and
no requests for waivers of the time to assess any such taxes
are pending. The Federal income tax returns of the Company
and each of its subsidiaries consolidated in such returns
have been examined by and settled with the United States
Internal Revenue Service for all years through 1987. As used
in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise and other
taxes, tariffs or governmental charges of any nature
whatsoever.
(s) Opinion of Financial Advisor. The Company has
received the opinion of CS First Boston Corporation, dated
the date of this Agreement, to the effect that, as of such
date, the consideration to be received in the Merger by the
Company's stockholders is fair to the Company's stockholders
from a financial point of view, a signed copy of which
opinion has been delivered to CMC.
(t) September Balance Sheets. Attached as Exhibit
3.1(t) hereto are the unaudited balance sheets of the
Processing Entities on a combined basis and of MFSC on an
individual basis as of September 30, 1994 (the "September
Balance Sheets"). Such balance sheets have been prepared in
accordance with the Accounting Principles (as set forth in
Schedule 1.1A of the Contribution Agreement) (except as may
be indicated in the notes thereto) and fairly present the
combined assets and liabilities of the Processing Entities
and of MFSC as of the date thereof. Except as set forth in
the September Balance Sheets, none of the Processing Entities
had as of the date thereof any liabilities or obligations of
any nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting
principles to be set forth on a combined balance sheet of the
Processing Entities or a balance sheet of MFSC or in the
notes thereto which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on
MFSC or on the Processing Entities taken as a whole.
(u) Books of Account. The books of account of the
Processing Entities are maintained in all material respects
in compliance with all applicable legal and accounting
requirements.
<PAGE>26 21
(v) Reports. Since December 31, 1993, the Company
and its subsidiaries have filed all reports, registrations
and statements, together with any amendments required to be
made with respect thereto, that were required to be filed
with any applicable federal, state, local or foreign
authorities, except where the failure to so file would not,
individually or in the aggregate, have a material adverse
effect on the financial condition, business or results of
operations of MFSC or of the Processing Entities taken as a
whole (all such reports and statements are collectively
referred to herein as the "Company Reports"). As of their
respective dates, the Company Reports complied with the
statutes, rules, regulations and orders enforced or
promulgated by the regulatory authority with which they were
filed except where the failure to comply with such statutes,
rules, regulations and orders would not, individually or in
the aggregate, have a material adverse effect on the
financial condition, business or results of operations of
MFSC or of the Processing Entities taken as whole.
(w) Properties.
(i) Except (A) as may be reflected in the
September Balance Sheets, (B) for any lien for current
taxes not yet delinquent, (C) for pledges to secure
deposits of states or municipalities, and (D) for such
other Liens as do not materially affect the value of the
property reflected in the September Balance Sheets or
acquired since the date of the September Balance Sheets
and which do not, individually or in the aggregate,
materially interfere with or impair the present and
continued use of such property, the Processing Entities
have good title, free and clear of any Liens, to all of
the property reflected in the September Balance Sheets,
and all property acquired since the date of the
September Balance Sheets, except such property as has
been disposed of (or, in the case of receivables,
collected or paid) in the ordinary course of business
consistent with past practice. As of September 30,
1994, all the material tangible personal property owned
or leased by the Processing Entities was in good working
condition (normal wear and tear excepted) and was
suitable in all material respects for the purposes for
which it was being used. Subject to any necessary
consents required with respect to any Data Processing
Licenses, and to appropriate arrangements with
Affiliates of New Trustco for the provision of certain
services in the states of California and Oregon, and
except for the Acquired Assets specifically identified
in Section 2.2(a) of the Contribution Agreement and the
Acquired Third Party Service Agreements (as defined in
the Contribution Agreement), the Retained Assets and the
rights granted under the License Agreement are adequate
to enable the Processing Entities to conduct the
Retained Business immediately following the Effective
Time in substantially the same manner as conducted by
the Company and its subsidiaries immediately prior to
the Effective Time (without taking into account
regulatory issues and contractual obligations to which
CMB, or its properties, are subject).
(ii) Schedule 3.1(w) attached hereto sets
forth a list as of the date hereof of all leases of real
property, identifying separately each lease, to which
any of the Processing Entities are a party or by which
any of the Processing Entities are bound (collectively,
the "Leases"). The Leases are in full force and effect
and neither the Company nor any subsidiary has received
a notice of default or termination with respect
<PAGE>27 22
to such Leases. On the date hereof, except as set forth
on Schedule 3.1(w) or, on the Closing Date, except as
set forth in such Schedule or as disclosed in the
Company Bring Down Certificates, there has not occurred
any event that constitutes, or with the giving of notice
or the passage of time or both, would constitute a
breach by the Company or a subsidiary of the Company of,
or default by the Company or a subsidiary of the Company
in, the performance of any covenant, agreement or
condition contained in any Lease, which breach or
default would, individually or in the aggregate, have a
material adverse effect on MFSC or on the Processing
Entities taken as a whole. On the date hereof, except
as set forth in Schedule 3.1(w), or, on the Closing Date
except as set forth in such Schedule or, as disclosed in
the Company Bring Down Certificate, the Company has no
knowledge of any obligation on its part, or the part of
its subsidiaries, to make material improvements or
material extraordinary payments with respect to such
leased premises. The Leases constitute all the real
property reasonably necessary for the conduct of the
Retained Business in the manner heretofore conducted.
None of the Processing Entities owns any real property.
All of the real properties that are subject to the
Leases and all of the fixtures and other improvements
thereon are in good operating condition and have been
adequately maintained and neither the Company nor any of
its subsidiaries has received any notice within the last
two years that it is in material violation of any
applicable building code, zoning ordinance or other law
or regulation, other than notices as to violations which
have been remedied.
(x) Absence of Certain Conditions. On the date
hereof, except as set forth on Schedule 3.1(x) or, as of the
Closing Date, except as set forth in such Schedule or as
disclosed in the Company Bring Down Certificate, there exists
no material "out of balance" or similar condition with
respect to any Investment Company Customer (as defined in
Section 3.1(y) to which MFSC furnishes Administration
Services (as defined in the Post Closing Covenants
Agreement). For purposes of this clause (x), material shall
mean a condition that would cause a net asset value change in
any unit of at least 1/2 of 1% of net asset value.
(y) Investment Companies.
(i) As used in this Agreement, the term
"Investment Company" shall have the meaning provided in
the Investment Company Act, provided that for purposes
of this Agreement the term Investment Company shall
include any person that would be an investment company,
as defined in that Act, but for the exemption contained
in Section 3(c)(1), the final clause of Section 3(c)(3)
or Section 3(c)(11) of the Investment Company Act.
Schedule 3.1(y) is a list, by sponsor, of each Customer
which is an Investment Company ("Investment Company
Customer") showing, as of September 30, 1994, the type,
the net asset value, and the number of shareholders and
other holders of beneficial interests of such Investment
Company.
(ii) Except as set forth on Schedule 3.1(y)
hereto, no Investment Company Customer for which any of
the Processing Entities has, or has had, responsibility
for preparing or for filing any Federal, State or local
tax return has, since the Processing Entities commenced
preparing or filing such Customers' returns or, to the
<PAGE>28 23
Company's best knowledge, since January 1, 1985, changed
its fiscal year. In the case of each U.S. Investment
Company Customer identified in Schedule 3.1(y) that has
elected to be treated as a "regulated investment
company" under Subchapter M of Chapter 1 of Subtitle A
of the Code and with respect to which any of the
Processing Entities has, or has had, responsibility for
preparing or filing Federal tax returns, to the best
knowledge of the Company, such Investment Company
Customer has, at all times since the end of the most
recent taxable year of such Investment Company Customer
that has been closed and for which the statute of
limitations for assessments has expired, qualified as a
"regulated investment company" and each such Investment
Company Customer has complied with all applicable
provisions of law necessary to preserve and retain such
Investment Company Customer's election and status as a
regulated investment company or has determined not to
retain such status.
(iii) Since January 1, 1990, none of the
information or data furnished by the Company or any of
its subsidiaries for inclusion in any registration
statement filed under the Securities Act with respect to
the shares of any U.S. Investment Company Customer
contained, as of the effective date of the registration
statement, any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein in order to make the statements therein not
misleading. None of the information furnished by the
Company for inclusion in any annual report, semi-annual
report, transition reports, prospectus, proxy statements
or sales literature of any Investment Company Customer,
or any amendment or supplement, as of the respective
dates of the report or other document, included an
untrue statement of a material fact or omitted to state
a material fact necessary in order to make the
statements made therein, in the light of the
circumstances under which they were made, not
misleading.
(iv) Except as set forth in Schedule 3.1(y),
none of the transactions contemplated by this Agreement
or the other Documents will require the approval of the
shareholders, holders of beneficial interests or other
holders of the equity of any Investment Company Customer
or the boards of directors or the trustees of such
Investment Company Customers as a condition to the
continued validity of any underlying Customer Agreement.
(v) Insofar as any of the Processing Entities
has legal liability under an administration, custody, or
similar agreement, or otherwise, for compliance with the
matters covered by the following, since January 1, 1990:
(A) each of the Processing Entities has or will have on
or prior to the Effective Time, properly prepared in all
material respects, executed and timely filed, all
federal, state and local tax returns for income, fran-
chise, sales, withholding, property, excise and other
taxes applicable to any Investment Company Customer
having a due date (taking into account any extension
granted prior to the Effective Time) on or prior to the
Effective Time, and has or will have paid all taxes,
assessments, fees and other governmental charges shown
on said returns or otherwise required to be paid by any
Investment Company Customer as of or prior to the
Effective Time; (B) all of such returns are complete and
accurate in all material respects and have been prepared
substantially in accordance with all applicable
<PAGE>29 24
legal requirements; (C) no tax liabilities,
disallowances or assessments relating to any Investment
Company Customer have been assessed or proposed or will
have been assessed or proposed as of the Effective Time
and none of the Retained Company or any of its
subsidiaries is aware of any basis for any such
assessment; (D) except as set forth in Schedule 3.1(y),
the federal income tax returns for each Investment
Company Customer for prior periods have not been audited
by the Internal Revenue Service; (E) any amounts
credited to the reserve account of an Investment Company
Customer as a provision for taxes is adequate for the
period to which it pertains; (F) without limiting the
foregoing, each Unit Trust (as defined in the
Contribution Agreement) which does not qualify as a
grantor trust under Subpart E of Subchapter J of the
Code, qualifies as a "regulated investment company"
under Section 851 of the Code, and has so qualified
during its entire existence; and (G) none of the Unit
Trusts is or has been liable for tax under Section 4982
of the Code.
(vi) Each of the representations and
warranties set forth in this Section 3.1(y), other than
those set forth in clauses (i) or (iv), is made only
insofar as the failure of such representation and
warranty to be true with respect to any matter or series
of related matters would have a material adverse effect
on MFSC or on the Processing Entities taken as a whole.
(z) Customers. Schedule 3.1(z) lists with respect
to each line of business (i.e., IAS Business, MFS Business
and UIT Business) each current Customer (or major sponsor in
the case of Unit Trusts) and sets forth with respect to each
Customer (or major sponsor in the case of Unit Trusts or
sponsor in the case of any Mutual Fund Complex in the case of
MFS) as of September 30, 1994:
(i) the approximate aggregate market value
(or par value in the case of Unit Trusts) of net assets
held in "Custody" or "Assets Administered" with the
asset values for each of the three categories separately
identified;
(ii) for each MFS Customer, the aggregate
market value of net assets subject to (A) fund
administration, (B) fund accounting services, and (C)
transfer agency services;
(iii) for each MFS Customer, the fees
(segmented by "fund accounting fees," "fund
administration fees," "transfer agency fees" and
"custody fees") earned by the Company for the three
quarters ended September 30, 1994;
(iv) for each IAS Customer, "Fiduciary or
other fees" earned by the Company for the three quarters
ended September 30, 1994;
(v) for each UIT Customer, "UIT trustee fees"
earned by the Company for the three quarters ended
September 30, 1994; and
<PAGE>30 25
(vi) any revenues not specifically allocated
to individual Customers or sponsors separately segmented
for each of the IAS Business, MFS Business and UIT
Business.
(aa) Unit Investment Trusts. USTNY is qualified to
act as a trustee of a registered unit investment trust in
accordance with the requirements of Section 26(a)(1) of the
Investment Company Act and each trust agreement relating to a
series of a unit investment trust and the standard terms and
conditions incorporated therein. Each of USTNY and MFSC is a
transfer agent registered under Section 17A of the Exchange
Act. USTNY is, and immediately prior to the Effective Time
will be, the duly appointed and acting trustee of each of the
Unit Trusts. Except as set forth on Schedule 3.1(aa), as of
September 30, 1994, (i) the "calculated lag" for each
Customer varied by no more than $0.05 per $1,000 unit from
the "trading lag", (ii) there was no material difference
(defined as 1/2 of 1% of the net asset value) between the net
asset value in the most recent audited financial statements
for each trust and the comparable net asset value used for
secondary market trading, and (iii) there is no misstatement
of a Customer account (including an Investment Company
account, asset, liability or expense (including trust related
expenses)) that exceeds generally accepted standards of
materiality applicable to the Customer.
(ab) Standards.
(i) Each of the Retained Company and its
subsidiaries maintains records that in all material
respects reflect its and, in cases in which it holds
Customer assets, its Customers' transactions, disposi-
tions and acquisitions of assets, and receipt of funds
and maintains a system of internal accounting controls,
policies and procedures sufficient to make it reasonable
to expect that (A) such transactions are executed in
accordance with its management's general or specific
authorization, (B) such transactions are recorded in
conformity with any applicable accounting principles and
in such a manner as to permit preparation of financial
statements in accordance with any applicable accounting
principles and any other criteria applicable to such
statements and to maintain accountability for assets,
(C) access to assets is permitted only in accordance
with management's general or specific authorization, (D)
the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate
action is taken with respect to any differences, and (E)
records of such transactions are retained, protected and
duplicated in accordance with prudent banking and
fiduciary practices and applicable regulatory
requirements.
(ii) The Company has made available to CMC
true, accurate and complete copies of all internal and
external audit control recommendations and exception
items, and deficiency letters from Governmental
Entities, concerning all Customers at any time since
January 1, 1992, and of the response of the Company and
its subsidiaries thereto. Except as set forth on
Schedule 3.1(ab), the Company and its subsidiaries have,
to the extent and at or before the times set forth in
such responses, materially complied with or otherwise
substantively addressed such recommendations, exceptions
and deficiency items.
<PAGE>31 26
(iii) The data and transaction processing
services of the Retained Company are of the quality
generally maintained as of the date of this Agreement by
securities processing businesses similarly situated and
are generally adequate for the performance of the
Processing Business and Related Back Office. The
Company has delivered to the CMC true, accurate and
complete copies of any management reports and any report
cards prepared by the Company or any of its subsidiaries
or by any Customer in connection with the 15 largest (by
aggregate revenues billed) Customers of the Retained
Business at any time since August 11, 1994. Schedule
3.1(ab) sets forth for each business unit of the
Retained Business as of the date or dates specified, the
following information (in each case by number of items
and dollar amount): (A) as of September 30, 1994,
transactions (financial or otherwise) not processed on
the same day, (B) as of September 30, 1994, reject rate
by quality control by error reason, (C) as of September
30, 1994, any kick-out transactions, (D) as of September
30, 1994, adjustment transactions processed, (E) as of
September 30, 1994, "as of" trades processed and reasons
therefor, and (F) as of September 30, 1994, financial
transactions processed, including, without limitation,
purchases, exchanges, transfers and redemptions by
account.
(ac) Accuracy of Representations and Warranties.
No representation or warranty made by the Company or any of
its subsidiaries in this Agreement or the Schedules hereto
(which are an integral part hereof) is false or misleading in
any material respect or contains any material misstatement of
fact.
SECTION 3.2. Representations and Warranties of
CMC. CMC represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power.
CMC is a bank holding company registered under the Bank
Holding Company Act. Each of CMC and CMB is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware, in the case of CMC, and
the United States, in the case of CMB, and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being
conducted. Each of CMC and CMB is duly qualified or licensed
to do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the
nature of the business conducted by it makes such
qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on CMC and its subsidiaries taken as a whole. True,
accurate and complete copies of the CMC's charter and
By-laws, as in effect on the date hereof, including all
amendments thereto, have heretofore been made available to
the Company.
(b) Capital Structure. As of the Business Day
immediately preceding the date of this Agreement, the
authorized capital stock of CMC consists of 500,000,000
shares of CMC Common Stock and 100,000,000 shares of
preferred stock, without par value. At the close of business
on September 30, 1994, (i) 181,289,886 shares of CMC Common
Stock and 56,000,000 shares of preferred stock were issued
and outstanding, (ii) 4,000,000 shares of
<PAGE>32 27
CMC Common Stock were held by CMC in its treasury, (iii)
19,011,983 shares of CMC Common Stock were reserved for
issuance pursuant to The Chase Lincoln First Bank, N.A. 1982
Incentive Stock Plan, The Chase Manhattan 1982 Long-Term
Incentive Plan, The Chase Manhattan 1987 Long-Term Incentive
Plan and The Chase Manhattan 1994 Long-Term Incentive Plan,
3,310,875 shares of CMC Common Stock were reserved for
issuance pursuant to warrants issued in settlement of a legal
action, 14,000,000 shares of CMC Common Stock were reserved
for issuance pursuant to The Chase Manhattan Stock Option
Program for Employees and 9,596,151 shares of CMC Common
Stock were reserved for issuance pursuant to CMC's Dividend
Reinvestment and Stock Purchase Plan and (iv) 2,500,000
shares of CMC Junior Participating Preferred Stock were
reserved for issuance in connection with the rights to
purchase shares of CMC Junior Participating Preferred Stock
pursuant to the Rights Agreement dated as of February 15,
1989, between CMC and Mellon Securities Trust Company, as
successor Rights Agent. Except as set forth above, at the
close of business on the Business Day immediately preceding
the date of this Agreement, no shares of capital stock or
other voting securities of the CMC were issued, reserved for
issuance or outstanding. All outstanding shares of capital
stock of the CMC are, and all shares which may be issued
pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are not any bonds,
debentures, notes or other indebtedness of CMC having the
right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
stockholders of CMC may vote. Except as set forth above, as
of the close of business on the Business Day immediately
preceding the date of this Agreement, there are not any
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
CMC or any of its subsidiaries is a party or by which any of
them is bound obligating CMC or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting
securities of CMC or obligating CMC or any of its
subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the close of
business on the Business Day immediately preceding the date
of this Agreement, there are not any outstanding contractual
obligations of CMC or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of
CMC.
(c) Authority; Noncontravention. CMC has all
requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
other Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action on the
part of CMC. This Agreement has been duly executed and
delivered by CMC and assuming this Agreement constitutes a
valid and binding obligation of the Company, constitutes a
valid and binding obligation of CMC, enforceable against it
in accordance with its terms. None of the execution and
delivery of this Agreement, the other Documents to which CMC
is a party or the consummation of the transactions
contemplated hereby and thereby and compliance with the
provisions of this Agreement or such other Documents will
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
<PAGE>33 28
any Lien upon any of the properties or assets of CMC or CMB
under, (i) the certificate of incorporation or by-laws of CMC
or the comparable charter or organizational documents of any
other subsidiary of CMC (including CMB), (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or
license to which CMC or CMB is a party or by which CMC or CMB
or any of their respective assets are bound or (iii) subject
to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to CMC, CMB or
their respective properties or assets other than, in the case
of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights or Liens that individually or in the
aggregate would not (x) have a material adverse effect on CMC
and its subsidiaries taken as a whole, (y) materially impair
the ability of CMC to perform its obligations under this
Agreement or the other Documents to which it is a party or
(z) prevent the consummation of any of the transactions
contemplated by this Agreement or such other Documents to
which it is party. No consent, approval, order or authoriza-
tion of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to CMC or
any subsidiary of CMC in connection with the execution and
delivery of this Agreement and any of the other Documents to
which it is a party, or the consummation by CMC or CMB of any
of the transactions contemplated hereby and thereby this
Agreement, except for (i) filings pursuant to the Bank
Holding Company Act, (ii) the filing with the SEC of the Form
S-4 and such reports under Sections 13 and 16(a) of the
Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the Certificate of Merger with
the New York Secretary of State and the Delaware Secretary of
State and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do
business, (iv) such filings as may be required in connection
with the New York State Real Property Transfer Tax, the New
York State Real Property Transfer Gains Tax and the New York
City Real Property Transfer Tax (collectively, the "Gains
Taxes"), (v) filings or applications with (A) the FRB under
the Bank Holding Company Act with respect to the Merger; (B)
the Office of the Comptroller of the Currency ("OCC") in
connection with (I) a possible conversion of Chase Cal (as
defined in Section 5.15) into a bank, (II) the Bank Merger,
and (III) the assumption by Chase Cal of custody
relationships of UST-Cal in accordance with Section 5.15;
(C) the FDIC in connection with a possible conversion of
Chase Cal into a bank; (D) New York State Department of
Banking with respect to the acquisition of USTNY; and (E)
various state regulatory authorities, (vi) such consents,
approvals, orders, authorizations, registrations,
declarations and filings as may be required under the
"takeover" or "blue sky" laws of various states, (vii) such
filings, consents or approvals as may be required in
connection with qualifying Chase Cal pursuant to Section
5.15, and (viii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the
failure of which to obtain or make could not reasonably be
expected to have a material adverse effect on CMC and its
subsidiaries taken as a whole.
(d) SEC Documents; Undisclosed Liabilities. CMC
has filed all required reports, schedules, forms, statements
and other documents with the SEC since January 1, 1994 (the
"CMC SEC Documents"). As of their respective dates, the CMC
SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC
promulgated thereunder
<PAGE>34 29
applicable to such CMC SEC Documents, and none of the CMC SEC
Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained
in any CMC SEC Document has been revised or superseded by a
later CMC SEC Document, none of the CMC SEC Documents
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading. The financial statements of CMC included in the
CMC SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on
a basis consistent with CMC's financial statements included
in its CMC SEC Documents (except as may be indicated in the
notes thereto) and fairly present the consolidated financial
position of CMC and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their
operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the CMC
SEC Documents, neither CMC nor any of its subsidiaries has
any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a
consolidated balance sheet of CMC and its consolidated
subsidiaries or in the notes thereto and which, individually
or in the aggregate, could reasonably be expected to have a
material adverse effect on CMC and its subsidiaries taken as
a whole.
(e) Information in Disclosure Documents and
Registration Statements. None of the information supplied by
CMC or its representatives for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading
and (ii) the Proxy Statement will, at the date mailed to
stockholders and at the time of the meeting of the Company's
stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all
material respects with the provisions of the Securities Act
and the rules and regulations thereunder, except that no
representation is made by CMC with respect to statements made
therein based on information supplied by the Company for
inclusion in the Form S-4 or with respect to information
concerning the Company or any of its Subsidiaries
incorporated by reference in the Form S-4.
(f) Absence of Certain Changes or Events. Except
as disclosed in the CMC SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed CMC
SEC Documents") or, as of the Closing Date, as disclosed in
the CMC SEC Documents filed and publicly available before the
Closing Date or in the CMC Bring Down Certificate, (i) since
the date of the most recent audited financial statements
included in the Filed CMC SEC
<PAGE>35 30
Documents, there has not been any material adverse change in
CMC and its subsidiaries taken as a whole or any event
affecting CMC and its subsidiaries that could reasonably be
expected to have such a material adverse effect, and (ii)
there has not been (A) any split, combination or
reclassification of any of CMC's capital stock or any
issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, (B) any damage, destruction or
loss, whether or not covered by insurance, that has had or is
likely to have a material adverse effect on CMC and its
subsidiaries taken as a whole, or (C) any change in
accounting methods, principles or practices by CMC materially
affecting its assets, liabilities or business, except insofar
as may have been required (in the opinion of the CMC's
independent accountants) by a change in generally accepted
accounting principles.
(g) Litigation. Except as disclosed in the Filed
CMC SEC Documents or, as of the Closing Date, as disclosed in
CMC SEC Documents filed and publicly available before the
Closing Date or in the CMC Bring Down Certificate, there is
no claim, investigation, suit, action or proceeding pending
or, to the knowledge of CMC, threatened, against any of CMC
or any of its subsidiaries before or by any Governmental
Entity or arbitrator that, individually or in the aggregate,
could reasonably be expected to (i) have a material adverse
effect on CMC and its subsidiaries taken as a whole, (ii)
materially impair the ability of CMC to perform its
obligations under this Agreement or any of the other
Documents to which it is a party or (iii) prevent, delay or
alter the consummation of any or all of the transactions
contemplated hereby or thereby, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against CMC or any of its
subsidiaries having, or which could reasonably be expected to
have, any such effect.
(h) Agreements with Bank Regulators. Neither CMC
nor CMB is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order, decree or
directive by, or is a recipient of any extraordinary
supervisory letter from, or since January 1, 1993 has been
required to adopt any board resolution by, any Regulator
which restricts materially the conduct of its business, or in
any manner relates to its capital adequacy, its credit
policies or its management, except for those the existence of
which has been disclosed to the Company prior to the date of
this Agreement, nor has CMC or CMB been advised by any
Regulator that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum or
understanding, extraordinary supervisory letter, commitment
letter or similar submission, or requiring (or is considering
the appropriateness of requiring) the adoption of any such
board resolution, except as disclosed in writing to the
Company prior to the date hereof.
(i) Compliance with Applicable Laws. CMC and its
subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of, and have made all
filings, applications and registrations with, all
Governmental Entities which individually or in the aggregate
are material to the operation of the businesses of CMC and
its subsidiaries taken as a whole (the "CMC Permits"). All
CMC Permits are in full force and effect in all material
respects. CMC and its subsidiaries are in compliance with
the terms of the CMC Permits, except where the failure so to
comply would not have a material adverse effect on CMC and
its
<PAGE>36 31
subsidiaries taken as a whole. Except as disclosed in the
Filed CMC SEC Documents or, as of the Closing Date, as
disclosed in CMC SEC Documents filed and publicly available
before the Closing Date or in the CMC Bring Down Certificate,
the businesses of CMC and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of
any Governmental Entity, except for possible violations which
individually or in the aggregate do not, and could not
reasonably be expected to, have a material adverse effect on
CMC and its subsidiaries taken as a whole. Except for
routine examinations by Bank Regulators, as of the date of
this Agreement, to the knowledge of CMC, no investigation by
any Governmental Entity with respect to CMC or any of its
subsidiaries is pending or threatened, other than, in each
case, those the outcome of which could not reasonably be
expected to have a material adverse effect on CMC and its
subsidiaries taken as a whole.
(j) Consummation of Transactions. CMC has not
received notice from any Federal or state governmental agency
or authority indicating that it would oppose or not grant or
issue its consent or approval, if required, with respect to
the transactions contemplated by this Agreement. To the best
knowledge of CMC, no event has occurred, and no condition
exists, which would materially and adversely affect its
ability to effect the transactions contemplated hereby or to
make payment of the Merger Consideration at the time it would
be required to do so under this Agreement.
(k) Voting Requirements. No action by the
stockholders of CMC is required to approve this Agreement and
the transactions contemplated by this Agreement.
(l) Brokers. No broker, investment banker,
financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made
by or on behalf of CMC.
(m) Accuracy of Representations and Warranties.
No representation or warranty made by CMC in this Agreement
is false or misleading in any material respect or contains
any material misstatement of fact.
ARTICLE IV
Covenants
SECTION 4.1. Covenants of the Company with
Respect to the Retained Business. During the period from the
date of this Agreement and continuing until the Effective
Time, the Company agrees as to itself and its subsidiaries
that, except for the Distribution and the other transactions
expressly provided for in the Distribution Agreement and the
Contribution Agreement, as expressly contemplated or
permitted by this Agreement, or to the extent that CMC shall
otherwise consent in writing:
<PAGE>37 32
(a) Ordinary Course. The Company and its
subsidiaries shall each carry on the Retained Business in the
usual, regular and ordinary course consistent with past
practice and use its reasonable efforts to preserve intact
the present business organization, keep available, consistent
with past practice, the services of Prospective Retained
Employees and preserve the relationships with customers,
suppliers and others having business dealings with the
Retained Business, it being understood that (i) certain
employees of the Retained Business will also be engaged in
activities for the businesses to be contributed and
distributed to New Trustco and New Holdings, (ii) the failure
of any employees of the Retained Business to remain employees
of the Retained Business or become employees of CMC or any
affiliate of CMC shall not constitute a breach of this
covenant and (iii) the Retained Company and its subsidiaries
may comply with their respective contractual obligations
under the contracts to which they are parties (provided that
the execution of such contracts by the Retained Company or
the applicable subsidiary does not constitute a breach of, or
default under, this Agreement).
(b) Changes in Stock. The Company shall not, nor
shall it permit any subsidiaries of the Retained Company to,
nor shall the Company propose to, (i) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock
(other than phantom share units required to be issued under
any Benefit Plan) or (ii) other than in connection with the
exercise of stock options outstanding as of the date of this
Agreement under any Benefit Plan, repurchase, redeem or
otherwise acquire, or permit any subsidiary to repurchase,
redeem or otherwise acquire, any shares of capital stock of
the Company or any of its subsidiaries; provided, however,
that the foregoing shall not prohibit the redemption by MFSC
of capital stock issued to the Company or the conversion of
debt or preferred equity of MFSC issued to the Company into
common equity in connection with or in anticipation of the
transactions contemplated by the Distribution Agreement.
(c) Issuance of Securities. Except as set forth
in Schedule 4.1(c), the Retained Company shall not, nor shall
the Retained Company permit any of its subsidiaries to,
issue, transfer or sell, or authorize or propose or agree to
the issuance, transfer or sale by the Retained Company or any
such subsidiary of, any shares of its capital stock of any
class or other equity interests or any securities convertible
into, or any rights, warrants, calls, subscriptions, options
or other rights or agreements, commitments or understandings
to acquire, any such shares equity interests or convertible
securities, other than (i) the issuance of shares of Company
Common Stock (x) upon the exercise of stock options
outstanding as of the date of this Agreement pursuant to any
Benefit Plan, (y) to make any payment under any Benefit Plan
that is required to be made in the form of shares of Company
Common Stock or (z) to make acquisitions of capital stock or
assets of another entity provided that such acquisition is
permitted pursuant to clause (e) of this Section 4.1) and
(ii) issuances by a wholly owned subsidiary of its capital
stock to its parent.
(d) Governing Documents. The Company shall not,
nor shall it permit any subsidiaries of the Retained Company
to, amend or propose to amend its Certificate of
Incorporation (or, if applicable, its Articles of
Incorporation or other charter document) or By-laws.
<PAGE>38 33
(e) No Acquisitions. The Retained Company shall
not, nor shall it permit any of its subsidiaries to, (i)
acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner,
any business or any corporation or other business
organization that would be directly or indirectly acquired by
CMC in the Merger, (ii) consummate any acquisition within 3
business days before or 1 business day after the Closing
Date, or (iii) make any other investment in any person
(whether by means of loan, capital contribution, purchase of
capital stock, obligations or other securities, purchase of
all or any integral part of the business of the person or any
commitment or option to make an investment or otherwise) that
would be directly or indirectly acquired by CMC in the Merger
except for investments by the Retained Company in its
existing wholly owned subsidiaries and investments made in
the ordinary course of business consistent with past
practices in an aggregate amount not exceeding $250,000.
(f) No Dispositions. The Retained Company shall
not, nor shall it permit any of its subsidiaries to, sell,
lease, license, encumber or otherwise dispose of, or agree to
sell, lease, license, encumber or otherwise dispose of, any
of the assets of the Retained Business other than in the
ordinary course of business consistent with past practice and
the sale or other disposition of obsolete equipment.
(g) Indebtedness. The Retained Company shall not,
nor shall it permit any of its subsidiaries to, incur (which
shall not be deemed to include (i) refinancings of existing
indebtedness; provided that, such refinancings shall not
increase the aggregate amount of indebtedness, or contain any
terms which are more restrictive in any material respect on
the Retained Company or the applicable subsidiary or (ii)
deposits accepted in the ordinary course of business by the
Retained Company and its subsidiaries) any indebtedness for
borrowed money or any obligation evidenced by a promissory
note or other instrument or guarantee any such indebtedness
or obligation or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the
Retained Company or any of its subsidiaries or guarantee any
obligations of others other than (x) in the ordinary course
of business consistent with past practice, (y) pursuant to
existing credit or guaranty agreements or (z) indebtedness
(including indebtedness incurred to fund the in substance
defeasance of the 8% Notes due 1996) incurred pursuant to a
written agreement that provides that such indebtedness may be
assumed by New Holdings or a subsidiary of New Holdings and
that, upon such assumption, the Retained Company and its
subsidiaries shall have no obligation or liability in respect
of such indebtedness.
(h) Benefit Plans. Except as otherwise provided
in or contemplated by this Agreement, the Distribution
Agreement or the Contribution Agreement, the Company shall
not, nor shall it permit any of its subsidiaries to, (i)
adopt any Benefit Plan or amend any Benefit Plan other than a
Retained Plan to the extent such adoption or amendment (x)
would create or increase any liability or obligation on the
part of the Company or any of its subsidiaries that will not
either (A) be fully performed or satisfied prior to the
Effective Time or (B) be assumed by New Holdings or New
Trustco pursuant to the Contribution Agreement or the
Distribution Agreement, or (y) would increase the number of
shares of Company Common Stock (if any) to be issued under
such Benefit Plan; or (ii) amend any Retained Plan in any
manner that would increase the liabilities or obligations of
the Company or any of its subsidiaries under such
<PAGE>39 34
Retained Plan or would increase the number of shares of
Company Common Stock to be issued under such Retained Plan;
or (iii) except for normal increases in the ordinary course
of business consistent with past practice, increase the base
salary of any Prospective Retained Employee. Notwithstanding
the foregoing, it is understood and agreed that the Annual
Incentive Plan of U.S. Trust Corporation may be amended so as
(i) to provide that each employee who terminated employment
prior to January 1, 1992 shall be entitled at the Effective
Time to receive payment with respect to the then outstanding
balance of his or her account under the plan in an amount up
to 120% of such balance and (ii) to increase the rate of
interest to be credited to participants' accounts for 1994 to
compensate for extraordinary charges to the Company's
earnings for 1994 required to be recognized in connection
with the Merger.
(i) Other Actions. Notwithstanding the fact that
such action might otherwise be permitted pursuant to this
Section 4.1, the Retained Company shall not, nor shall it
permit any of its subsidiaries to, take any action that would
or is reasonably likely to result in any of the conditions to
the Merger set forth in Article VI not being satisfied or
would materially impair the ability of the Company to
consummate the Distribution or the Merger or USTNY to
consummate the transactions contemplated by the Contribution
Agreement in accordance with the terms hereof, of the
Distribution Agreement and of the Contribution Agreement or
materially delay such consummation.
(j) Advice of Changes; Filings. The Company shall
promptly advise CMC orally and in writing of any change or
development or combination of changes or developments that
would cause the representation in Section 3.1(i) to be
untrue. The Company shall promptly provide CMC (or its
counsel) copies of all filings (other than those filings, or
portions thereof, which CMC has no reasonable interest in
obtaining in connection with the Merger or the transactions
contemplated hereby) made by the Company or any of its
subsidiaries with any Federal, state or foreign Governmental
Entity in connection with this Agreement, the Distribution
Agreement, the Contribution Agreement and the transactions
contemplated hereby and thereby.
(k) Accounting Policies and Procedures. The
Retained Company will not and will not permit any of its
subsidiaries to change any of its accounting principles,
policies or procedures, except such changes as may be
required, in the opinion of Coopers & Lybrand, the Company's
independent accountants, by generally accepted accounting
principles.
(l) New Trustco and New Holdings. The Company
shall (i) use its best efforts to organize New Holdings and
New Trustco under the laws of the State of New York and
furnish all information required in connection with approvals
of or filings with Bank Regulators and other Governmental
Entities in order to organize New Holdings as a bank holding
company and New Trustco as a bank and trust company, (ii) not
engage in or allow transfers of assets or liabilities or
engage or enter into other transactions between the Retained
Company and its subsidiaries, on the one hand, and New
Holdings and its subsidiaries, on the other hand, except as
contemplated hereby and by the Distribution Agreement, the
Contribution Agreement
<PAGE>40 35
and the agreements referred to therein, (iii) abide and cause
New Holdings and its subsidiaries to abide by their
respective obligations under the Distribution Agreement, the
Contribution Agreement and the agreements referred to therein
and (iv) not terminate or amend, or waive compliance with any
obligations under, the Distribution Agreement, the
Contribution Agreement or any of the agreements referred to
therein.
(m) Liens. The Company shall not, and shall not
permit any of its subsidiaries to, create, incur or assume
any Lien on the Retained Assets (as defined in the
Contribution Agreement), except for Liens created, incurred
or assumed in the ordinary course of business consistent with
the past practices of the Company and its subsidiaries.
(n) Material Contracts. The Retained Company
shall not, and shall not permit its subsidiaries to, (i)
enter into other than in the ordinary course of business, any
material contract relating to the Acquired Assets or Assumed
Liabilities that cannot be assigned, free of liability to the
Retained Company and its subsidiaries, to New Holdings or one
of its subsidiaries in connection with the transactions
contemplated in the Distribution Agreement and Contribution
Agreement; or (ii) enter into, terminate, or modify in any
material respect any Material Contract or any Customer
Agreement other than in the ordinary course of business
consistent with past practice and, in the case of any
Customer Agreement, without consultation with CMC. In
addition, the Company shall notify CMC in writing at least 30
days before making, or in any way becoming committed to make,
any capital expenditure, or series of related capital
expenditures relating to the Processing Business and Related
Back Office, in excess of $50,000.
SECTION 4.2. Covenants of the Company. During
the period from the date of this Agreement and continuing to
the Effective Time, the Company agrees as to itself and its
subsidiaries that, except as CMC shall otherwise agree in
writing or as provided in the documents:
(a) Change in Business. The Company shall not and
shall not permit its subsidiaries to make any change in the
lines of business engaged in by (i) the Retained Company or
any of its subsidiaries as of the date hereof or (ii) the
Company and any of its subsidiaries as of the date hereof
that would, based on the facts and circumstances and conduct
of the particular business, materially increase the potential
liability of the Retained Company or any of its subsidiaries
under statutes or legal doctrines permitting the imposition
of liability on a parent corporation in respect of the
liabilities of its subsidiaries.
(b) Actions Affecting Merger or Distribution. The
Company shall not, and shall not permit any of its
subsidiaries to, take any action, including, without
limitation, with respect to the terms of the Certificate of
Incorporation or By-laws of New Holdings, that would or is
reasonably likely to result in any of the conditions to the
Merger set forth in Article VI not being satisfied or that
would materially impair the ability of the Company to
consummate the Distribution in accordance with the terms of
the Distribution Agreement or the Merger in accordance with
the terms hereof or would materially delay such consummation
or that would disqualify the Distribution as a tax free
spin-off within the meaning of Section 355 of the Code.
<PAGE>41 36
(c) Certain Indebtedness. The Company shall, or
shall cause its subsidiaries to, redeem or effect an in
substance defeasance of the outstanding indebtedness of the
Company and its subsidiaries set forth in Schedule 4.2(c).
(d) Delivery of Certain Information. The Company
shall furnish to CMC:
(i) as soon as available and in any event
within 20 days after the end of each month, (A) reports
of the end of month and average monthly balances of
loans and overdrafts, book and collected deposits and
funds able to be invested, (B) a monthly receivables
aging report for the Processing Entities, (C) management
profitability reports for the Processing Businesses and
management reports for the Computer Services Division,
Securities Services and Trust Operations and Bank
Operations units and (D) balance sheet as of the end of
each month for the Company and its subsidiaries on a
consolidated basis, in each case, substantially in the
form delivered to CMC prior to the date of this
Agreement;
(ii) as soon as available, approved 1994 and
1995 capital budgets for the Processing Business and the
Related Back Office (as defined in the Contribution
Agreement) and related reports, in each case in the form
prepared by the Company and its subsidiaries in the
ordinary course of their business and consistent with
past practices.
(iii) promptly upon receipt, copies of all
reports submitted to the Company or any of its
subsidiaries by independent accountants in connection
with the examination of the financial statements of the
Retained Company;
(iv) promptly after the furnishing of each
such document, copies of any statement or report
relating to the Retained Company or any of its
subsidiaries furnished to any other party pursuant to
the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to
CMC;
(v) promptly after request by CMC,
information relating to any employee benefit plan,
arrangement, practice, policy or understanding
maintained by the Company, any of its subsidiaries or
any Commonly Controlled Entity for the benefit of any
Retained Employee, including, without limitation, any
Benefit Plan and any plan, arrangement, practice, policy
or understanding relating to profit sharing, bonuses,
retainers, consulting, incentives, fringe benefits,
perquisites, automobiles, club memberships, vacation,
child care, leaves of absence (including, without
limitation, maternity, paternity, military, medical or
other leaves of absence), insurance and other benefits;
(vi) promptly after becoming aware thereof,
notice of the occurrence of any event or the existence
of any circumstances that could reasonably result in any
material liability of the part of the Company, any of
its subsidiaries or any Commonly Controlled Entity under
Title I or Title IV of ERISA or under Section 412 or
Chapter 43 of the Code.
<PAGE>42 37
(e) Execution of Post Closing Covenants Agreement
and Services Agreement. The Company shall cause New Holdings
and New Trustco to execute and deliver the Post Closing
Covenants Agreement and the Services Agreement on the Closing
Date.
SECTION 4.3. Covenants of CMC. During the period
from the date of this Agreement and continuing until the
Effective Time, CMC agrees as to itself and its subsidiaries
that:
(a) Actions Affecting Merger. CMC shall not take
any action that would or is reasonably likely to result in
any of the conditions to the Merger set forth in Article VI
not being satisfied or that would materially impair the
ability of CMC to consummate the Merger in accordance with
the terms hereof or materially delay such consummation and
CMC shall promptly provide the Company (or its counsel)
copies of all filings (other than those filings, or portions
thereof, which the Company has no reasonable interest in
obtaining in connection with the Merger or the transactions
contemplated hereby) made by CMC with any Federal, state or
foreign Governmental Entity in connection with this Agreement
and the transactions contemplated hereby.
(b) CMC Common Stock. CMC shall not split,
combine or reclassify any of the CMC Common Stock or
authorize the (i) making of any in-kind distribution or
extraordinary cash dividend with respect to the CMC Common
Stock, or (ii) issuance of any other securities in respect of
or in exchange for shares of the CMC Common Stock, provided
the foregoing shall not prohibit the issuance of securities
of CMC convertible into CMC Common Stock.
(c) Tax Free Spin-Off. CMC shall not, and shall
not permit any of its subsidiaries to, take or cause or
permit to be taken, any action that would disqualify the
Distribution as a tax free spin-off within the meaning of
Section 355 of the Code.
(d) Other Actions. Notwithstanding the fact that
such action might otherwise be permitted pursuant to this
Section 4.3, CMC shall not, nor shall it permit any of its
subsidiaries to, take any action that would or could
reasonably be expected to result in the failure to satisfy
any of the conditions to the Merger set forth in Article VI,
would materially impair the ability of CMC to consummate the
Merger in accordance with the terms hereof or materially
delay such consummation.
(e) Execution of Post Closing Covenants Agreement
and Services Agreement. CMC shall execute and deliver the
Post Closing Covenants Agreement and shall cause CMB to
execute and deliver the Services Agreement on the Closing
Date.
<PAGE>43 38
SECTION 4.4. Mutual Covenants.
(a) The Company and CMC shall not, and shall not
permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of
such party set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified
becoming untrue in any material respect or (iii) the failure
to satisfy any of the conditions to the Merger set forth in
Article VI.
(b) The Company and CMC shall promptly advise the
other party orally and in writing of any change or event
having, or which, insofar as can reasonably be foreseen,
would have, a material adverse effect on such party and its
subsidiaries taken as a whole.
(c) For purposes of the tax opinions to be
delivered pursuant to Section 6.2(h) and 6.3(f), each of CMC
and the Company shall deliver to O'Melveny & Myers, counsel
to CMC, and to Cravath, Swaine & Moore, counsel to the
Company, representation letters substantially in the form of
the respective letters set forth in Exhibit III, dated as of
the Closing Date.
(d) CMC and the Company agree that they shall
negotiate and within 60 days after the date hereof agree on a
definitive form of the Services Agreement substantially in
accordance with the terms of that certain Processing
Agreement Term Sheet dated as of the date of this Agreement
and executed by authorized representatives of CMC and the
Company (the "Processing Services Term Sheet").
(e) CMC and the Company shall each use reasonable
efforts to negotiate and to agree, and to cause CMB and USTNY
to agree upon, and to execute and deliver, an agreement
providing for the Bank Merger under 12 U.S.C. 215a and
applicable law ("Bank Merger Agreement"), provided, however,
that the Bank Merger Agreement shall provide that
consummation of the Bank Merger is conditioned on occurrence
of the Merger and that USTNY and its affiliates shall incur
no additional liability or expense in connection therewith.
ARTICLE V
Additional Agreements
SECTION 5.1. Preparation of Form S-4, Form S-1,
Form 10 and the Proxy Statement; Stockholders Meeting.
(a) As soon as practicable following the date of
this Agreement, the Company and CMC shall prepare and file
with the SEC the Form S-4, the Form S-1 (if required), the
Form 10 and the Proxy Statement. Each of the Company and CMC
shall use its reasonable efforts to have the Form S-4 and
Form S-1 (if required) declared effective under the
Securities Act, and the Form 10 declared effective under the
Exchange Act, as promptly as practicable after such
<PAGE>44 39
filing. The Company will use its reasonable efforts to cause
the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Form S-4,
Form S-1 (if required) and Form 10 are declared effective
under the Securities Act and the Exchange Act, as the case
may be. CMC shall also take any action (other than
qualifying to do business in any jurisdiction in which it is
not now so qualified) required to be taken under any
applicable state securities laws in connection with the
issuance of CMC Common Stock in the Merger and the Company
shall furnish all information concerning the Company and the
holders of the Company Common Stock and rights to acquire
Company Common Stock pursuant to the Stock Plans as may be
reasonably requested in connection with any such action.
(b) The Company shall, as soon as practicable
following the date on which the Form S-4, Form S-1 (if
required) and Form 10 are declared effective, duly call, give
notice of, convene and hold a meeting of its stockholders
(the "Stockholders Meeting") for the purpose of voting upon
the approval and adoption of this Agreement and upon the
Distribution. The Company shall, through its Board of
Directors, recommend to its stockholders approval of this
Agreement and the transactions contemplated by this
Agreement.
SECTION 5.2. Letter of the Company's Accountants.
The Company shall use its best efforts to cause to be
delivered to CMC a letter of Coopers & Lybrand, the Company's
independent public accountants, dated a date within two
business days before the date on which the Form S-4 shall
become effective and addressed to CMC, in form and substance
reasonably satisfactory to CMC and customary in scope and
substance for letters delivered by independent public
accountants in connection with registration statements
similar to the Form S-4.
SECTION 5.3. Letter of CMC's Accountants. CMC
shall use its best efforts to cause to be delivered to the
Company a letter of Price Waterhouse & Co., CMC's independent
public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective
and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public
accountants in connection with registration statements
similar to the Form S-4.
SECTION 5.4. Access to Information; Confidenti-
ality.
(a) The Company shall, and shall cause its
subsidiaries to, afford to CMC and its officers, employees,
accountants, counsel, financial advisors and other
representatives of CMC, reasonable access during the period
prior to the Effective Time to all its properties, books,
contracts, commitments, personnel and records and shall make
available to such persons reasonable facilities (including
office space and telephones) in connection therewith. During
the period prior to the Effective Time, the Company shall,
and shall cause its subsidiaries to, furnish promptly to CMC
(i) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to
the requirements of Section 13(a) and 15(d) of the Exchange
Act, and copies of public portions of each report, schedule,
registration statement, and other document filed by it or any
subsidiary during such period with any state or Federal
<PAGE>45 40
banking or bank holding company regulatory authorities, and
(ii) all other information concerning its business,
properties and personnel as CMC may reasonably request;
provided that the Company shall not be required to provide
information regarding New Holdings or New Trustco unless such
information relates to liabilities that could be incurred by
one of the Processing Entities in connection with the
transactions contemplated by this Agreement and the other
Documents or otherwise has a nontrivial effect on the
Retained Business.
(b) During the period prior to the Effective Time,
CMC shall furnish promptly to the Company a copy of each
report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements
of Section 13(a) and 15(d) of the Exchange Act.
(c) Except as required by law, each of the Company
and CMC will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic
information in confidence in accordance with the
confidentiality agreements, dated August 17, 1994 (the
"Confidentiality Agreements"), between CMC and the Company.
SECTION 5.5. Legal Conditions to Distribution and
Merger; Legal Compliance.
(a) CMC shall use reasonable efforts to comply
promptly with all legal and regulatory requirements which may
be imposed on itself or its respective subsidiaries with
respect to the Merger (which actions shall include, without
limitation, furnishing all information required in connection
with approvals of or filings with Bank Regulators or other
Governmental Entities required to be made or obtained by CMC
or its subsidiaries). Subject to the terms and conditions
hereof, CMC will, and will cause its subsidiaries to,
promptly use its reasonable efforts to obtain any consent,
authorization, order or approval of, or any exemption by, and
to satisfy any condition or requirement imposed by, any Bank
Regulator, Governmental Entity or other public or private
third party, required to be obtained, made or satisfied by
CMC or any of its subsidiaries in connection with the Merger
or the taking of any action contemplated thereby or by this
Agreement or the Distribution Agreement (including the Bank
Merger).
(b) The Company will use its reasonable efforts to
comply promptly with all legal and regulatory requirements
which may be imposed on itself or its respective subsidiaries
with respect to the Distribution and the Merger (which
actions shall include, without limitation, furnishing all
information required in connection with approvals of or
filings with Bank Regulators or other Governmental Entities
required to be made or obtained by the Company or its
subsidiaries). Subject to the terms and conditions hereof,
the Company will, and will cause its subsidiaries to,
promptly use its reasonable efforts to obtain any consent,
authorization, order or approval of, or any exemption by, and
to satisfy any condition or requirement imposed by, any Bank
Regulator, Governmental Entity or other public or private
third party, required to be obtained, made or satisfied by
the Company or any of its subsidiaries in connection with the
Distribution or the Merger or the taking of any action
contemplated thereby or by this Agreement or the Distribution
Agreement, including without limitation in obtaining the
ruling
<PAGE>46 41
contemplated by the Ruling Request; provided, however, that
the Company and its subsidiaries shall not be required
hereunder to assume or bear any additional liability in
connection with the Bank Merger. The Company agrees that it
shall use its reasonable efforts to take, and to cause its
subsidiaries to take, such actions as are necessary to assure
material compliance by the Retained Company and its
subsidiaries with all applicable legal and regulatory
requirements relating to employment and benefits matters and
other applicable governmental regulations (and in this
connection will have due regard to any reasonable request of
CMC as to what, if any, such actions should be taken).
(c) Each of the Company and CMC will promptly
cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of
them or any of their respective subsidiaries in connection
with the Distribution or the Merger.
(d) Nothing herein shall obligate any party to
take any action pursuant to the foregoing if the taking of
such action or such compliance or the obtaining of such
consent, authorization, order, approval or exemption is
likely, in such party's reasonable opinion, (i) to be
materially burdensome to such party and its subsidiaries
taken as a whole or to impact in a materially adverse manner
the economic or business benefits of the transactions
contemplated by this Agreement, the Bank Merger Agreement
(in the form agreed to by CMC, the Company, CMB and USTNY),
the Contribution Agreement or the Distribution Agreement so
as to render inadvisable the consummation of the Merger, the
Bank Merger, the Contribution or the Distribution or (ii) to
result in the imposition of a condition or restriction on
such party or on the Surviving Corporation of the type
referred to in Section 6.1(c) (it being understood that
compliance by CMC with Section 5.19 shall not constitute such
an action). Each of CMC and Company will promptly cooperate
with and furnish information to the other in connection with
any such burden suffered by, or requirement imposed upon, any
of them or any of their Subsidiaries in connection with the
foregoing.
SECTION 5.6. Rights Agreement. The Board of
Directors of the Company shall take all further action (in
addition to that referred to in Section 3.1(p)) requested in
writing by CMC (including, if necessary, redeeming the Rights
immediately prior to the Effective Time or amending the
Rights Agreement) in order to render the Rights inapplicable
to the Merger and the other transactions contemplated by this
Agreement and the Distribution Agreement. Except as
requested in writing by CMC, prior to the Stockholders
Meeting, the Board of Directors of the Company shall not (i)
amend the Rights Agreement or (ii) take any action with
respect to, or make any determination under, the Rights
Agreement (including a redemption of the Rights).
SECTION 5.7. Benefit Plans. Before the Effective
Time, the Company shall, and shall cause USTNY to, take all
steps necessary to cause each of the Benefit Plans maintained
by the Company or USTNY other than (i) any such Benefit Plan
listed in Schedule 5.7 (the Benefit Plans so listed are
hereinafter referred to as the "Retained Plans") and (ii) the
Transition Bonus Plan adopted by the Retained Company
pursuant to Section 5.8(e), to be transferred pursuant to the
Distribution Agreement and the Contribution Agreement to New
Holdings and to New Trustco, respectively, and to cause New
Holdings and New Trustco, respectively, to assume and become
solely responsible for all liabilities and obligations of the
<PAGE>47 42
Company and USTNY under each of the Benefit Plans so
transferred. In the case of each such Benefit Plan that is
transferred to New Holdings or to New Trustco, the transfer
and assumption shall be effected prior to the New Holdings
Distribution. Prior to the Effective Time, Company shall, or
shall cause its subsidiaries to, inform the Retained
Employees (as defined in Section 5.8(a)) of the transfer to,
and the assumption by, New Holdings or New Trustco of the
liabilities under, the Benefit Plans under which such
Retained Employees are covered. The Company shall cooperate
with CMC, to the extent requested by CMC to do so, to
communicate with the Retained Employees concerning any
employee benefit plans, agreements, practices, policies or
arrangements of CMC or any of its affiliates to which they
will be subject after the Effective Time. The Company shall,
and shall cause USTNY to, amend the Retained Plans and take
such other steps as may be necessary to
(i) cause all stock options granted under the
Retained Plans that have not expired or that have not
been exercised or cancelled prior to the Effective Time,
to be cancelled as of the Effective Time;
(ii) cause all payments required under the
terms of the Retained Plans to be made to the holders of
stock options that are to be cancelled as of the
Effective Time pursuant to clause (i) above, to be made
at the Effective Time or as soon thereafter as
practicable;
(iii) cause payments to be made, at the
Effective Time or as soon thereafter as practicable, to
all persons with outstanding balances to their credit
under the Annual Incentive Plan of U.S. Trust
Corporation at the Effective Time, in amounts sufficient
to discharge in full the Company's obligations with
respect to such balances; and
(iv) cause each of the Retained Plans other
than the Retention Bonus Program to be terminated as
soon as all unexercised options under such Plan have
been cancelled, and all payments to be made with respect
to options or account balances under such Plan have been
made, as provided in clauses (i), (ii) and (iii) above.
SECTION 5.8. Employment Matters.
(a) Employment with Retained Business. Schedule
5.8(a) lists all persons who are presently employed by the
Retained Company in positions associated with the conduct of
the Retained Business, and designates those persons New
Holdings or any of its subsidiaries proposes to employ prior
to the Closing. CMC agrees to cause Retained Company or its
Affiliates to offer to retain approximately 1150 of the
employees listed in Schedule 5.8(a) in employment after the
Closing and CMC has offered, or will offer, to so employ (i)
all employees employed in the MFS Business except for those
identified in writing to the Company by the date of this
Agreement, (ii) all employees employed in the UIT Business
except for those identified in writing to the Company by the
date of this Agreement, and (iii) all other employees listed
in Schedule 5.8(a) except for those identified in writing to
the Company as soon as possible following the date of this
Agreement, but in any event on or before January 1, 1995.
<PAGE>48 43
Any person listed in Schedule 5.8(a) to whom CMC has made, or
could make, a timely offer of continuing employment in
accordance with the immediately preceding sentence is
referred to as a Prospective Retained Employee In the
event that any of the persons designated on Schedule 5.8(a)
as persons New Trustco proposes to become employed with New
Trustco or any of its affiliates prior to the Closing are
also persons CMC proposes to cause its subsidiaries to offer
to retain in employment after the Closing, CMC and the
Company agree that their respective representatives shall use
their best efforts to resolve the conflict as quickly,
effectively and fairly as possible. The offer of continuing
employment to be made hereunder shall include provision for
the payment of base salary to each such employee at a rate at
least equal to the rate of base salary in effect for such
employee immediately prior to the Closing. Notwithstanding
the foregoing, nothing contained herein shall be construed as
obligating CMC, the Surviving Corporation or any of its
affiliates (x) to offer employment after the Closing to any
employee listed in Schedule 5.8(a) whose employment with the
Retained Company terminates for any reason prior to the
Closing, or (y) to maintain any term or condition of employ-
ment (including base salary) for any period following the
Effective Time, except as provided in Section 5.8(c). Those
employees of the Retained Company who accept such offer of
continuing employment with one of CMC's subsidiaries pursuant
to this Agreement are hereinafter referred to as the
"Retained Employees".
(b) Employee Benefits. CMC agrees that on and
after the Effective Time, the Retained Employees shall be
covered under the employee benefit plans, programs, arrange-
ments and policies (including, without limitation, any stock
option, bonus and incentive compensation plans) maintained by
CMC and its affiliates for their employees (such plans,
programs, arrangements, and policies are hereinafter referred
to as "CMC's Plans"), upon the same terms and conditions as
are applicable to other personnel employed by CMC and its
affiliates in comparable positions, subject, however, to the
following:
(i) Except as provided in subparagraph (ii)
below, service performed by a Retained Employee for
USTNY (or for any affiliate of USTNY) prior to the
Closing (such service is hereinafter referred to as a
Retained Employee's "Prior Service") shall be treated as
service performed for CMC and its affiliates for
purposes of determining (w) the Retained Employee's
eligibility to participate in any of CMC's Plans, (x)
the Retained Employee's satisfaction of any service
requirement that is a condition for eligibility to
receive any benefit provided under any of CMC's Plans,
(y) the Retained Employee's vesting status with respect
to any benefit under any of CMC's Plans, and (z) the
amount of any benefit to which the Retained Employee is
entitled under any of CMC's Plans, in any case where the
amount of the benefit so provided is determined, in
whole or in part, by reference to the length of a
participant's service with CMC and its affiliates (it
being understood that there shall be no credits to
Retained Employees' accounts under CMC's retirement and
thrift plans with respect to any period before the
Closing Date and that no Retained Employee shall be
treated as having been a member of CMC's retirement plan
as of any date prior to the Closing Date).
(ii) In the case of any Retained Employee (x)
whose employment with CMC and its affiliates is
terminated within two years following the Closing Date,
(y)
<PAGE>49 44
whose "attained age" and his or her "Years of Service"
or "units of Credited Service", as those terms are
defined in the Employees' Retirement Plan of United
States Trust Company of New York and Affiliated
Companies, immediately prior to the Closing total 70 or
more, and (z) who has at least ten years of Prior
Service, such Retained Employee's Prior Service shall
not be taken into account for purposes of such Retained
Employee's eligibility to participate in or receive any
benefit provided under any of CMC's Plans that provide
post-retirement welfare benefits.
(iii) Each Retained Employee shall be
covered under those of CMC's Plans that are health and
welfare plans without exclusion for preexisting
conditions.
(c) Severance and Other Benefits on Termination.
CMC agrees to provide any Retained Employee whose employment
with CMC and its affiliates is involuntarily terminated (as
hereinafter defined) within two years following the Closing
Date with the severance benefits and other benefits described
in Schedule 5.8(c) in lieu of any severance benefits provided
under any of CMC's Plans. For purposes of this Section
5.8(c) and Schedule 5.8(c), a Retained Employee's employment
with CMC and its affiliates shall be treated as having been
"involuntarily terminated" if he or she is no longer employed
by CMC or any of its affiliates as a result of the
termination of his or her employment (i) by CMC or any of its
affiliates for any reason other than for cause, or (ii) by
the Retained Employee after (A) any reduction in his or her
salary, or (B) any change, without the Retained Employee's
consent, in location of his or her place of employment to a
location outside the City of New York or, if such place of
employment is not in the City of New York, to a city more
than 25 miles distant from the city in which his or her place
of employment is located on the Closing Date.
(d) Data to be Furnished. At the Closing, the
Company shall furnish CMC with information as to (i) the rate
of base salary in effect for each Retained Employee
immediately before the Closing, (ii) each Retained Employee's
position with the Retained Company immediately before the
Closing and (iii) each Retained Employee's Prior Service.
CMC agrees to furnish New Holdings and New Trustco with such
information as they may request from time to time after the
Closing, regarding any Retained Employee's period of service
and base salary with CMC and its affiliates.
(e) Transition Bonus Program. As soon as
practicable after the date of this Agreement, the Company
shall cause USTNY and its affiliates included in the Retained
Business to adopt a program (the "Transition Bonus Program")
pursuant to which each of the employees listed in Schedule
5.8(e) who becomes a Retained Employee shall be entitled to
receive from the Retained Company a bonus (the "Transition
Bonus") in the amount specified for such employee in Schedule
5.8(e) if the employee completes the period of service with
the Retained Company following the Closing Date that is
specified for such employee in Schedule 5.8(e) (the
employee's "Required Service"). The Transition Bonus so
payable to any such employee shall be paid in the form of a
single lump sum cash payment, as soon as practicable after
the employee completes his or her Required Service. For
purposes of the foregoing, a Retained Employee whose
employment with the Retained Company is involuntarily
terminated (as defined in Section 5.8(c)) after the Closing
Date but before he or she has completed his or
<PAGE>50 45
her Required Service shall be treated as having completed
such Required Service on the day immediately preceding the
date on which his or her employment was so terminated. As
soon as practicable after the date of this Agreement, the
Company shall furnish, or cause its subsidiaries to furnish,
each employee listed in Section 5.8(e) with written notice
(the form of which notice shall be mutually agreed upon in
advance by the Company and CMC) advising the employee of his
or her eligibility to participate in the Transition Bonus
Program, the amount of the Transition Bonus he or she may
become entitled to receive, and the Required Service he or
she must complete to receive such Bonus.
SECTION 5.9. Employment Agreements. The Company
shall use reasonable efforts to cause the Retained Company to
enter, or to facilitate CMB's or any affiliates' entry, as
applicable, into employment agreements with such of the
Prospective Retained Employees who are then still employees
of the Company or any of its affiliates, as CMC shall have
specified to the Company in writing not less than ten
business days before the Closing Date on terms satisfactory
to CMC. Notwithstanding the foregoing, it is understood and
agreed that the failure of any such officer or employee to
enter into an employment agreement with CMC or the Retained
Company shall not constitute a breach of this Agreement.
SECTION 5.10. Fees and Expenses. All fees and
expenses incurred in connection with the Merger, the
Distribution, this Agreement, the Distribution Agreement and
the transactions contemplated by this Agreement and the other
Documents shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except
that expenses incurred in connection with printing and
mailing the Proxy Statement, the Form S-4, the Form S-1 (if
required) and the Form 10, shall be shared equally by CMC and
the Company.
SECTION 5.11. Distribution. Prior to the Closing,
the Company will (a) enter into the Distribution Agreement
and the agreements contemplated thereby to which the Company
is to be a party and (b) cause each of USTNY, New Holdings
and New Trustco to enter into the Distribution Agreement, the
Contribution Agreement and each of the other Documents to
which it is a party. The Company will, and will cause USTNY,
New Holdings and New Trustco to, take all action necessary to
effect the Distribution pursuant to the terms of the
Distribution Agreement, the Contribution Agreement and the
other Documents.
SECTION 5.12. Public Announcements. CMC on the
one hand, and the Company, on the other hand, will consult
with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or
other public statements (it being understood that discussions
by the parties with financial analysts or other advisors
shall not constitute public statements) with respect to the
transactions contemplated by this Agreement and the
Distribution Agreement, including the Merger, and shall not
issue any such press release or make any such public
statement prior to such consultation, except as may be
required by applicable law, court process or by obligations
pursuant to any listing agreement with any national
securities exchange.
<PAGE>51 46
SECTION 5.13. Private Letter Ruling. The Company
and CMC each hereby agree to cooperate with the other party
and to use their reasonable best efforts to obtain the
private letter ruling contemplated by Section 6.2(c) of this
Agreement.
SECTION 5.14. Use of Name. From and after the
Closing Date, CMC (i) shall promptly change the name on all
documents, stationery and facilities relating to the Retained
Business to a name that is not in any way similar to the
Company's or USTNY's names (or any name or initial similar
thereto). Nothing in this Section shall require CMC to
undertake to reissue deposits or rewrite outstanding loans or
other agreements or documents except in the ordinary course
of business, it being understood, however, that reasonable
efforts will be used to change names in accordance with the
provisions of the first sentence of this Section.
SECTION 5.15. UST-CA. Prior to the Closing Date,
CMC shall use its best efforts to have The Chase Manhattan
Trust Company of California, N.A. ("Chase Cal") approved (if
not already approved) by the California Department of
Insurance as a "qualified custodian", "qualified depository"
and a "qualified subcustodian, under Section 1104.9 of the
California Insurance Code, and to obtain such other approvals
or make such other filings as are necessary to qualify such
bank or trust company to act as trustee and custodian (or
sub-custodian) under the Customer Agreements (as defined in
the Contribution Agreement) with respect to which U.S. Trust
Company of California, N.A. currently acts as trustee and
custodian. The Company and CMC shall use their reasonable
best efforts to obtain all necessary consents to substitute
Chase Cal as trustee and custodian under such Customer Agree-
ments.
SECTION 5.16. Affiliates. Prior to the Closing
Date, the Company shall deliver to CMC a letter identifying
all persons who are, at the time this Agreement is submitted
for approval to the stockholders of the Company, "affiliates"
of the Company for purposes of Rule 145 under the Securities
Act. The Company shall use its best efforts to cause each
such person to deliver to CMC on or prior to the Closing Date
a written agreement substantially in the form attached as
Exhibit VII hereto.
SECTION 5.17. Stock Exchange Listing. CMC shall
use its best efforts to cause the shares of CMC Common Stock
to be issued in the Merger and under the Stock Plans to be
approved for listing on the NYSE, subject to official notice
of issuance, prior to the Closing Date.
SECTION 5.18. Capital Adequacy. On the Closing
Date, CMC shall ensure that the Surviving Corporation and its
subsidiaries meet and satisfy all capital adequacy
requirements imposed by applicable law, bank regulators and
other Governmental Entities.
<PAGE>52 47
ARTICLE VI
Conditions Precedent
SECTION 6.1. 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) Stockholder Approval. This Agreement shall
have been approved and adopted by the affirmative vote or
consent of the Requisite Stockholders of the Company.
(b) NYSE Listing. The shares of CMC Company Stock
issuable to the Company's stockholders pursuant to this
Agreement and under the Stock Plans shall have been approved
for listing on the NYSE, subject to official notice of
issuance.
(c) Regulatory Approvals. Each of CMC and the
Company shall have obtained all requisite approvals of, or
satisfied all requisite filing requirements with, Bank
Regulators and other Governmental Entities, including all
requisite approvals under, and the expiration of all waiting
periods in respect of, the Bank Holding Company Act. No such
approval applicable to the Merger, the Distribution or the
Bank Merger shall impose any condition or restriction upon
CMC or New Holdings, or any of their respective subsidiaries,
including, without limitation, any requirement to raise
additional capital or to dispose of assets, which would so
materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement and the
Distribution Agreement as to render inadvisable the consum-
mation of the Merger or the Distribution.
(d) No Injunctions or Restraints. (i) No
temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect;
provided, however, that each of the parties shall have used
its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be
entered, and (ii) no action, suit or other proceeding shall
be pending or, to the knowledge of the Company and CMC,
threatened by any Governmental Entity that, if successful,
would restrict or prohibit the consummation of the
transactions contemplated in this Agreement or the other
Documents.
(e) Services Agreement. New Trustco, USTNY and
CMC shall have entered into the Services Agreement
substantially on the terms and conditions set forth in the
Processing Services Term Sheet (as defined in Section 4.4(d))
of date even herewith.
(f) Form S-4. The Form S-4 shall have become
effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop
order.
<PAGE>53 48
(g) Consummation of the Distribution. The
Distribution shall have become effective in accordance with
the terms of the Distribution Agreement, the Contribution
Agreement and each of the agreements contemplated thereby.
SECTION 6.2. Conditions to Obligations of CMC.
The obligation of CMC to effect the Merger is further subject
to the following conditions, unless waived by CMC:
(a) Representations and Warranties. The repre-
sentations and warranties of the Company set forth in this
Agreement that are qualified as to materiality shall be true
and correct, and the representations and warranties of the
Company set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, except to the
extent that any representation or warranty shall be as of a
specific date, in which case such representation and warranty
shall be true and correct as of such date, and CMC shall have
received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of
the Company to such effect. The Company shall have delivered
to CMC a certificate (the "Company Bring Down Certificate"),
dated as of the Closing Date and reasonably satisfactory in
form to CMC, that sets forth each event that has occurred and
each condition that exists that (i) had not occurred or was
not in existence as of the date of this Agreement and (ii) if
it had occurred or was in existence as of the date of this
Agreement would be required to be disclosed pursuant to
Section 3.1(g), (h), (l)(iii), (w) or (x). In determining
the materiality of the failure of any representation or
warranty made by the Company to be true when made, the
parties shall consider whether the failure can be remedied by
a financial indemnity, whether New Holdings or New Trustco is
obligated under the Post Closing Covenants Agreement to
indemnify against the failure, and the financial ability of
New Holdings or New Trustco, as appropriate, to satisfy any
indemnification obligation.
(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 and the Distribution Agreement at or prior to the
Closing Date, and CMC shall have received a certificate
signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to
such effect.
(c) Private Letter Ruling. The Service shall have
issued and not revoked a private letter ruling (the "Private
Letter Ruling"), reasonably satisfactory in form and
substance to CMC, in response to the Ruling Request,
substantially to the effect that, on the basis of the facts,
representations, and assumptions existing at the Effective
Time:
(i) the contribution by USTNY to New Trustco
of certain assets and the assumption of certain
liabilities of USTNY by New Trustco, as contemplated in
the Contribution Agreement, will qualify for Federal
income tax purposes as a tax-free reorganization within
the meaning of Section 368(a)(1)(D) of the Code or as
tax-free under Section 351 of the Code;
<PAGE>54 49
(ii) the distribution of all the capital stock
of New Trustco to the Company by USTNY, as contemplated
by the Distribution Agreement, will be tax-free for
Federal income tax purposes to USTNY under Section
361(a) of the Code and to the Company under Section
355(a) of the Code;
(iii) the contribution by the Company to
New Holdings of certain assets (including, without
limitation, all of the capital stock of New Trustco) and
the assumption of certain liabilities of the Company by
New Holdings, as contemplated by the Distribution
Agreement, will qualify for Federal income tax purposes
as a tax-free reorganization within the meaning of
Section 368(a)(1)(D) of the Code or as tax-free under
Section 351 of the Code; and
(iv) the distribution of the stock of New
Holdings on a pro rata basis to the holders of the
Company Common Stock will be tax-free for Federal income
tax purposes to the Company under Section 361(a) of the
Code and to the Company's stockholders under Section
355(a) of the Code.
(d) Opinion of the Company's Counsel. CMC shall
have received an opinion dated the Closing Date of Cravath,
Swaine & Moore, counsel to the Company, and/or in-house
counsel of the Company satisfactory to counsel to CMC, to the
effect that:
(i) The Company is a corporation validly
existing and in good standing under the laws of the
State of New York; USTNY is a bank and trust company
validly existing and in good standing under the laws of
the State of New York. New Holdings is a corporation
validly existing and in good standing under the laws of
the State of New York; and New Trustco is a bank and
trust company validly existing and in good standing
under the laws of the State of New York.
(ii) Each of the Company, USTNY, New Holdings
and New Trustco (collectively, the "Company Parties")
has the power and authority to execute each Document
(such term being used herein as defined in the
Contribution Agreement) to which it is a party and to
consummate the transactions contemplated hereby and
thereby; the execution and delivery of the Documents and
the consummation of the transactions contemplated hereby
and thereby have been duly authorized by requisite
corporate action on the part of each Company Party that
is a party thereto and the stockholders of each such
Company Party and each Document has been duly executed
and delivered by the Company Parties that are party
thereto and constitutes a legal, valid and binding
obligation of each such Company Party, enforceable in
accordance with its terms subject to applicable
bankruptcy, insolvency, receivership or other similar
laws affecting the enforcement of creditors, rights
generally and subject, as to enforceability, to general
principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity
or at law.
(iii) The execution, delivery and
performance of the Documents by each Company party
thereto will not (x) violate any Federal law or the laws
of the State of
<PAGE>55 50
New York or (y) conflict with any provision of the
certificate of incorporation or By-laws of the
applicable Company Party. Such counsel expresses no
opinion, however, as to any violation of any law or
regulation which may have become applicable to any
Company Party as a result of the involvement of CMC or
any of its subsidiaries in the transactions contemplated
by this Agreement because of CMC's or any of its
subsidiaries' legal or regulatory status or because of
any other facts specifically pertaining to CMC or any of
its subsidiaries.
(iv) Any consent, approval, order or
authorization of, any registration, declaration or
filing with, and any waiting period imposed by, any
governmental authority under Federal law or the laws of
the State of New York which is required by or with
respect to any Company Party in connection with the
execution and delivery of the Documents by the Company
Parties that are party thereto or the consummation by
the Company Parties of the transactions contemplated
hereby or thereby, has been obtained or made or, in the
case of any such waiting period, has expired. Such
counsel expresses no opinion, however, as to any consent
or approval which any Company Party may be required to
obtain as a result of the involvement of the CMC or any
of its subsidiaries in the transactions contemplated by
this Agreement because of CMC's or any of its
subsidiaries' legal or regulatory status or because of
any other facts specifically pertaining to CMC or any of
its subsidiaries.
(e) No Material Adverse Change. Whether or not
any event or change is reflected in the Company Bring Down
Certificate, since September 30, 1994, there shall have been
no material adverse change, and no event that could
reasonably be expected to result in a material adverse
change, to the business, properties, assets, results of
operations, or financial condition of MFSC or of the
Processing Entities taken as a whole; provided, however that
"material adverse change" for this purpose shall not include
(i) any adverse change resulting from economic or market
conditions generally affecting businesses engaged in the same
or substantially similar activities as the Processing
Entities or (ii) any adverse change resulting directly from
any action taken by CMC or any subsidiary of CMC except an
action specifically permitted or contemplated by this
Agreement (including the Bank Merger).
(f) Dissenters' Rights. Dissenters' Shares shall
not constitute more than 5% of the aggregate number of
outstanding Shares of Company Common Stock.
(g) Other Documents. Each of the other Documents
(other than the Servicing Agreement) shall have been executed
substantially in the forms attached as Exhibits hereto or to
the Contribution Agreement or, if not included as Exhibits,
in the form mutually agreed to as the parties thereto and
CMC, as the case may be, by the applicable parties thereto
(other than CMC and its Affiliates) and shall have become
effective in accordance with its terms. The Company shall
have delivered to CMC true, correct and complete copies of
each Document to which the CMC is not a party.
(h) Tax Opinion. CMC shall have received an
opinion, based on the representation letters to be delivered
pursuant to Section 4.4(c), of O'Melveny & Myers, counsel to
<PAGE>56 51
CMC, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that CMC and the
Company will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
(i) Amendments to SEC Documents. Since the
effective date of the Form S-4 or the Proxy Statement, as
applicable, no event with respect to the Company, any
subsidiary of the Company or any security holder of the
Company has occurred which should have been set forth in an
amendment to the Form S-4 or a supplement to the Proxy
Statement which has not been set forth in such an amendment
or supplement.
(j) Rule 145 Letters. The Company shall have
delivered letters regarding Rule 145 of the Securities Act,
substantially in the form of Exhibit VII hereto, executed by
each affiliate of the Company who will acquire shares of CMC
Common Stock in connection with the Merger.
(k) Anti-Virus Software. MFSC shall have
installed anti-virus computer software satisfactory to CMC in
its reasonable discretion.
(l) Compliance with Securities Settlement
Regulatory Changes.
(i) The Asset Management System shall comply
with material regulatory requirements.
(ii) If the Closing Date occurs before June 1,
1995, software modifications required to comply with
"T+3" ("T+3 Modifications") shall have been completed in
all material respects and shall have been operated in a
testing environment reasonably satisfactory to CMC.
(iii) If the Closing Date occurs on or
after June 1, 1995, the T+3 Modifications shall have
been implemented in production and operating
successfully.
(m) Conversion of Asset Management System. The
Asset Management System shall have been modified to operate
in a multi-bank environment to the reasonable satisfaction of
CMC, subject only to such "work-arounds" as CMC may approve
in its reasonable discretion.
SECTION 6.3. Conditions to Obligation of the
Company. The obligation of the Company to effect the Merger
is further subject to the following conditions, unless waived
by the Company:
(a) Representations and Warranties. The represen-
tations and warranties of CMC set forth in this Agreement
that are qualified as to materiality shall be true and
correct, and the representations and warranties of CMC set
forth in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case as of
the date of this
<PAGE>57 52
Agreement and as of the Closing Date as though made on and as
of the Closing Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a certificate
signed on behalf of CMC by the chief executive officer and
the chief financial officer of CMC to such effect. CMC shall
have delivered to the Company a certificate (the "CMC Bring
Down Certificate"), dated as of the Closing Date and
reasonably satisfactory in form to the Company, that sets
forth each event that has occurred and each condition that
exists that (i) had not occurred or was not in existence as
of the date of this Agreement and (ii) if it had occurred or
was in existence as of the date of this Agreement would be
required to be disclosed pursuant to Section 3.2(f), (g) or
(i).
(b) Performance of Obligations of CMC. CMC shall
have performed in all material respects all obligations
required to be performed by it under this Agreement at or
prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of CMC by the chief
executive officer and the chief financial officer of CMC to
such effect.
(c) Private Letter Ruling. The Service shall have
issued and not revoked the Private Letter Ruling reasonably
satisfactory in form and substance to the Company.
(d) Opinion of CMC's Counsel. The Company shall
have received an opinion dated the Closing Date of O'Melveny
& Myers, counsel to CMC, and/or in-house Counsel of CMC,
satisfactory to counsel to the Company to the effect that:
(i) CMC is a corporation validly existing and
in good standing under the laws of Delaware.
(ii) CMC has the requisite power and authority
to execute this Agreement and to consummate the
transactions contemplated hereby; the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part
of CMC and, if required, its stockholders; and this
Agreement has been duly executed and delivered by CMC
and constitute valid and binding obligations of CMC
enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, receivership or other
similar laws affecting the enforcement of creditors'
rights generally and subject, as to enforceability, to
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity
or at law.
(iii) The execution, delivery and
performance of this Agreement, the Tax Allocation
Agreement and the Post Closing Covenants Agreement by
CMC will not (x) violate any Federal law or any law of
the State of Delaware or (y) conflict with any provision
of the certificate of incorporation or By-laws of CMC.
Such counsel expresses no opinion, however, as to any
violation of any law or regulation which may have become
applicable to CMC as a result of the involvement of the
Company, New Holdings and any subsidiary of either in
the transactions contemplated by this Agreement because
of the Company's legal or regulatory status or because
of any other facts specifically pertaining to the
Company or any of its subsidiaries.
<PAGE>58 53
(iv) Any consent, approval, order or
authorization of, any registration, declaration or
filing with, and any waiting period imposed by, any
governmental authority under Federal law or the law of
the State of Delaware, which is required by or with
respect to CMC in connection with the execution and
delivery of this Agreement by CMC or the consummation of
the transactions contemplated hereby has been obtained
or made or, in the case of any such waiting period, has
expired. Such counsel expresses no opinion, however, as
to any consent or approval which CMC may be required to
obtain as a result of the involvement of the Company,
New Holdings and any subsidiary in the transactions
contemplated by this Agreement because of the Company's,
New Holdings' or any subsidiary's legal or regulatory
status or because of any other facts specifically
pertaining to the Company or any of its subsidiaries.
(e) No Material Adverse Change. Whether or not
any event or change is reflected in the CMC Bring Down
Certificate, since September 30, 1994, there shall have been
no material adverse change, and no event that could
reasonably be expected to result in a material adverse
change, to the business, properties, assets, results of
operations or financial condition of CMC and its subsidiaries
taken as a whole, provided, however, that "material adverse
change" for this purpose shall not include (i) any adverse
change resulting from economic or market conditions generally
affecting businesses engaged in the same or substantially
similar activities as CMC and its subsidiaries; or (ii) any
adverse change resulting directly from any action taken by
the Company or any subsidiary of the Company except an action
specifically permitted or contemplated by this Agreement
(including the Bank Merger).
(f) Tax Opinion. The Company shall have received
an opinion, based on the representation letters to be
delivered pursuant to Section 4.4(c), of Cravath, Swaine &
Moore, counsel to the Company, to the effect that the Merger
will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code, and that CMC and the Company will each be a party to
that reorganization within the meaning of Section 368(b) of
the Code.
(g) Amendments to SEC Documents. Since the
effective date of the Form S-4 or the Proxy Statement, as
applicable, no event with respect to CMC, any subsidiary of
CMC or any security holder of CMC has occurred which should
have been set forth in an amendment to the Form S-4 or a
supplement to the Proxy Statement which has not been set
forth in such an amendment or supplement.
(h) Other Documents. Each of the other Documents
(other than the Servicing Agreement) shall have been executed
substantially in the forms attached as Exhibits hereto or to
the Contribution Agreement or, if not included as Exhibits,
in the form mutually agreed to by the parties thereto and
CMC, as the case may be, by the applicable parties thereto
(other than the Company and its Affiliates) and shall have
become effective in accordance with its terms.
ARTICLE VII
<PAGE>59 54
Termination, Amendment and Waiver
SECTION 7.1. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of matters presented in connection
with the Merger by the stockholders of the Company:
(a) by mutual written consent of CMC and the
Company; or
(b) by either CMC or the Company:
(i) if, upon a vote at a duly held Stock-
holders meeting or any adjournment thereof, any required
approval of the stockholders of the Company shall not
have been obtained;
(ii) if the Merger shall not have been
consummated on or before the date one year following the
date of this Agreement, unless the failure to consummate
the Merger is the result of a wilful and material breach
of this Agreement by the party seeking to terminate this
Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof (but in no
event for more than an additional 90 days) during which
any party shall be subject to a nonfinal order, decree,
ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger or the
calling or holding of the Stockholders Meeting; or
(iii) if any Governmental Entity shall
have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable.
SECTION 7.2. Effect of Termination.
(a) In the event of termination of this Agreement
by either the Company or CMC as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of CMC or the
Company, other than the provisions of Section 3.1(r), Section
3.2(l), the last two sentences of Section 5.4, Section 5.10,
this Section 7.2 and Article VIII and except to the extent
that such termination results from the wilful and material
breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement, the
Distribution Agreement, the Contribution Agreement or any
agreement contemplated thereby.
(b) If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) CMC shall return all documents and other
material received from the Company or its
representatives relating to the transactions
contemplated hereby, whether so obtained before or after
the execution hereof, to the Company; and
<PAGE>60 55
(ii) all confidential information received by
CMC with respect to the businesses of the Company shall
be treated in accordance with the Confidentiality Agree-
ment which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) CMC has incurred substantial expenses in
connection with its examination of the Company and
negotiation of this Agreement and shall incur substantial
expense in connection with its actions to implement the
Merger. If this Agreement is terminated for any reason other
than by reason of the failure to satisfy the conditions set
forth in Sections 6.1(b) or (c); or 6.3(a), (b), (d) (but
only if Cravath, Swaine & Moore is prepared to deliver the
opinion referred to in 6.3(f) based on representation letters
delivered to it in good faith), (e), (g) or (h); or due to a
permanent injunction issued at the instance of the United
States Department of Justice; or otherwise due to any default
on the part of CMC or failure of CMC to obtain all requisite
approvals, the Company shall pay to CMC, as liquidated
damages, and not a penalty, the sum of (i) $5,000,000, if
such termination occurs on or before the date that proxy
statements relating to the Merger are first mailed to the
Company's stockholders, and (ii) $7,500,000, if the
termination occurs after the date of such mailing.
SECTION 7.3. Amendment. This Agreement may be
amended by the parties at any time before or after any
required approval of matters presented in connection with the
Merger by the stockholders of the Company; provided, however,
that after any such approval, there shall be made no
amendment that by law requires further approval by such
stockholders without the further approval of such stock-
holders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the
parties.
SECTION 7.4. Extension; Waiver. At any time
prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or
in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.3, waive compliance with
any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 7.5. Procedure for Termination,
Amendment, Extension or Waiver. A termination of this
Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver
pursuant to Section 7.4 shall, in order to be effective,
require in the case of CMC or the Company, action by its
Board of Directors or the duly authorized designee of its
Board of Directors.
<PAGE>61 56
ARTICLE VIII
General Provisions
SECTION 8.1. 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 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the
Effective Time.
SECTION 8.2. Notices. Any notice, request,
instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be
deemed to have been duly given (i) on the first business day
occurring on or after the date of transmission if transmitted
by facsimile (upon confirmation of receipt by journal or
report generated by the facsimile machine of the party giving
such notice), (ii) on the first business day occurring on or
after the date of delivery if delivered personally or (iii)
on the first business day following the date of dispatch if
dispatched by Federal Express or other next-day courier
service. All notices hereunder shall be given as set forth
below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to CMC, to
The Chase Manhattan Corporation
One Chase Manhattan Plaza
New York, New York 10081
Attention: Robert M. MacAllester
with a copy (which shall not constitute
notice) to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022-4611
Attention: William H. Satchell
(b) if to the Company, to
U. S. Trust Corporation
114 West 47th Street
New York, NY 10036
Attention: Maureen Scannell Bateman
<PAGE>62 57
with a copy (which shall not constitute
notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: B. Robbins Kiessling
SECTION 8.3. Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person;
(b) "person" means an individual, corporation,
partnership, joint venture, association, trust,
unincorporated organization or other entity; and
(c) a "subsidiary" of any person means another
person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first person.
SECTION 8.4. Interpretation. When a reference is
made in this Agreement to a Section, Exhibit or Schedule,
such reference shall be to a Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. When-
ever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the
words "without limitation."
SECTION 8.5. 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 8.6. Entire Agreement; No Third-Party
Beneficiaries. This Agreement, the other Documents and the
agreements referred to herein and therein or required to be
delivered in connection with the transactions contemplated by
the Documents and certain side letters of date even herewith
exchanged by the parties in connection with the execution of
this Agreement constitute the entire agreement, and supersede
all prior agreements (other than the Confidentiality
Agreement) and understandings, both written and oral, among
the parties with respect to the subject matter of this
Agreement, and except for the provisions of Article II,
Section 5.7, Section 5.8 and Section 5.9, this Agreement is
not intended to confer upon any person other than the parties
any rights or remedies.
<PAGE>63 58
SECTION 8.7. Governing Law. This Agreement shall
be governed by, and construed in accordance with, the laws of
the State of New York and, insofar as the Merger is
concerned, the Delaware General Corporate Law, regardless of
the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 8.8. Assignment. Neither this Agreement
nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by opera-
tion of law or otherwise by any of the parties without the
prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties
and their respective successors and assigns.
SECTION 8.9. Enforcement. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United
States located in the State of New York, this being in
addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of
any Federal court located in the State of New York in the
event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that
it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a
Federal court sitting in the State of New York.
[Remainder of page intentionally left blank]
<PAGE>64
IN WITNESS WHEREOF, CMC and the Company have caused
this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written
above.
THE CHASE MANHATTAN CORPORATION
By: /s/ Deborah L. Duncan
------------------------
Name: Deborah L. Duncan
Title: Executive Vice
President and
Treasurer
ATTEST:
/s/ Ronald C. Mayer
____________________________
Name: Ronald C. Mayer
Title: Secretary
U.S. TRUST CORPORATION
By: /s/ H. Marshall Schwarz
---------------------------
Name: H. Marshall Schwarz
Title: Chairman and CEO
ATTEST:
/s/ Jeffrey S. Maurer
____________________________
Name: Jeffrey S. Maurer
Title: President
<PAGE>65 Schedule 5.8(c)
Set forth below is a description of the severance
and other benefits that shall be provided by CMC pursuant to
Section 5.8(c) to any Retained Employee whose employment with
CMC and its affiliates is involuntarily terminated within two
years following the Closing Date:
1. Severance Benefit. CMC shall provide any such
Retained Employee with a severance benefit in an amount not
less than the sum of (a) the amount determined under the
table set forth below based on the Retained Employee's
position with the Retained Company immediately prior to the
Closing, and (b) an amount determined by multiplying the
Retained Employee's annual base salary by 4% for each year,
or part thereof, of his or her Prior Service. The table
referred to in clause (a) is as follows:
Position Held Severance Amount
Senior Vice President and One year's base salary
above
All other officers 6 months' base salary
All other employees 2 weeks' base salary for
each year of Prior
Service, but not to
exceed 26 weeks' base
salary
For purposes of the foregoing, a Retained
Employee's "base salary," shall mean the rate of base salary
(annual, monthly or weekly, as the case may be) in effect for
the Retained Employee immediately prior to the Closing.
The amount to be paid to a Retained Employee
pursuant to this paragraph 1 shall be paid in the form of a
single lump sum cash payment. Payment shall be made as soon
as practicable after the date of the Retained Employee's
termination of employment with CMC and its affiliates.
2. Outplacement Services. CMC shall arrange for
any such Retained Employee to be provided with professional
outplacement counselling services for such period of time
following termination of his or her employment with CMC and
its affiliates as may be necessary in order for such Retained
Employee to find employment with another employer on terms
acceptable to the Retained Employee; provided, however, that
the cost to CMC of the services so provided to any Retained
Employee shall not exceed the amount determined for such
Retained Employee in accordance with the following table
based on the position held by the
<PAGE>66
Retained Employee with the Retained Company, and the annual
rate of base salary in effect for the Retained Employee,
immediately prior to the Closing:
Position Held Cost of Service
Senior Vice President and 17% of base salary
above
All other officers 15% of base salary
All other employees 5% of base salary
3. Other Benefit Coverage.
(a) CMC shall provide any such Retained Employee
with coverage under (or with coverage comparable to that
provided under) the health care, dental and life insurance
plans maintained by CMC and its affiliates for their
employees, for at least such period following the Retained
Employee's termination of employment with CMC and/or its
affiliates as is determined for such Retained Employee under
the table set forth below based on the Retained Employee's
position with the Retained Company immediately prior to the
Closing:
Position Held Benefit Continuation Period
Senior Vice President and One year
above
All other officers 6 months
All other employees 3 months
Each such benefit coverage shall be provided to a Retained
Employee on the same terms and conditions as would apply
under the applicable plan to such Retained Employee if he or
she were still an active employee of CMC and its affiliates.
Such benefit continuation period shall be treated as part of
the period of continuation coverage required to be provided
pursuant to Section 601 of ERISA or Section 4980B of the
Code.
(b) If, under the applicable life insurance plan
maintained by CMC and/or its affiliates, the amount of the
insurance coverage provided under the plan is based on the
level of compensation of the employee in question, the amount
of life insurance coverage to be provided to any Retained
Employee pursuant to this paragraph 3 shall not be less than
the amount that would be provided under such plan on the
basis of the annual rate of base salary in effect for such
Retained Employee immediately prior to the Closing.
<PAGE>67
(c) Notwithstanding any provision of this
paragraph 3 to the contrary, CMC shall not be required to
provide any benefit coverage to a Retained Employee for any
period beginning on or after the date, following the
termination of his or her employment with CMC and its
affiliates, as of which the Retained Employee becomes
entitled to receive similar benefit coverage under the plan
of any employer other than CMC or any of its affiliates
(including without limitation any post-retirement medical or
life insurance plan maintained by New Trustco or any of its
affiliates), except to the extent the applicable CMC's Plan
otherwise so provides.
<PAGE>68 Schedule 5.8(e)
Set forth below is a list of employees eligible for
participation in the Transition Bonus Program referred to in
Section 5.8(e), the amount of the Transition Bonus
potentially payable to each such employee, and the period of
such employee's Required Service.
Division: Systems Development
Required Service: Three months following the Closing Date
Position/ Annual Salary No. of Months Bonus Amount
Employee
EXHIBIT I
to Merger Agreement
AGREEMENT AND PLAN OF DISTRIBUTION
Dated as of , 1995
Among
U.S. TRUST CORPORATION,
UNITED STATES TRUST COMPANY OF NEW YORK,
[NEW HOLDINGS]
and
[NEW TRUSTCO]
<PAGE>2
1
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of
, 1995 (this "Distribution Agreement"), among U.S.
TRUST CORPORATION, a New York corporation (the "Company"),
UNITED STATES TRUST COMPANY OF NEW YORK, a New York State
chartered bank and trust company and a wholly owned
subsidiary of the Company (including any successor by merger,
"USTNY"), [NEW HOLDINGS], a New York corporation and a wholly
owned subsidiary of the Company ("New Holdings"), and [NEW
TRUSTCO], a New York State chartered bank and trust company
and a wholly owned subsidiary of USTNY ("New Trustco").
RECITALS
WHEREAS, the Company and The Chase Manhattan
Corporation, a Delaware corporation ("CMC") have entered
into an Agreement and Plan of Merger, dated as of November
18, 1994 (the "Merger Agreement"), providing for the Merger
(as defined in the Merger Agreement) of the Company with and
into CMC, with CMC as the surviving corporation;
WHEREAS, immediately prior to the Effective Time (as
defined in Section 1.3 of the Merger Agreement), subject to
the satisfaction or waiver of the conditions set forth in
Article VII of this Distribution Agreement, (i) the Board of
Trustees of USTNY expects to distribute as a dividend to the
Company all of the outstanding shares of Common Stock (the
"New Trustco Common Stock"), par value $1.00 per share, of New
Trustco (the "New Trustco Spin-off") and (ii) the Board of
Directors of the Company expects, following the contribution
of the New Trustco Common Stock and certain other assets by
the Company to New Holdings, to distribute as a dividend to
the holders of Common Stock of the Company, par value $1.00
per share (the "Company Common Stock"), on a pro rata basis,
all of the then outstanding shares of Common Stock (the "New
Holdings Common Stock"), par value $1.00 per share of New
Holdings (the "New Holdings Spin-Off" and, together with the
New Trustco Spin-Off, the "Spin-Offs"); and
WHEREAS, the purpose of the Spin-Offs is to make
possible the Merger by divesting the Company of all
businesses and operations other than the Retained Business
(as defined in the Merger Agreement). This Distribution
Agreement sets forth or provides for certain agreements
among the Company, USTNY, New Holdings and New Trustco in
consideration of the separation of their ownership.
NOW, THEREFORE, in consideration of the premises,
and of the respective representations, warranties, covenants
and agreements set forth herein, the parties hereto hereby
agree as follows:
<PAGE>3
2
ARTICLE I
Definitions
SECTION 1.1. Definitions. As used in this
Distribution Agreement, the following terms shall have the
following respective meanings (capitalized terms used but
not defined herein shall have the respective meanings
ascribed thereto in the Contribution Agreement):
"Company Group" shall mean the Company and its
subsidiaries, other than New Holdings and its
subsidiaries (determined after giving effect to the
transfers and transactions contemplated by Sections 4.1
and 4.2 of this Distribution Agreement).
"Contribution Agreement" shall mean the
Contribution and Assumption Agreement dated as of the
date hereof between USTNY and New Trustco, in the form
attached as Exhibit II to the Merger Agreement.
"Fair Market Value" shall mean, with respect to
any asset or property, the sale value that would be
obtained in an arms length transaction between an
informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion
to buy.
"Limit Amount" shall mean the sum of (i) the
amount described in clause (x) of Section 4.3, plus
(ii) the amount described in clause (y)(i) of Section
4.3, plus (iii) the amount described in clause (z) of
Section 4.3.
"MFSC Retained Liabilities" shall mean the
following:
(i) all liabilities to trade creditors and
accounts payable of the Processing Business, but
only to the extent fully liquidated and reflected
on the Final MFSC Balance Sheet;
(ii) all duties, obligations and liabilities
under Customer Agreements relating to the
Processing Business, but not any liability for
defaults or damages arising before the Closing
Date;
(iii) all duties, obligations and liabilities
under Contracts relating to the Processing
Business, but not any liability for defaults or
damages arising before the Closing Date;
(iv) all intercompany obligations of MFSC
owing to the Company or USTNY;
<PAGE>4
3
(v) all obligations and duties as a lessee
under leases, including the lease at 73 Tremont
Street, Boston, MA, between MFSC, as lessee, and
Tremont Land Holding Company, Inc., as lessor (the
"Tremont Lease"); and
(vi) to the extent not included in (i)
through (v) above, any liabilities to the extent
reflected on the Final MFSC Balance Sheet.
Notwithstanding anything to the contrary in this
Agreement, MFSC Retained Liabilities shall not include
any liability for Taxes, except as provided in the Tax
Allocation Agreement.
"New Holdings Group" shall mean New Holdings and
its subsidiaries (determined after giving effect to the
transfers and transactions contemplated by Sections 4.1
and 4.2 of this Distribution Agreement).
"Time of Distribution" shall mean the time as of
which the Spin-Offs are effective.
"Transfer Agent" shall mean USTNY, the transfer
agent for the Company Common Stock.
ARTICLE II
Capitalization of New Trustco; Recapitalization
of New Holdings; Mechanics of Spin-Offs
SECTION 2.1. Capitalization of New Trustco. The
authorized capital stock of New Trustco currently consists
of 100 shares of New Trustco Common Stock, all of which are
issued and outstanding and owned beneficially and of record
by USTNY.
SECTION 2.2. Recapitalization of New Holdings. (a)
The authorized capital stock of New Holdings currently
consists of 100 shares of Common Stock, par value $1.00 per
share (the "Existing New Holdings Common Stock"), all of
which are issued and outstanding and owned beneficially and
of record by the Company.
(b) Immediately prior to the Time of
Distribution, the Company shall (i) appropriately cause New
Holdings to amend and restate its Certificate of
Incorporation to, among other things, provide (x) for an
increase in the number of authorized shares of common stock
of New Holdings from the number of shares of Existing New
Holdings Common Stock authorized prior to such amendment and
restatement and (y) that the authorized common stock of New
Holdings shall consist of New Holdings Common Stock, and
(ii) exchange the 100 shares of Existing New Holdings Common
Stock owned by the Company for a total number of
<PAGE>5
4
shares of New Holdings Common Stock equal to the total
number of shares of Company Common Stock outstanding as of
the Record Date (as defined below) for the Distribution.
SECTION 2.3. Mechanics of Spin-Offs. The Spin-Offs
shall be effected by (a)(i) the contribution of certain
assets by USTNY to New Trustco, and the assumption of
certain liabilities of USTNY by New Trustco, in each case as
provided in the Contribution Agreement, and (ii) the
declaration and payment of a dividend by USTNY of all the
outstanding capital stock of New Trustco to the Company, as
provided for in this Distribution Agreement, followed by
(b)(i) the contribution of certain assets (including,
without limitation, all of the capital stock of New Trustco
and certain other subsidiaries of the Company) by the
Company to New Holdings, and the assumption of certain
liabilities of the Company by New Holdings, in each case as
provided for in this Distribution Agreement and (ii) the
distribution to each holder of record of Company Common
Stock, as of the close of the stock transfer books on the
record date designated by or pursuant to the authorization
of the Board of Directors of the Company (the "Record
Date"), of certificates representing one share of New
Holdings Common Stock multiplied by the number of shares of
Company Common Stock held by such holder.
SECTION 2.4. Timing of Spin-Offs. Immediately prior
to the Effective Time subject to the satisfaction or waiver
of the conditions set forth in Article VII of this
Distribution Agreement, (i) the Board of Trustees of USTNY
shall formally declare the New Trustco Spin-Off and pay it
by delivery of certificates for New Trustco Common Stock to
the Company and (ii) the Board of Directors of the Company
shall formally declare the New Holdings Spin-Off and pay it
by delivery of certificates for New Holdings Common Stock to
the Transfer Agent for delivery to the holders entitled
thereto. The Spin-Offs shall be deemed to be effective upon
notification by the Company to the Transfer Agent that the
Spin-Offs have been declared and that the Transfer Agent is
authorized to proceed with the distribution of New Holdings
Common Stock, which notification the Company agrees to
deliver promptly following such declarations.
ARTICLE III
Ancillary Agreements
SECTION 3.1. Tax Matters. Prior to the Time of
Distribution, the parties hereto shall execute and deliver
an agreement relating to past and future tax sharing and
certain issues associated therewith in the form attached to
the Merger Agreement as Exhibit V (the "Tax Allocation
Agreement").
SECTION 3.2. Services Agreement. Prior to the Time
of Distribution, USTNY and New Trustco shall execute and
deliver the Services Agreement (as defined in the
Contribution Agreement).
<PAGE>6
5
SECTION 3.3. Post Closing Covenants Agreement. Prior
to the Time of Distribution, the parties hereto shall
execute and deliver the Post Closing Covenants Agreement in
the form attached to the Merger Agreement as Exhibit VI (the
"Post Closing Covenants Agreement").
ARTICLE IV
Certain Transactions
SECTION 4.1. Transactions Relating to New Trustco
Spin-Off. Immediately prior to the Time of Distribution,
subject to the satisfaction or waiver of the conditions set
forth in Article VII of this Distribution Agreement:
(a) USTNY and New Trustco shall execute and
deliver the Contribution Agreement; and
(b) Pursuant to the terms of the Contribution
Agreement, USTNY shall assign, transfer, convey and
contribute to New Trustco the assets required therein to be
assigned, transferred, conveyed and contributed and, in
connection therewith, New Trustco shall assume the
liabilities required therein to be assumed.
SECTION 4.2. Transactions Relating to New Holdings
Spin-Off. Immediately prior to the Time of Distribution and
immediately after (i) the transfers described in Section 4.1
and (ii) the New Trustco Spin-Off, as provided in Section
2.3, the Company shall, upon the terms and conditions of
this Distribution Agreement, assign, transfer, convey and
contribute (or cause the assignment, transfer, conveyance or
contribution of) the following (the "Acquired Assets") to
New Holdings:
(a) all of the issued and outstanding capital
stock of the following subsidiaries:
(i) New Trustco;
(ii) U.S. Trust Co. of Florida Savings Bank,
a Florida banking corporation;
(iii) U.S.T.L.P.O. Corp., a Delaware
corporation;
(iv) Campbell, Cowperthwait & Company, a
Delaware Corporation;
<PAGE>7
6
(v) U.S. Trust Co. of California, N.A., a
national banking association;
(vi) U.S. Trust Co. of New Jersey, a New
Jersey banking corporation;
(vii) U.S. Trust Company of Connecticut, a
Connecticut banking corporation;
(viii) UST Financial Services Corp., a New York
corporation;
(ix) CTMC Holding Company, an Oregon
corporation;
(x) U.S. Trust Company Limited, a New York
banking corporation;
(xi) Technologies Holding Corporation, a
Delaware corporation; and
(xii) UST Risk Management Services Inc., a New
York corporation.
(b)(i) subject to the provisions of Section 4.3,
all monies, cash on hand, deposits with banks, loans,
advances, investments (other than equity investments
described in the parenthetical in Section 4.2(b)(iii))
and securities (other than securities representing
equity investments described in the parenthetical in
Section 4.2(b)(iii)) owned by, or held for the account
of, the Company;
(ii) all patents, patent applications,
trademarks, trademark registrations, service marks,
tradenames, copyrights, or licenses with respect
thereto, and all rights to the name "U.S. Trust
Corporation" or any other name used or employed by the
Company or any of its affiliates (other than Mutual
Funds Service Company, a Delaware corporation and a
wholly owned subsidiary of the Company ("MFSC"));
(iii) all equity or debt investments of the
Company in any corporation, joint venture, partnership,
trust or other business association (other than the
Company's equity investments in MFSC, USTNY and US
Trust Co. of Wyoming, a Wyoming corporation and wholly
owned subsidiary of the Company ("UST-WY"));
(iv) all records prepared in connection with
the merger contemplated by the Merger Agreement or the
sale of the Retained Business, including bids received
from other persons and analyses relating to the
Processing Business and all books of account, general,
financial, accounting and personnel records, files,
invoices and similar data owned by the Company on the
Closing Date;
(v) all rights relating to the Assumed
Liabilities; and
(vi) all assets identified in Schedule
4.2(b);
(c)(i) all monies, cash on hand, deposits with
banks, loans, advances, investments and securities
owned by, or held for the account of, MFSC; and
<PAGE>8
7
(ii) all equity or debt investments of MFSC
(other than MFSC's equity interest in Mutual Funds
Service Company (Canada) Ltd.) in any corporation,
joint venture, partnership, trust or other business
association.
(d)(i) all monies, cash on hand, deposits with
banks, loans, advances, investments and securities
owned by, or held for the account of, UST-WY;
(ii) all patents, patent applications,
trademarks, trademark registrations, service marks,
tradenames, copyrights, or licenses owned by UST-WY and
all rights with respect to the name U.S. Trust Company
of Wyoming, or any similar name used or employed by
UST-WY or any of its affiliates; and
(iii) all equity or debt investments of UST-WY
in any corporation, joint venture, partnership, trust
or other business association.
Anything herein to the contrary notwithstanding,
Acquired Assets do not include the business, properties,
assets, goodwill and rights of the Company of whatever kind
and nature, real or personal, tangible or intangible that
are primarily used or held for use in the Processing
Business and the Related Back Office on the Closing Date
(other than any names that are Acquired Assets, and any
similar names).
SECTION 4.3. Certain Funds. Notwithstanding the
foregoing, the Company shall retain, and not distribute or
contribute to New Holdings pursuant to Section 4.2, cash
funds equal to the Retention Amount. The "Retention Amount"
shall mean the sum of (x) the aggregate amount, determined
as of the close of business on the day immediately prior to
the Closing Date, of the cash payments required to be made
with respect to all stock options granted under the 1989
Stock Compensation Plan of U.S. Trust Corporation and the
U.S. Trust Corporation Stock Option Plan for Non-Employee
Directors that have not expired or that have not been
exercised or cancelled prior to the Effective Time (as
defined in the Merger Agreement), determined in accordance
with the relevant provisions of each such plan on the basis
of a "Change in Control" having occurred thereunder with
respect to such stock options as a result of the Merger (as
defined in the Merger Agreement); (y) the product of (i) the
aggregate amount, determined as of the close of business on
the day immediately prior to the Closing Date, of the cash
payments required to be made with respect to all outstanding
account balances under the Annual Incentive Plan of U.S.
Trust Corporation, determined in accordance with the
relevant provisions of such plan (including any amendment
thereof made in accordance with the last sentence of
Section 4.1(h) of the Merger Agreement) on the basis of a
"Change in Control" having occurred thereunder as a result
of the Merger, multiplied by (ii) 0.68875; and (z) the
aggregate amount, determined as of the close of business on
the day immediately prior to the Closing Date, required to
pay any employer payroll taxes, including the employer's
share of FICA and FUTA, due on amounts payable under the
plans referred to in clauses (x) and (y).
At all times at and after the Closing, the Company
will retain and be solely responsible for, and the Company
hereby agrees to pay, perform and discharge when due, and
<PAGE>9
8
indemnify New Holdings and hold New Holdings harmless from
and against, all liabilities and obligations, but not in
excess of the Limit Amount, for amounts payable under each
of the plans referred to in clauses (x) and (y)(i) above,
and all liabilities and obligations to pay all employer
payroll taxes referred to in clause (z) above.
SECTION 4.4. Assumed Liabilities. The parties agree
that at or prior to the Time of Distribution, New Holdings
shall execute an assumption agreement substantially in the
form attached hereto as Exhibit A, pursuant to which New
Holdings shall, except as otherwise provided in this
Distribution Agreement, the Merger Agreement, the
Contribution Agreement or the Tax Allocation Agreement,
assume, or agree to be responsible for, all liabilities of
the Company and MFSC other than the MFSC Retained
Liabilities arising before the Time of Distribution and the
liabilities and obligations referred to in the second
paragraph of Section 4.3 (the "Assumed Liabilities") .
SECTION 4.5. Further Assurances. (a) The parties
agree that if after the Time of Distribution, either party
holds assets which by the terms hereof or of the
Contribution Agreement or the Merger Agreement were intended
to be assigned and transferred to, or retained by, the other
party, such party shall promptly assign and transfer or
cause to be assigned and transferred such assets to the
other party.
SECTION 4.6. Benefit Plans. Prior to the Time of
Distribution, the Company shall transfer each Benefit Plan
maintained by it other than any Retained Plan (as defined in
the Merger Agreement) to New Holdings, and New Holdings
agrees to assume and become solely responsible for all
liabilities and obligations of the Company under the Benefit
Plans so transferred.
SECTION 4.7. Indebtedness. Prior to the Time of
Distribution, the Company shall, and shall cause its
subsidiaries to, redeem or defease the indebtedness set
forth in Schedule 4.2(c) to the Merger Agreement.
SECTION 4.8. Certain Custody Arrangements. Prior to
the Time of Distribution, the Company shall cause its
subsidiary, U.S. Trust of the Pacific Northwest ("Pacific
Northwest") to enter a sub-custody agreement (the "Sub-
custody Agreement") with USTNY. The Sub-custody Agreement,
in form and substance mutually satisfactory to the parties
thereto, shall provide, in substance, that (i) USTNY shall
furnish sub-custody services with respect to all assets of
Standard Insurance Company of Oregon required by law to be
maintained with a custodian domiciled in the State of
Oregon; (ii) for the pass-through to USTNY of all revenues
received with respect to all such custody services furnished
to such Customer; (iii) for indemnification of Pacific
Northwest by USTNY against all losses, expenses, costs or
liabilities associated with or arising from such relation-
ship, except those resulting from its own gross negligence,
and (iv) in the event USTNY or its successor, or any
Affiliate, is at any time eligible to furnish sub-custody
services directly to such Customer, then at the request of
USTNY or its successor or any Affiliate, Pacific Northwest
shall use its reasonable best efforts to obtain all
<PAGE>10
9
necessary consents to substitute USTNY, any successor, or
Affiliate, as the case may be, as trustee or custodian for
such Customer.
ARTICLE V
Representations and Warranties
SECTION 5.1. Representations and Warranties of the
Company. The Company hereby represents and warrants to New
Holdings as follows:
(a) Organization, Standing and Power. The
Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its
business as now being conducted.
(b) Authority. The Company has all requisite
power and authority to execute this Distribution Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery of this Distribution Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the
part of the Company and by the stockholders of the Company.
This Distribution Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against it in
accordance with its terms.
(c) No Conflict. The execution, delivery and
performance by the Company of this Distribution Agreement
will not contravene, violate, result in a breach of or
constitute a default under (i) any provision of applicable
law or of the certificate of Incorporation or By-laws of the
Company or other charter or organizational documents, (ii)
any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its
properties or assets, (iii) any Material Contract (as
defined in the Contribution Agreement) to which the Company
is a party or by which the Company or any of its properties
is bound, or (iv) any debt obligation fully defeased and
discharged or fully defeased in substance on or before the
Time of Distribution.
(d) Approvals. No consent, approval, order,
authorization of, or registration, declaration or filing
with, any Governmental Entity (as defined in the Contri-
bution Agreement) is required in connection with the making
or performance by the Company of this Agreement, except (i)
approval of the Board of Governors of the Federal Reserve
System, (ii) filings with or applications to (A) the FDIC
(as defined in the Merger Agreement), and (B) the Banking
Department of the State of New York, (iii) potentially,
filing with the Securities and Exchange Commission ("SEC")
of (A) a registration statement on Form S-1 and (B) a
Form 10 (as defined in the Merger Agreement), (iv) filings
with various state bank regulatory authorities and
(v) application for (A) designation of the New Holdings
Common Stock as national market
<PAGE>11
10
system securities on the NASDAQ, or (B) listing of the New
York Stock Exchange or the American Stock Exchange.
SECTION 5.2. Representations and Warranties of New
Holdings. New Holdings hereby represents and warrants to
the Company as follows:
(a) Organization, Standing and Power. New
Holdings is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its
business as now being conducted.
(b) Authority. New Holdings has all requisite
power and authority to execute this Distribution Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery of this Distribution Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the
part of New Holdings and, to the extent required, by the
stockholders of New Holdings. This Agreement has been duly
executed and delivered by New Holdings and constitutes a
legal, valid and binding obligation of New Holdings
enforceable against it in accordance with its terms.
(c) No Conflict. The execution, delivery and
performance by New Holdings of this Agreement will not
contravene, violate, result in a breach of or constitute a
default under (i) any provision of applicable law or of the
Certificate of Incorporation or By-laws of New Holdings or
other charter or organizational documents or (ii) any
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to New Holdings or any of its
properties or assets.
(d) Approvals. No consent, approval, order,
authorization of, or registration, declaration or filing
with, any Governmental Entity (as defined in the
Contribution Agreement) is required in connection with the
making or performance by New Holding of this Agreement,
except (i) approval of the Board of Governors of the Federal
Reserve System, (ii) filings with or applications to (A) the
FDIC (as defined in the Merger Agreement), and (B) the
Banking Department of the State of New York, (iii)
potentially, filing with the SEC of (A) a registration
statement on Form S-1 and (B) a Form 10 (as defined in the
Merger Agreement), (iv) filings with various state bank
regulatory authorities and (v) application for (A)
designation of the New Holdings Common Stock as national
market system securities on the NASDAQ, or (B) listing of
the New York Stock Exchange or the American Stock Exchange.
<PAGE>12
11
ARTICLE VI
Certain Covenants
SECTION 6.1. Certain Understandings. New Holdings
acknowledges that neither the Company nor any other person
has made any representation or warranty, express or implied,
as to the accuracy or completeness of any information
regarding the Acquired Assets or Assumed Liabilities not
included in this Distribution Agreement or the schedules
hereto. New Holdings acknowledges that it will acquire the
Acquired Assets without any representation or warranty as to
merchantability or fitness for any particular purpose, in an
"as is" condition and on a "where is" basis.
ARTICLE VII
Conditions
The obligations of the Company and New Holdings to
consummate the Spin-Offs shall be subject to the fulfillment
of each of the following conditions:
SECTION 7.1. Recapitalization of New Holdings. The
recapitalization of New Holdings in accordance with Section
2.2 hereof shall have been completed substantially as
described therein.
SECTION 7.2. Tax Allocation Agreement. The Tax
Allocation Agreement shall have been executed and delivered
by each of the Company and New Holdings.
SECTION 7.3. Certain Transactions. All of the
transactions or obligations contemplated by Sections 4.1 and
4.2 hereof to be consummated or performed at or prior to the
Time of Distribution shall have been successfully
consummated or so performed.
SECTION 7.4. Conditions to Merger Satisfied. Each
condition to the closing of the Merger set forth in Article
VI of the Merger Agreement, other than the condition to each
party's obligations set forth in Section 6.1(g) thereof as
to the consummation of the transactions contemplated by this
Distribution Agreement, shall have been satisfied or waived.
SECTION 7.5. Stockholder Approval. This Distribution
Agreement and the New Holdings Spin-Off shall have been
approved and adopted by the affirmative vote of the holders
of Company Common Stock entitled to cast at least 66-2/3% of
the total number of votes entitled to be cast.
SECTION 7.6. Registration of New Holdings Shares.
Any registration statement filed by New Holdings with the
SEC pursuant to the Securities Act of 1933, as amended (the
<PAGE>13
12
"Securities Act") or the Securities Exchange Act of 1934,
as amended (the "Exchange Act") in connection with the
issuance of New Holdings Common Stock in the New Holdings
Spin-Off shall have become effective under the Securities
Act or Exchange Act, as applicable, and shall not be the
subject of any stop order or proceeding by the SEC seeking a
stop order.
SECTION 7.7. Quotation on NASDQ/NMS. The shares of
New Holdings Common Stock to be issued in the New Holdings
Spin-Off shall have been designated as national market
system securities on the interdealer quotation system by the
National Association of Securities Dealers, Inc. or listed
on the New York or American Stock Exchanges, subject to
official notice of issuance.
SECTION 7.8. Regulatory Approvals. All
authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting
periods imposed by, any governmental authority necessary for
the consummation of the transactions contemplated by this
Distribution Agreement shall have been obtained or filed or
shall have occurred.
SECTION 7.9. No Injunctions or Restraints. No
temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition
preventing the consummation of the Spin-Offs shall be in
effect (each party agreeing to use all reasonable efforts to
have any such order reversed or injunction lifted).
SECTION 7.10. Post Closing Covenants Agreement. The
Post Closing Covenants Agreement shall have been executed
and delivered by each of CMC, the Company, USTNY, New
Holdings and New Trustco.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1. Termination. Notwithstanding anything
to the contrary in this Distribution Agreement, this
Distribution Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior
to the Closing by mutual written consent of the Company and
New Holdings in the event the Merger Agreement is terminated
by any party thereto in accordance with the terms thereof.
SECTION 8.2. Amendments and Waivers. This
Distribution Agreement may not be amended except by an
instrument in writing signed on behalf of each of the
parties hereto and consented to by CMC. By an instrument in
writing, the parties hereto may waive compliance by any
other party with any term or provision of this Agreement
that such other party was or is obligated to comply with or
perform; provided that no such waiver by the Company, USTNY
or MFSC shall be effective unless consented to by CMC.
<PAGE>14
13
ARTICLE IX
General Provisions
SECTION 9.1. Counterparts. For the convenience of
the parties hereto, this Distribution Agreement may be
executed in separate counterparts, each such counterpart
being deemed to be an original instrument, and which
counterparts shall together constitute the same agreement.
SECTION 9.2. Governing Law. This Distribution
Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to
its conflicts of law principles.
SECTION 9.3. Notices. Any notice, request,
instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be
deemed to have been duly given (i) on the first business day
occurring on or after the date of transmission if
transmitted by facsimile (upon confirmation of receipt by
journal or report generated by the facsimile machine of the
party giving such notice), (ii) on the first business day
occurring on or after the date of delivery if delivered
personally or (iii) on the first business day following the
date of dispatch if dispatched by Federal Express or other
next-day courier service. All notices hereunder shall be
given as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to
receive such notice:
If to the Company or USTNY:
c/o The Chase Manhattan Corporation
One Chase Manhattan Plaza
New York, New York 10081
Attention: Robert M. MacAllister
with a copy (which shall not constitute notice)
to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attention: William H. Satchell
<PAGE>15
14
If to New Holdings or New Trustco:
c/o U.S. Trust Corporation
114 West 47th Street
New York, New York 10036
Attention: Maureen Scannell Bateman
with a copy (which shall not constitute notice)
to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: B. Robbins Kiessling
SECTION 9.4. Captions. All Article, Section and
paragraph captions herein are for convenience of reference
only, do not constitute part of this Distribution Agreement
and shall not be deemed to limit or otherwise affect any of
the provisions hereof.
SECTION 9.5. Assignment. Except as expressly
provided herein, nothing contained in this Distribution
Agreement is intended to confer on any person or entity
other than the parties hereto and their respective
successors and permitted assigns any benefit, rights or
remedies under or by reason of this Distribution Agreement,
except that the provisions of Sections 5.1 and 5.2 hereof
shall inure to the benefit of the persons referred to
therein.
SECTION 9.6. Survival. The representations and
warranties of New Holdings and New Trustco contained in this
Agreement shall survive the Closing and shall terminate at
the close of business two years following the Closing Date.
The representations of the Company and USTNY contained in
this Agreement shall terminate on the Closing Date.
SECTION 9.7. Interpretation. When a reference is
made in this Agreement to a Section, Schedule or Exhibit,
such reference shall be to a Section, Schedule or Exhibit of
this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the
words "included", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". All accounting terms not defined in
this Agreement shall have the meanings determined by
generally accepted accounting principles.
[Remainder of page intentionally left blank]
<PAGE>16
15
IN WITNESS WHEREOF, this Distribution Agreement has
been duly executed and delivered by the duly authorized
officers of the parties hereto as of the date first
hereinabove written.
U.S. TRUST CORPORATION
By:
-------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK
By:
--------------------------
Name:
Title:
[NEW HOLDINGS]
By:
--------------------------
Name:
Title:
[NEW TRUSTCO]
By:
--------------------------
Name:
Title:
<PAGE>17
18
MUTUAL FUNDS SERVICE COMPANY,
for purposes of Section 4.2(c)
only,
By:
--------------------------
Name:
Title:
U.S. TRUST CO. OF WYOMING, for
purposes of Section 4.2(d)
only,
By:
--------------------------
Name:
Title:
<PAGE>18
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . 1
ARTICLE I
Definitions . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . 2
ARTICLE II
Capitalization of New Trustco; Recapitalization
of New Holdings; Mechanics of Spin-Offs . . 3
SECTION 2.1 Capitalization of New Trustco . . . 3
SECTION 2.2 Recapitalization of New Holdings . 3
SECTION 2.3 Mechanic of Spin-Offs . . . . . . . 3
SECTION 2.4 Timing of Spin-Offs . . . . . . . . 4
ARTICLE III
Ancillary Agreements . . . . . . . 4
SECTION 3.1 Tax Matters . . . . . . . . . . . . 4
SECTION 3.2 Services Agreement . . . . . . . . 4
SECTION 3.3 Post Closing Covenants Agreement . 4
ARTICLE IV
Certain Transactions . . . . . . . 4
SECTION 4.1 Transactions Relating to New
Trustco Spin-Off . . . . . . . . . . . . . . 4
SECTION 4.2 Transactions Relating to New
Holdings Spin-Off . . . . . . . . . . . . . . 5
SECTION 4.3 Certain Funds . . . . . . . . . . . 7
[SECTION 4.4 Assumed Liabilities . . . . . . . . 7
SECTION 4.5 Further Assurances . . . . . . . . 7
SECTION 4.6 Benefit Plans . . . . . . . . . . . 7
SECTION 4.7 Indebtedness . . . . . . . . . . . 8
ARTICLE V
Representations and Warranties . . . . . 8
SECTION 5.1 Representations and Warranties of
the Company . . . . . . . . . . . . . . . . . 8
SECTION 5.2 Representations and Warranties of
New Holdings . . . . . . . . . . . . . . . . 9
<PAGE>19
ARTICLE VI
Certain Covenants . . . . . . . . 10
SECTION 6.1 Certain Understandings . . . . . . 10
ARTICLE VII
Conditions . . . . . . . . . . 10
SECTION 7.1 Recapitalization of New Holdings . 10
SECTION 7.2 Tax Allocation Agreement . . . . . 10
SECTION 7.3 Certain Transactions . . . . . . . 10
SECTION 7.4 Conditions to Merger Satisfied . . 10
SECTION 7.5 Stockholder Approval . . . . . . . 10
SECTION 7.6 Registration of New Holdings
Shares . . . . . . . . . . . . . . . . . . . 10
SECTION 7.7 Quotation on NASDQ/NMS . . . . . . 11
SECTION 7.8 Regulatory Approvals . . . . . . . 11
SECTION 7.9 No Injunctions or Restraints . . . 11
SECTION 7.10 Post Closing Covenants Agreement . 11
ARTICLE VIII
Termination, Amendment and Waiver . . . . 11
SECTION 8.1 Termination . . . . . . . . . . . . 11
SECTION 8.2 Amendments and Waivers . . . . . . 11
ARTICLE IX
General Provisions . . . . . . . . 12
SECTION 9.1 Counterparts . . . . . . . . . . . 12
SECTION 9.2 Governing Law . . . . . . . . . . . 12
SECTION 9.3 Notices . . . . . . . . . . . . . . 12
SECTION 9.4 Captions . . . . . . . . . . . . . 13
SECTION 9.5 Assignment . . . . . . . . . . . . 13
SECTION 9.6 Survival . . . . . . . . . . . . . 13
EXHIBITS
Exhibit A Assumption Agreement
SCHEDULES
Schedule 4.2(b) Company Assets Assigned to New Holdings
EXHIBIT II
to Merger Agreement
CONTRIBUTION AND ASSUMPTION AGREEMENT
Dated as of , 1995
Between
UNITED STATES TRUST
COMPANY OF NEW YORK
and
[NEW TRUSTCO]
<PAGE>2
1
CONTRIBUTION AND ASSUMPTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT dated as of
, 1995 (the "Agreement" or "Contribution
Agreement"), between UNITED STATES TRUST COMPANY OF NEW
YORK, a New York State chartered bank and trust company
(including any successor by merger, "USTNY"), and [NEW
TRUSTCO], a New York State chartered bank and trust company
and a wholly owned subsidiary of USTNY ("New Trustco").
RECITALS
WHEREAS, U.S. Trust Corporation, a New York
corporation (the "Company"), of which USTNY is a wholly
owned subsidiary and The Chase Manhattan Corporation, a
Delaware corporation ("CMC") have entered into an Agreement
and Plan of Merger, dated as of November 17, 1994 (the
"Merger Agreement"), providing for the Merger (as defined in
the Merger Agreement) of the Company with and into CMC, with
the CMC as the surviving corporation;
WHEREAS, immediately prior to the Effective Time
(as defined in Section 1.3 of the Merger Agreement), subject
to the satisfaction or waiver of the conditions set forth in
Article VI of this Contribution Agreement and the
consummation of the transactions contemplated hereby,
(i) the Board of Trustees of USTNY expects to distribute as
a dividend to the Company all of the outstanding shares of
Common Stock (the "New Trustco Common Stock"), par value
$1.00 per share, of New Trustco (the "New Trustco
Spin-Off"), (ii) the Board of Directors of the Company
expects to contribute the New Trustco Common Stock and
certain other assets of the Company to [NEW HOLDINGS], a New
York corporation ("New Holdings"), which will be a newly
formed wholly owned subsidiary of the Company, and (iii) the
Board of Directors of the Company expects, following the
contribution of the New Trustco Common Stock to New
Holdings, to distribute as a dividend to the holders of
Common Stock of the Company, par value $1.00 per share (the
"Company Common Stock"), on a pro rata basis, all of the
then outstanding shares of Common Stock (the "New Holdings
Common Stock"), par value $1.00 per share, of New Holdings
(the "New Holdings Spin-Off" and, together with the New
Trustco Spin-Off, the "Spin-Offs"); and
WHEREAS, the purpose of the Spin-Offs is to make
possible the Merger by divesting the Company of all
businesses and operations other than the Retained Business
(as defined in the Merger Agreement). This Contribution
Agreement provides for the transfer to, and assumption by,
New Trustco, in anticipation of the New Trustco Spin-Off, of
the businesses, assets and liabilities of USTNY other than
the Processing Business and the Related Back Office and the
<PAGE>3
2
assets and liabilities relating thereto (the
"Contribution"), and sets forth certain agreements between
USTNY and New Trustco in respect thereof.
NOW, THEREFORE, in consideration of the premises,
and of the respective representations, warranties, covenants
and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. For purposes of this
Agreement, the terms defined in the recitals hereto shall
have the meanings assigned to them in such recitals, and the
following terms shall have the meanings set forth below:
"Abandoned Property" shall mean any funds or
securities which are payable or deliverable to third parties
in connection with USTNY's activities as trustee, custodian,
paying agent or in a similar capacity, and which have become
"abandoned property" within the meaning of the New York
Abandoned Property Law or other applicable Federal or state
laws (regardless of whether such property has been delivered
by USTNY to any governmental authority entitled to or
responsible for abandoned property).
"Accounting Principles" shall mean the accounting
principles set forth on Schedule 1.1A hereto.
"Acquired Assets" shall have the meaning assigned
to such term in Section 2.2(a).
"Acquired Business" shall mean all the businesses
of USTNY, including the Asset and Investment Management
Business, the Corporate Trust and Agency Business and the
Private Banking Business, other than the Processing Business
and the Related Back Office.
"Acquired Third-Party Service Agreements" shall
mean the third-party services agreements related to the
Related Back Office and maintained for, and used
predominantly by, the Acquired Business.
"Adjustment Amount" shall mean the sum of (i) the
excess of (A) the aggregate amount of the Statement
Liabilities on the Final Processing Balance Sheet over
(B) the aggregate amount of the Statement Assets (without
inclusion of any Eligible Investments or funds to be
retained by USTNY at the Closing pursuant to Section
2.7(b)), minus (ii) the MFSC Equity Amount, plus (iii) the
Computer Lease Adjustment Amount, plus (iv) the Retained
Bank Plans Amount, plus (v) the Real Property Transfer Tax
Amount, plus (vi) the Transition Bonus Amount, plus
(vii) the Post-Retirement Benefit Adjustment Amount, plus
(viii) the Put Adjustment Amount.
<PAGE>4
3
"Affiliate" shall mean, when used with respect to
a specified person, another person that directly, or
indirectly through one or more intermediaries, Controls or
is Controlled by or is under common Control with the person
specified.
"Anticipation Advances" shall have the meaning
assigned to such term in Section 2.2(b).
"Asset and Investment Management Business" shall
mean the asset and investment management business of USTNY
and its Affiliates ("AIM"), as conducted in the case of
USTNY by its Asset Management Group, which consists of
administration of personal and family trusts and estates,
estate planning services, providing special fiduciary
services, broker-dealer services, custody services with
respect to assets managed by AIM, providing tax and
financial counseling and acting as a discretionary trustee
or an investment manager for stocks, bonds, separately
managed or pooled accounts, common trust funds and other
financial assets for individuals and entities including
without limitation, mutual funds, institutions and employee
benefit plans.
"Asset Management System" shall mean the computer
software (including all source and object codes, manuals and
related documentation) comprising the core trust and custody
software system utilized by USTNY in the Processing Business
and its other businesses, which system is owned by Financial
Technologies International, L.P. The Asset Management
System includes both the AMS/Open Product (consisting of the
(i) AMS/Open Customer Information System Product,
(ii) AMS/Open Access Security Product, (iii) Investor
Information Workbench Product, (iv) Administrators
Information Workbench Product and (v) Global Securities
Industry Relational Data Model) and the AMS/1 System.
"Asset Management System Agreements" shall mean
any and all agreements with Financial Technologies
International L.P. ("FTI") or any third party relating to
the Asset Management System, including (i) the letter
agreement between FTI and USTNY dated August 29, 1994,
relating to the AMS/1 system, (ii) the letter agreement,
between FTI and USTNY dated August 29, 1994, relating to the
AMS/Open Product, and (iii) the Demonstration and Licensing
Agreement dated August 29, 1994, between FTI and USTNY.
"Assumed Liabilities" shall have the meaning
assigned to such term in Section 2.3(a).
"Assumption Agreement" shall mean an assumption
agreement in the form of Exhibit A, pursuant to which New
Trustco confirms its assumption of, and agreement to pay,
perform and discharge, the Assumed Liabilities.
"Bank Processing Services" shall mean loan
processing services, deposit processing services, check
processing services, payments processing services, cash
management processing
<PAGE>5
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services, electronic funds transfer services, ATM switching
and settlement services, related bank records and retrieval
services, and other related processing services.
"Book Value" shall mean, with respect to any asset
or liability, the dollar amount thereof reflected in the
accounting records of USTNY. The Book Value of any item
shall be determined as of the Closing Date after adjustments
made by USTNY for suspense items, unposted debits and
credits and other similar adjustments or corrections.
Without limiting the foregoing, the Book Value of (i) a
Retained Liability shall include all accrued and unpaid
interest thereon as of the Closing Date, (ii) an overdraft
or loan shall reflect adjustments for accrued but unpaid
interest, (iii) a Retained Asset that is a financial asset
shall not include adjustments for reserves in the accounting
records of USTNY, and (iv) any other Retained Asset shall be
reflected net of applicable depreciation and amortization.
"Broadway Lease" shall mean the Lease Agreement
dated as of June 20, 1980, as amended, between New York
Equities, Inc., as Lessor, and USTNY, as Lessee, relating to
space in the building located at 770 Broadway, New York, New
York.
"Broadway Lease Put" shall mean the letter
agreement dated November 8, 1994, between New York Equities
Company and USTNY relating to the potential subletting, at
the option of USTNY, to New York Equities Company of certain
floors covered by the Broadway Lease.
"Broadway Sublease" shall mean a sublease between
USTNY as sublessor, and New Trustco as sublessee, relating
to portions of the premises at 770 Broadway, New York, New
York, to be entered into on substantially the terms set
forth on the Term Sheet attached as Exhibit C.
"Business Day" shall mean any day (other than a
day which is a Saturday, Sunday or legal holiday in the
State of New York) on which banks are open for business in
New York City.
"Capital Notes" shall mean the 8-1/2% Capital
Notes due 2001 of USTNY.
"Closing" shall mean the closing hereunder of the
assignment and transfer of the Acquired Assets and the
transfer and assumption of the Assumed Liabilities.
"Closing Date" shall mean the date on which the
Closing occurs.
"CMB" shall mean The Chase Manhattan Bank
(National Association), a national banking association and a
wholly-owned subsidiary of CMC.
"CMC" shall have the meaning assigned to such term
in the Recitals hereof.
<PAGE>6
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"Company" shall have the meaning assigned to such
term in the Recitals hereof.
"Company Common Stock" shall have the meaning
assigned to such term in the Recitals hereof.
"Computer Lease" shall mean any lease under which
USTNY is the lessee of data processing equipment or computer
hardware used solely or predominantly to support, or
reasonably necessary to the conduct of, the Processing
Business and the Related Back Office. Any lease or
licensing agreement for system or application software that
is hard-coded into such equipment or computer hardware shall
constitute a Computer Lease.
"Computer Lease Adjustment Amount" shall mean the
product of (x) the aggregate termination payments that would
be required to be made to the lessors under the Computer
Leases listed on Schedule 1.1B if such leases were
terminated effective as of the Closing Date, determined in
each case by agreement of New Trustco and CMC in accordance
with the terms of the relevant lease multiplied by (y)
0.585.
"Contracts" shall have the meaning assigned to
such term in Section 2.2(b).
"Contribution" shall have the meaning assigned to
such term in the Recitals hereof.
"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,
and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Corporate Trust and Agency Business" shall mean
the corporate trust and agency business of USTNY and its
Affiliates, which consists of acting as trustee for the
holders of interests representing obligations under bonds,
debentures, leases, structured obligations, derivative and
asset-backed securities, and voting trusts, acting as
registrar, tender agent, voting trustee, solicitation agent,
drawing agent, authenticating agent, warrant agent, paying
agent, issuing agent, depositary or exchange agent for cash,
securities or other property (other than Registered
Investment Company securities), acting as fiscal agent under
public bond resolutions, acting as an escrow agent, transfer
agent or collateral agent for public and private
corporations, partnerships (but not Registered Investment
Companies) and municipalities and acting as bond
immobilization agent.
"Customer Agreements" shall mean any contracts,
agreements, trusts, indentures, arrangements and other
understandings between USTNY and any Customer, including any
indirect arrangement under which an Affiliate of USTNY has
appointed USTNY to act as subcustodian, sub-agent or in a
similar capacity, pursuant to which the Processing Business
renders Processing Services to such Customers.
<PAGE>7
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"Customers" shall mean the customers and clients
(other than Excluded Customers) of the Processing Business
in their capacity as such. Without limiting the foregoing,
the term "Customers" includes, in the case of the UIT
Business, Unit Trusts and sponsors of Unit Trusts; in the
case of the MFS Business, Investment Companies and
Investment Company sponsors and managers; and in the case of
the IAS Business, insurance companies, banks, limited
partnerships, endowments, foundations and pension,
retirement and benefit plans. Notwithstanding anything to
the contrary contained in this Agreement, except to the
extent specified on Schedule 1.1C, neither the Company nor
any subsidiary of the Company shall be deemed to be a
Customer. Each person who has an indirect customer or
client relationship with the Processing Business through an
Affiliate of USTNY that has appointed USTNY to act as sub-
custodian, sub-agent or in a similar capacity, shall be
deemed a Customer for purposes hereof and are identified on
Schedule 1.1C.
"Data Processing License" shall mean a lease or
licensing agreement, and any related support agreements,
under which USTNY is the lessee of or has a license to use
systems or application software which is used to support, or
is reasonably necessary to the conduct of, the UIT Business,
the MFS Business or the IAS Business, other than (i) any
such lease or licensing agreement that is a Computer Lease
and (ii) the Asset Management System Agreements.
"Delayed Asset" shall have the meaning assigned to
such term in Section 2.6(a).
"Delayed Liability" shall have the meaning
assigned to such term in Section 2.6(a).
"Deposit" shall mean a deposit, as defined in 12
U.S.C. Section 1813(1), including all uncollected items
included in a depositor's balance and credited on the books
of USTNY.
"Distribution Agreement" shall mean the Agreement
and Plan of Distribution, substantially in the form of
Exhibit I to the Merger Agreement, to be entered into among
the Company, USTNY, New Holdings and New Trustco, pursuant
to which, among other things, the Spin-Offs will be
effected.
"Documents" shall mean this Agreement, the
Assumption Agreement, the Merger Agreement, the Distribution
Agreement, the Post-Closing Covenants Agreement, the Tax
Allocation Agreement, the Services Agreement, the
Forty-Seventh Street Lease Assignment, the Broadway Sublease
and the License Agreement.
"Eligible Investments" shall mean direct
obligations of the United States of America having at the
Closing Date a remaining term to maturity not in excess of
one year.
"Estimated Balance Sheets" shall mean the
Estimated Processing Balance Sheet and the Estimated MFSC
Balance Sheet.
<PAGE>8
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"Estimated MFSC Balance Sheet" shall mean a
balance sheet prepared by USTNY with respect to the assets
and liabilities of MFSC as of the close of business on the
day immediately prior to the Closing Date, but giving effect
to the transfers of assets of MFSC to New Holdings
contemplated by Section 4.2 of the Distribution Agreement.
The Estimated MFSC Balance Sheet shall be in the form of
Exhibit B and shall be prepared in accordance with the
Accounting Principles on the same basis as MFSC's audited
balance sheet for its fiscal year ended December 31, 1993
and in accordance with the provisions of Section 2.7.
"Estimated Processing Balance Sheet" shall mean an
estimated balance sheet prepared by USTNY with respect to
the Retained Assets and Retained Liabilities of USTNY (to
the extent they would appear on a balance sheet prepared in
accordance with the Accounting Principles) as of the close
of business on the day immediately prior to the Closing
Date. The Estimated Processing Balance Sheet shall be in
the form of Exhibit B, and shall be prepared in accordance
with the provisions of Section 2.7.
"Excluded Customers" shall mean Lafayette College
Endowment, Hallmark Cards and Florida Prepaid College
Program.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next
succeeding Business Day by The Wall Street Journal, Eastern
Edition or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for
such day for such transactions received by CMB from three
Federal funds brokers of recognized standing selected by it.
"Final Balance Sheets" shall mean the Final
Processing Balance Sheet and the Final MFSC Balance Sheet.
"Final MFSC Balance Sheet" shall mean a balance
sheet prepared by USTNY with respect to the assets and
liabilities of MFSC as of the close of business on the day
immediately prior to the Closing Date, but giving effect to
the transfers of assets of MFSC to New Holdings contemplated
by Section 4.2 of the Distribution Agreement. The Final
MFSC Balance Sheet shall be in the form of Exhibit B and
shall be prepared in accordance with the Accounting
Principles on the same basis as MFSC's audited balance sheet
for its fiscal year ended December 31, 1993 and in
accordance with the provisions of Section 2.7.
"Final Processing Balance Sheet" shall mean a
balance sheet prepared by USTNY with respect to the Retained
Assets and Retained Liabilities of USTNY (to the extent they
would appear on a balance sheet prepared in accordance with
the Accounting Principles) as of the close of business on
the day immediately prior to the Closing Date. The Final
Processing Balance Sheet shall be in the form of Exhibit B,
and shall be prepared in accordance with the provisions of
Section 2.7.
<PAGE>9
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"Fixtures" shall mean all leasehold improvements,
additions and alterations to leasehold premises as of the
Closing Date.
"Float Amount" shall mean the amount, as reflected
on the Final Balance Sheets, of any check, draft, payment
order or similar item originating from the Processing
Business and payable by or drawn upon a Customer account at
USTNY that has not, as of the close of business on the day
immediately preceding the Closing Date, been paid by or
charged against such account.
"Forty-Seventh Street Lease" shall mean,
collectively, the Lease dated as of September 10, 1987,
between 46-47 Associates, as Lessor, and USTNY, as Lessee,
relating to space at 114 West 47th Street, New York, New
York; the Subordination Agreement dated as of September 10,
1987, between USTNY and 1133 Building Corp.; the Right of
First Refusal dated as of September 10, 1987, between USTNY
and 46-47 Associates; and the Agreement dated as of
September 10, 1987, among USTNY, 46-47 Associates and 1155
Office Building Corp.; each agreement heretofore entered
into by USTNY relating to or supplementing any of the
foregoing; and each amendment, clarification and
modification to or under any of the foregoing, all as set
forth, or incorporated by reference in Exhibits 10.5, 10.6,
10.7 and 10.8 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, filed with the
SEC.
"Forty-Seventh Street Lease Assignment" shall
mean, collectively, the assignments to New Trustco of, and
assumption by New Trustco of, all USTNY's rights, benefits,
duties and obligations under the Forty-Seventh Street Lease.
The Forty-Seventh Street Lease Assignment shall be in such
form as may be agreed to by New Trustco, USTNY and other
parties thereto and approved by CMC.
"Furniture and Equipment" shall mean the furniture
and equipment (other than equipment subject to a Computer
Lease) owned or (to the extent of the lessee's interest)
leased by USTNY as of the Closing Date that, in each case,
is currently used in, or is reasonably necessary for the
conduct of the Processing Business and Related Back Office.
"Governmental Entity" shall mean any Federal,
state or local government or any court, administrative
agency or commission or other governmental authority or
agency or self-regulatory agency, domestic or foreign.
"IAS Business" shall mean the institutional asset
services business of USTNY and its Affiliates, as conducted
by the Company's Institutional Asset Services Division,
which includes master trust and custody services, zero-
balance account services conducted for Customers (including
Merrill Lynch and Nike), securities processing services,
global custody services, on-line accounting and reporting,
quantitative analysis, securities lending services, short
term money management services related to custody services,
investment manager services, rabbi trust services, benefit
payment services and portfolio performance evaluation
services, in each
<PAGE>10
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case, provided to corporate employee retirement, pension or
benefit funds, 401(k) plans, public funds, endowments and
foundations, limited liability companies, group trusts,
insurance companies and financial institutions; provided,
however, that the IAS Business does not include (i) USTNY's
corporate, municipal and employee stock ownership plan trust
and agency business, (ii) the business conducted by CTMC
Holding Company, an Oregon corporation, and U.S. Trust of
the Pacific Northwest, an Oregon corporation, in each case,
as described on Schedule 1.1D hereto, or (iii) the business
conducted by the Special Fiduciary Division of U.S. Trust of
California, as described on Schedule 1.1D hereto, or, in
each case, any assets, liabilities, agreements or personnel
thereof, or used exclusively therewith, and not of, or
reasonably necessary to the conduct of the Processing
Business.
"License Agreement" shall mean a Software License
Agreement substantially in the form of Exhibit IV to the
Merger Agreement.
"Lien" shall mean any mortgage, lien, pledge,
charge, assignment for security purposes or security
interest.
"Liquidation Value" shall mean with respect to any
unit of any Eligible Investment at any Business Day, (i) the
price at which such unit is sold on such Business Day or at
the opening of the market on the next following Business Day
or (ii) if such unit is not so sold, the average of the bid
price for such unit on that Business Day obtained by CMB
from three established dealers on the principal United
States inter-dealer market in which such Eligible Investment
is regularly traded.
"Merger Agreement" shall have the meaning assigned
to such term in the Recitals hereof.
"MFS Business" shall mean the mutual funds
services business of the Company and its subsidiaries
(including MFSC), which includes providing domestic and
global custody, transfer agency, fund accounting, funds
administration, securities lending and related banking and
cash management services to Registered Investment Companies.
"MFSC" shall mean Mutual Funds Service Company, a
Delaware corporation and a wholly owned subsidiary of USTNY.
"MFSC Equity Amount" shall mean the amount of
MFSC's net worth as shown as a liability on the Estimated
MFSC Balance Sheet and the Final MFSC Balance Sheet, which
shall be equal to the excess of (x) the aggregate assets
reflected on such balance sheet over (y) the aggregate
liabilities reflected on such balance sheet.
"New Holdings" shall have the meaning assigned to
such term in the Recitals hereof.
<PAGE>11
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"New Holdings Common Stock" shall have the meaning
assigned to such term in the Recitals hereof.
"New Holdings Spin-Off" shall have the meaning
assigned to such term in the Recitals hereof.
"New Trustco" shall have the meaning assigned to
such term in the introduction hereof.
"New Trustco Common Stock" shall have the meaning
assigned to such term in the Recitals hereof.
"New Trustco Documents" shall have the meaning
assigned to such term in Section 4.2(b).
"New Trustco Spin-Off" shall have the meaning
assigned to such term in the Recitals hereof.
"Person" shall mean any natural person,
corporation, partnership, business trust, joint venture,
association, company or government, or any agency or
political subdivision thereof.
"Post-Closing Covenants Agreement" shall mean an
agreement among CMC, CMB, the Company, USTNY, New Holdings
and New Trustco in the form of Exhibit VI to the Merger
Agreement, relating to certain post-closing obligations of
the parties thereto.
"Post-Retirement Benefit Adjustment Amount" shall
mean $1,750,000.
"Private Banking Business" shall mean the private
banking business of the Company and its subsidiaries which
consists of the provision of a full range of commercial
banking and fiduciary services to individuals, families,
family offices, partnerships and other entities. Services
and products provided by the Private Banking Business
include checking accounts, money market accounts,
certificates of deposit, secured and unsecured loans,
mortgage loans, lines of credit, letters of credit, custody
and securities administration services, secured broker loans
and cash management services offered to securities industry
participants and financial institutions (other than
Customers).
"Processing Business" shall mean the UIT Business,
the MFS Business and the IAS Business, collectively.
"Processing Business Abandoned Property" shall
mean Abandoned Property relating to Termination Account
Liabilities and to other claims arising from accounts of
Customers in the Processing Business.
<PAGE>12
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"Processing Services" shall mean those services
which, as of the date hereof, are being regularly and
customarily provided to Customers by the UIT Business, the
MFS Business and the IAS Business.
"Put Adjustment Amount" shall mean $250,000.
"Real Property Transfer Tax Amount" shall mean the
product of (i) aggregate amount of New York City real
property transfer and real property transfer gains taxes
payable by USTNY in connection with the transfer to New
Trustco of the Forty-Seventh Street Lease and other
leasehold interests as part of the Contribution and in
connection with the entry into the Broadway Sublease and
(ii) 0.585.
"Registered Investment Company" shall mean an
"investment company", as such term is defined in Section 3
of the Investment Company Act of 1940, as amended, which is
registered as an investment company with the SEC in
accordance with Section 8 of such Act.
"Related Back Office" shall mean USTNY's Computer
Services Division and Securities Services and Trust
Operations Division, including the computer equipment, laser
printers, bar coding and mailing machines, other furniture,
fixtures and equipment, inventory and supplies and other
property and assets thereof (but not stationery or other
forms or blanks reflecting USTNY's, or any similar name),
but not including any furniture, fixtures, equipment or
facilities solely related to providing Bank Processing
Services.
"Related Schedules" shall have the meaning
assigned to such term in Section 2.7(b).
"Required Consent" shall mean, with respect to any
agreement, lease or contract, any consent, waiver or
agreement of any party thereto (other than USTNY) or of any
other person that is legally required in order to effect the
assignment and transfer thereof to New Trustco, the
assumption thereof by New Trustco, and the release therefrom
of USTNY, as contemplated hereby. For purposes hereof, a
Required Consent may be obtained pursuant to a waiver of
consent and release and shall also be deemed to have been
obtained if a person party to such agreement, lease or
contract agrees to enter into (or enters into) an agreement
with New Trustco or an Affiliate of New Trustco (a
"Substitute Agreement"), which supersedes, and releases
USTNY from, and serves a substantially similar function as,
such agreement, lease or contract.
"Retained Assets" shall have the meaning assigned
to such term in Section 2.2(b).
"Retained Bank Plan Amount" shall mean the sum of
the aggregate amounts, determined as of the close of
business on the day immediately prior to the Closing Date,
of the cash payments (i) required to be made as of or after
the Effective Time under the 1986 Stock Option Plan, plus
(ii) required to pay employer payroll taxes, including the
employer's share of FICA and FUTA, due with respect to the
payments described in clause (i) above.
<PAGE>13
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"Retained Employees" shall have the meaning
assigned to such term in Section 5.8(a) of the Merger
Agreement.
"Retained Liabilities" shall have the meaning
assigned to such term in Section 2.3(b).
"SEC" shall mean the Securities and Exchange
Commission.
"September Balance Sheets" shall mean the balance
sheets of (i) the Processing Business conducted by USTNY and
the Related Back Office and (ii) MFSC, each at September 30,
1994, set forth as Schedule 1.1E hereto.
"Services Agreement" shall mean an agreement or
agreements between USTNY and New Trustco to be entered into
on substantially on the terms set forth in the Services
Agreement Term Sheet dated the date of the Merger Agreement
and signed for identification purposes on behalf of the
Company and CMC.
"Spin-Offs" shall have the meaning assigned to
such term in the Recitals hereof.
"Statement Assets" shall mean all the assets of
the Processing Business and the Related Back Office
reflected on the Final Processing Balance Sheet, including
the Eligible Investments and funds to be retained by USTNY
on the Closing Date.
"Statement Liabilities" shall mean all the
Deposits and other Retained Liabilities which are reflected
on the Final Processing Balance Sheet.
"Substitute Agreement" shall have the meaning
assigned to such term in the definition of the term Required
Consent.
"Tax Allocation Agreement" shall mean the Tax
Allocation Agreement, substantially in the form of Exhibit V
to the Merger Agreement, to be entered into among the
Company, USTNY, New Holdings and CMC.
"Taxes" shall mean all federal, state, local and
foreign income, property, sales, excise and other taxes,
tariffs or governmental charges (and all penalties and
interest relating thereto) imposed by a governmental
authority pursuant to the exercise of its power to tax.
"Termination Account Liabilities" shall mean
(i) Deposit liabilities of the Processing Business in
respect of units of Unit Trusts which have been redeemed and
which are payable upon surrender of the certificates
evidencing such units and (ii) similar Deposit liabilities
attributable to the UIT Business and reflected in the
"termination account" on the books and records of the
Processing Business.
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"Transferred Processing Receivables" shall mean
all receivables of the Processing Business including
receivables relating to advances, claims of payments,
extensions of credit, overdrafts and amounts paid on
Customer accounts of paying agents, brokers, depositories or
other third parties outstanding as of the close of business
on the day immediately prior to the Closing Date that, at
such time, (i) are subject to any dispute with the Customer
that is the account debtor in respect of such receivable,
(ii) contravene in any material respect any laws, rules or
regulations applicable thereto or (iii) have been assigned
to a collection agency or are more than 120 days past the
date of advance or the date payable.
"Transition Bonus Amount" shall mean an amount
equal to the product of (x) the Company's Share of the
Program Cost, multiplied by (y) a fraction equal to 0.68875.
For purposes of the foregoing, the "Company's Share of the
Program Cost" shall mean an amount equal to the sum of the
products, determined separately for each employee who is a
Retained Employee at the Effective Time of (i) the amount of
the Transition Bonus specified in Schedule 5.8(e) of the
Merger Agreement for such employee, multiplied by (ii) a
fraction, the numerator of which is the number of days in
the period commencing on the date following the date of the
Merger Agreement and ending on the Closing Date, and the
denominator of which is the number of days in the period
commencing on the day following the date of the Merger
Agreement and ending on the last day of the period of such
employee's Required Service, as specified in Schedule 5.8(e)
of the Merger Agreement.
"UIT Business" shall mean the unit investment
trust business of USTNY and its Affiliates, which includes
acting as a trustee for Unit Trusts, maintaining custody of
securities and investments for Unit Trusts, collecting and
distributing to unit holders interest, dividend and
principal payments with respect to such securities and
investments, processing unit redemptions and transfers,
providing reporting services and annual reports for Unit
Trusts and providing transfer agency and customer service
for certain closed-end bond funds of John Nuveen & Co.,
Incorporated ("Nuveen").
"Uncollected Items" shall mean any check, draft,
payment order, wire transfer advice, security transfer
advice, provisional credit or advance, or similar item that
has been delivered to, or received in respect of the
Processing Business and Related Back Office as a Deposit on
or before the close of business on the day preceding the
Closing Date but which at such time is in the process of
collection or has not yet settled.
"Unit Trust" shall mean a "unit investment trust"
as such term is defined in Section 4 of the Investment
Company Act of 1940, as amended.
"USTNY" shall have the meaning assigned to such
term in the introduction hereof.
"USTNY Documents" shall have the meaning assigned
to such term in Section 4.2(a).
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"1986 Stock Option Plan" shall mean the United
States Trust Company of New York and Affiliated Companies
1986 Stock Option Plan.
As used herein, the phrase "close of business on
the day immediately prior to the Closing Date" and similar
references shall mean 11:59 p.m. on the day immediately
prior to the Closing Date.
ARTICLE II
Contribution of Assets and Assumption of Liabilities
SECTION 2.1. Contribution. Upon the terms and
subject to the conditions of this Agreement, USTNY hereby
assigns, transfers, conveys and contributes to New Trustco,
effective as of the Closing, and New Trustco hereby
acquires, effective as of the Closing, all of USTNY's right,
title and interest in, to and under the Acquired Assets.
SECTION 2.2. Acquired Assets and Retained
Assets. (a) The term "Acquired Assets" means all the
business, properties, assets, goodwill and rights of USTNY
of whatever kind and nature, real or personal, tangible or
intangible, other than the Retained Assets, owned by USTNY
on the Closing Date, including the following:
(i) all assets used or held for use
primarily in the Acquired Business of USTNY;
(ii) all contracts, agreements,
mortgages, indentures, escrows, trusts and
understandings entered into by USTNY with
customers or clients of the Acquired Business
relating to such businesses and all rights, claims
and benefits in connection therewith, including
the right to possession of custodial or trust
assets subject thereto;
(iii) all mortgages, loans, overdrafts,
lines of credit, rights in respect of letters of
credit and similar assets of the Acquired Business
and all rights in respect of collateral or
security (except rights in collateral to the
extent that such rights secure any Retained
Assets) for any of the foregoing;
(iv) all accrued fees, accrued interest
or discount, and all accounts receivable
(including all Transferred Processing
Receivables), other than those of the Processing
Business and the Related Back Office reflected on
the Final Processing Balance Sheet;
(v) each of the branch offices of
USTNY, as set forth on Schedule 2.2(a)(v);
(vi) all real property owned by USTNY
and all rights in, to and under the Forty-Seventh
Street Lease, the leasehold estate under the
Broadway Sublease, and the
<PAGE>16
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leases listed on Schedule 2.2(a)(vi), and
ownership of, and all rights to, all Fixtures in
leasehold premises subject to such leases or
sublease;
(vii) all monies, cash on hand, funds
available for investment, investments, securities,
securities purchase agreements, swap agreements,
forward rate agreements, and derivative agreements
of, or held for the account of, USTNY, other than
Eligible Investments or funds reflected on the
Final Processing Balance Sheet and retained by
USTNY pursuant to Section 2.7(b);
(viii) all trademarks, trademark
registrations, service marks and trade names which
contain the words "United States Trust" or "U.S.
Trust" and all patents, patent applications,
trademarks, trademark registrations, service
marks, tradenames, copyrights, or licenses with
respect thereto (except for the patents, patent
applications and copyrights relating to the USTNY
proprietary software referred to in
Section 2.2(b)(vii)), used or held for use solely
or predominantly for the Acquired Business;
(ix) all rights associated with the
Acquired Third-party Service Agreements;
(x) certain performance measurement
service agreements listed on Schedule 3.1(q),
Part II of the Merger Agreement;
(xi) USTNY's right, title and interest
in all lease and licensing agreements, and related
support agreements, with third parties for the use
of systems and applications software, and all
copies of the software (source code and object
code), manuals and related documentation covered
by such lease or license agreements, which are in
USTNY's possession as of the Closing Date
(excluding, however, Data Processing Licenses and
Computer Leases);
(xii) notwithstanding anything to the
contrary in Section 2.2(a)(xi) and
Section 2.2(b)(vi), USTNY's right, title and
interest in all lease and licensing agreements,
and related support agreements, with third parties
for the use of third party PC software installed
on servers, workstations and personal computers
which are part of the Acquired Assets, and all
copies of the software (source code and object
code), manuals and related documentation covered
by such lease or license agreements which are in
USTNY's possession as of the Closing Date;
(xiii) USTNY's right, title and interest
in the Asset Management System Agreements and all
copies of the Asset Management System in USTNY's
possession as of the Closing Date;
(xiv) all equity or debt investments held
for the account of USTNY in any corporation, joint
venture, partnership, trust or other business
association, including
<PAGE>17
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the capital stock and other ownership interests
set forth in Schedule 2.2(a)(xv) and all
intercompany advances owed to USTNY by Affiliates
of USTNY (other than MFSC);
(xv) all rights of USTNY as adviser,
trustee and sponsor in respect of any mutual fund,
common trust fund or collective investment fund
sponsored, managed, advised or maintained by
USTNY, including USTNY's Short Term Investment
Fund and the UST Master Money and Government
Funds;
(xvi) all records prepared in connection
with the Merger contemplated by the Merger
Agreement or the sale of the Processing Business
and Related Back Office, including bids received
from other persons and analyses relating to the
Processing Business and Related Back Office, and
all books of account, general, financial,
accounting and personnel records, files, invoices
and similar data owned by USTNY relating to the
Acquired Business on the Closing Date;
(xvii) all rights relating to the Assumed
Liabilities;
(xviii) all rights relating to Abandoned
Property (except Processing Business Abandoned
Property);
(xix) all financial institution bonds,
banker's blanket bond, policies of insurance or
similar agreements, and all proceeds and rights in
respect thereof;
(xx) any special or general reserves or
reserves maintained on deposit with the Federal
Reserve System;
(xxi) all recoveries on the charged-off
portions of loans and receivables, including those
of the Processing Business;
(xxii) all collateral posted to secure
clearing and other contingent obligations with any
clearing or similar organization, including the
Depository Trust Company of New York;
(xxiii) all fees or accounts receivable of
the Processing Business and the Related Back
Office which have been paid on or before the close
of business on the day immediately prior to the
Closing Date, regardless of whether still in the
process of collection and all claims in respect of
items received in payment of such fees or accounts
receivable; and
(xxiv) all assets identified on Schedule
2.2(a)(xxiv).
(b) The term "Retained Assets" means, subject to
the provisions of Section 2.6, all the business, properties,
assets, goodwill and rights of USTNY of whatever kind and
nature, real or personal, tangible or intangible, that are
primarily used, or that are held for use in, or are
<PAGE>18
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reasonably necessary for the conduct by USTNY of, the
Processing Business and the Related Back Office on the
Closing Date, including the following (but excluding the
Acquired Assets specifically identified in Section 2.2(a)):
(i) all Customer Agreements and all
rights and claims in connection therewith,
including the right to possession of custodial or
trust assets subject to Customer Agreements;
(ii) all accounts receivable and all
accrued and unpaid fees under Customer Agreements
owed to USTNY on the Closing Date and arising out
of the operations of or services performed by the
Processing Business, but not the Transferred
Processing Receivables;
(iii) all contracts and agreements,
commitments and all other arrangements that are
legally binding on the other parties thereto,
whether oral or written ("Contracts") (other than
the Asset Management System Agreements, Customer
Agreements, Data Processing Licenses and Computer
Leases), to which USTNY is a party or by which
USTNY is bound, that are referenced in Section
3.1(l) of the Merger Agreement and all other
Contracts that relate to the Processing Business
or the Related Back Office which are not required
to be scheduled pursuant to Section 3.1(l) of the
Merger Agreement;
(iv) the Broadway Lease and the Fixtures
located in the premises covered by the Broadway
Lease other than Fixtures located in the premises
on the 8th Floor and a portion of the 9th Floor
(excluding the cafeteria) covered by the Broadway
Sublease;
(v) the Broadway Lease Put;
(vi) the Furniture and Equipment, the
Computer Leases and the Data Processing Licenses;
(vii) all USTNY proprietary systems and
application software (including all source and
object codes, manuals and related documentation)
or licenses or rights of use with respect thereto;
(viii) notwithstanding anything in
Section 2.2(a)(xi) and Section 2.2(b)(vii),
USTNY's right, title and interest in all lease and
license agreements with third parties for the use
of third party PC software installed on servers,
workstations and personal computers which are part
of the Retained Assets, and all copies of the
software (source code and object code), manuals
and related documentation covered by such lease or
license agreements which is in USTNY's possession
as of the Closing Date;
<PAGE>19
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(ix) any and all patents, patent
applications, trademarks, trademark registrations,
service marks, tradenames, copyrights, or licenses
with respect thereto used or held for use solely
or predominantly for the Processing Business or
the Related Back Office, except for any
trademarks, trademark registrations, service marks
and tradenames which contain the words "United
States Trust" or "U.S. Trust";
(x) all overdrafts, loans or other
extensions of credit made by the Processing
Business to Customers and outstanding on the
Closing Date, including loans and advances made by
USTNY to Customers in order to permit the payment
of dividends, principal, interest or other amounts
payable in respect of securities held in custody
prior to the actual receipt of payments from the
issuers of or other obligors on such securities
("Anticipation Advances"), but excluding
Transferred Processing Receivables;
(xi) all inventory and supplies owned by
USTNY on the Closing Date that are used or held
for use by the Processing Business and the Related
Back Office, but not inventory or supplies with
respect to which the name "U.S. Trust" or a
related name is an integral part;
(xii) all Uncollected Items;
(xiii) all Customer files and records;
(xiv) all books of account, general,
financial, accounting and personnel records,
files, invoices, and other similar data owned by
USTNY on the Closing Date maintained at the
offices of, or used by, the personnel of the
Processing Business and the Related Back Office,
or used or held for use by the Processing Business
and the Related Back Office;
(xv) all rights relating to Retained
Liabilities;
(xvi) the portion of FDIC assessments
prepaid by USTNY and allocable to Deposits
associated with the Processing Business;
(xvii) all rights of USTNY under this
Agreement and the agreements, instruments and
certificates delivered in connection with this
Agreement;
(xviii) the Related Back Office; and
(xix) to the extent not included in
clauses (i) through (xviii) above, the Statement
Assets, including the Eligible Investments and
funds retained by USTNY pursuant to Section 2.7.
<PAGE>20
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(c) The transfer of the Acquired Assets hereunder
is made without recourse to USTNY. No representation is
made by USTNY to New Trustco concerning the collectibility,
quality, enforceability or fitness of any Acquired Assets.
(d) USTNY acknowledges that certain Customer
Agreements of the IAS Business for Cash Management Services
(as defined in the Post-Closing Covenants Agreement)
relating to collective investment vehicles that will be
maintained or advised by New Trustco are part of the
Retained Assets. In each such instance, USTNY and New
Trustco shall use its best efforts to have the relevant
Customers of the IAS Business enter into agreements with
USTNY in order to transfer the money management relationship
of such Customers to USTNY.
SECTION 2.3. Assumption of Certain Liabilities.
(a) Upon the terms and subject to the conditions of this
Agreement, New Trustco hereby assumes, subject to Section
2.6, effective as of the Closing, and agrees to pay, perform
and discharge when due and indemnify USTNY and hold USTNY
harmless from and against the Assumed Liabilities. The term
"Assumed Liabilities" shall mean all liabilities of USTNY
existing on the Closing Date, whether current or long-term,
absolute or contingent, matured or unmatured, known or
unknown, liquidated or unliquidated, due or to become due,
including the following liabilities, other than Retained
Liabilities:
(i) all liabilities and obligations of
USTNY, whether matured or unmatured, fixed or
contingent, relating to or arising out of the
Acquired Business, including all Deposits of such
businesses and all liabilities, duties and
obligations in respect of indentures, contracts,
leases or other agreements with customers or
clients of, or other persons dealing with, such
businesses;
(ii) all claims, liabilities or
litigation arising out of any event, occurrence,
action or omission taken or occurring prior to the
Closing Date by or with respect to USTNY, its
officers, directors, Board of Trustees, employees,
agents or representatives;
(iii) all obligations in respect of the
Capital Notes;
(iv) any obligation or liability which
is attributable to any of the Acquired Assets or
any expense arising from the ownership by New
Trustco of the Acquired Assets;
(v) all liabilities and obligations
under each Benefit Plan (as defined in the Merger
Agreement) that is transferred to New Trustco
pursuant to Section 2.4;
(vi) any liability in respect of
Abandoned Property other than Processing Business
Abandoned Property;
<PAGE>21
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(vii) all fees and expenses of USTNY and
its subsidiaries incurred on or before the
Contribution in connection with the Merger; and
(viii) all duties, obligations and
liabilities under Customer Agreements and
Contracts relating to the Processing Business and
the Related Back Office that are to be performed
or discharged prior to the Closing Date.
Notwithstanding anything to the contrary in this
Agreement, Assumed Liabilities shall not include any
liability for Taxes, except as provided in the Tax
Allocation Agreement.
(b) At all times at and after the Closing, USTNY
will, subject to Section 2.6, retain and be solely
responsible for, and USTNY hereby agrees to pay, perform
and, discharge when due, and indemnify New Trustco and hold
New Trustco harmless from and against, the Retained
Liabilities. The term "Retained Liabilities" shall mean the
following:
(i) all Deposits arising from the
Processing Business, including Termination Account
Liabilities and other Deposit liabilities relating
to Processing Business Abandoned Property and
Deposits relating to Uncollected Items, but only
to the extent reflected on the Final Processing
Balance Sheet;
(ii) all liabilities to trade creditors
and accounts payable of the Processing Business
and the Related Back Office, but only to the
extent fully liquidated and reflected on the Final
Processing Balance Sheet;
(iii) all duties, obligations and
liabilities under Customer Agreements relating to
the Processing Business, but not any liability for
defaults or damages arising before the Closing
Date;
(iv) all duties, obligations and
liabilities under Contracts relating to the
Processing Business and the Related Back Office,
but not any liability for defaults or damages
arising before the Closing Date;
(v) (A) all liabilities and obligations
for amounts required to be paid as of or after the
Effective Time under the terms of the 1986 Stock
Option Plan and employer payroll taxes due with
respect to such amounts, but not in excess of the
Retained Bank Plan Amount, and (B) all liabilities
and obligations for amounts payable under the
Transition Bonus Program (as defined in the Merger
Agreement) maintained by USTNY;
(vi) all obligations and duties as
lessee under the Broadway Lease, but not any
liability for defaults or damages arising before
the Closing Date;
(vii) escheatment obligations relating to
Processing Business Abandoned Property; and
<PAGE>22
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(viii) to the extent not included in (i)
through (vii) above, the Statement Liabilities.
Notwithstanding anything to the contrary in this
Agreement, Retained Liabilities shall not include any
liability for Taxes, except as provided in the Tax
Allocation Agreement.
SECTION 2.4. Benefit Plans; Employee Matters.
(a) Effective as of the Closing, USTNY shall transfer each
Benefit Plan (as defined in the Merger Agreement) maintained
by it, other than any Retained Plan and the Transition Bonus
Program (each, as defined in the Merger Agreement), to New
Trustco, and New Trustco shall assume and become solely
responsible for all liabilities and obligations of USTNY and
its Subsidiaries under each of the Benefit Plans so
transferred. Effective as of the Closing, each person who
immediately prior to the Closing is an employee of USTNY or
any of its Affiliates and who will not be a Retained
Employee as of the Effective Time as defined in the Merger
Agreement, shall become an employee of New Trustco or of any
Affiliate of New Trustco designated by it.
(b) Notwithstanding the definition of "Retained
Bank Plan Amount" contained in Section 1.1, it is understood
that (i) the cash payments required to be made as of or
after the Effective Time under the 1986 Stock Option Plan
are payments with respect only to stock options granted
under such plan other than any incentive stock options
granted under such plan prior to October 27, 1987, and
(ii) such cash payments will be determined in accordance
with the provisions of such plan on the basis of a "Change
in Control" being deemed to have occurred thereunder with
respect to such stock options (other than any incentive
stock options granted under such plan prior to October 27,
1987) as a result of the Merger.
SECTION 2.5. Capital Notes. Prior to the
Closing, USTNY shall (i) have all obligations of USTNY in
respect of the Capital Notes transferred to and assumed by
New Trustco and USTNY irrevocably released and discharged
therefrom, effective as of the Closing Date, in accordance
with the terms of the indenture governing the Capital Notes
or (ii) give an effective notice under such indenture to
redeem all the outstanding Capital Notes in accordance with
the terms of such indenture and irrevocably deposit with the
trustee under such indenture funds sufficient to pay all
amounts of principal, premium and accrued interest on the
Capital Notes at the stated redemption date.
SECTION 2.6. Delayed Assets and Liabilities.
(a) To the extent that any Required Consent with respect to
a contract, agreement, lease or other instrument included in
the Acquired Assets has not been obtained on or prior to the
Closing Date, such contract, agreement, lease or instrument
(a "Delayed Asset") shall not be transferred as an Acquired
Asset hereunder, and any related liability (a "Delayed
Liability") shall not be assumed by New Trustco as an
Assumed Liability hereunder, unless and until such Required
Consent has been obtained. Notwithstanding the foregoing,
if such a Required Consent to transfer is not obtained,
USTNY will reasonably cooperate with New Trustco to attempt
to provide to New Trustco the benefits under or of any such
Delayed Asset; provided, however, that New Trustco shall
assume, pay and perform (and indemnify and hold USTNY
harmless from and against) all
<PAGE>23
22
obligations and liabilities relating to such Delayed Asset
or Delayed Liability and shall promptly reimburse USTNY for
all of its actual costs and expenses (including attorneys'
fees and employee salaries and allocable benefits, but not
overhead) in connection with any such arrangement.
(b) At such time and on each occasion after the
Closing Date that a Required Consent shall be obtained with
respect to a Delayed Asset, such Delayed Asset shall
forthwith be transferred and assigned to New Trustco
hereunder, and all related Delayed Liabilities shall be
simultaneously assumed by New Trustco hereunder, whereupon
(i) such Delayed Asset shall constitute an Acquired Asset
for all purposes hereunder and (ii) such Delayed Liabilities
shall constitute Assumed Liabilities for all purposes
hereunder.
SECTION 2.7. Estimated and Final Balance Sheets;
Eligible Investment Retention. (a) USTNY shall prepare the
Estimated Balance Sheets prior to the Closing. The
Estimated Balance Sheets and Final Balance Sheets shall be
prepared in accordance with the Accounting Principles in
substantially the same format as the September Balance
Sheets, and shall set forth, as of the close of business on
the day immediately preceding the Closing Date, the assets
and liabilities of (i) the Processing Business conducted by
USTNY and the Related Back Office, and the Processing
Business conducted by MFSC, in each case, recorded at their
Book Values; provided, however, that the such balance sheets
(i) shall reflect Anticipation Advances and Uncollected
Items but shall not include any Transferred Processing
Receivables, (ii) shall not reflect any amounts in respect
of the Computer Lease Adjustment Amount (or the loss on
termination of Computer Leases relating thereto), the Put
Adjustment Amount, the Retained Bank Plans Amount, the Real
Property Transfer Tax Amount, the Transition Bonus Amount,
the Post-Retirement Benefit Adjustment Amount or any
liabilities in respect of Taxes on income, (iii) shall not
reflect the leasehold space (or leasehold improvements in
such space) on the 8th Floor and a portion of the 9th Floor
covered by the Broadway Sublease and (iv) shall reflect all
Eligible Investments to be retained by USTNY pursuant to
Section 2.7(b) at their Liquidation Values. The Estimated
Balance Sheets and the Final Balance Sheets described in
paragraph (b) below may reflect reasonable estimates of any
items the exact amounts of which are not then known to or
reasonably ascertainable to the extent reasonably agreed to
by New Trustco and CMC; provided, however, that notes to the
Estimated Balance Sheets or the Final Balance Sheets, as the
case may be, shall set forth in detail the basis for such
estimates.
(b) Not fewer than three Business Days before the
Closing, USTNY shall provide New Trustco and CMC with the
Estimated Balance Sheets and drafts of schedules ("Related
Schedules") setting forth (i) a listing by series or issue,
of the face amount of Eligible Securities, (ii) the
Fixtures, Furniture and Equipment, (iii) the equipment
subject to Computer Leases, and (iv) all reasonably
necessary detail concerning the components of the Adjustment
Amount. At the Closing, USTNY shall provide New Trustco and
CMC with the Final Balance Sheets and the Related Schedules
in the same forms as the Estimated Balance Sheets and
estimated Related Schedules and shall transfer to New
Trustco all funds, securities, investments, loans and other
financial assets owned or held by or for the account of
USTNY, other than (i) the funds and Eligible Investments
identified by USTNY on the schedule prepared by USTNY
<PAGE>24
23
pursuant to this paragraph (b) of this Section and (ii) such
overdrafts or loans as are reflected on the Final Processing
Balance Sheet as Statement Assets. Any such transfer of
funds to New Trustco by USTNY shall be made pursuant to a
wire transfer of immediately available funds.
(c) The amount of retained funds plus the
aggregate Liquidation Value of retained Eligible Assets
shall equal the Adjustment Amount.
(d) The parties recognize that the Statement
Assets and Statement Liabilities reflected on the Final
Processing Balance Sheet and the amounts of assets and
liabilities reflected on the Final MFSC Balance Sheet may
not be entirely accurate. As soon as practicable and in any
event within five Business Days after the Closing Date, New
Trustco shall cause to be prepared (in accordance with the
provisions of this Agreement) and provide to USTNY updated
Final Balance Sheets and Related Schedules which shall
correct the amounts of any estimates utilized in preparing
the Final Balance Sheets and correct any bookkeeping errors
or omissions discovered after the Closing that affected the
Final Balance Sheets or the Related Schedules (such updated
balance sheets and schedules being deemed upon delivery to
be the Final Balance Sheets and Related Schedules). USTNY
and its accountants shall have the right to discuss the
preparation of the Final Balance Sheets and Related
Schedules with New Trustco and its accountants and shall be
allowed access to the work papers used in such preparation.
USTNY or New Trustco, as the case may be, shall (except to
the extent such party institutes a dispute pursuant to
Section 8.9), not later than the 50th day after the Closing
Date, pay to the other party in immediately available funds
an amount equal to the net adjustment, if any, required to
be made to the amount of retained funds and Liquidation
Value (determined as of the Closing Date in accordance with
the definition of such term) of retained Eligible
Investments on the basis of such Final Balance Sheets (with
such changes therein as USTNY and New Trustco may mutually
agree in writing prior to such 50th day), plus interest on
such amount for each day during the period from the Closing
Date to the date of payment at a rate per annum (calculated
on the basis of a 360-day year) equal to the Federal Funds
Rate in effect on such day.
ARTICLE III
The Closing
SECTION 3.1. Closing Date. The Closing of the
sale and transfer of the Acquired Assets and assumption of
the Assumed Liabilities shall take place at the offices of
Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New
York 10019, at 10:00 a.m. on the same date as the closing is
to occur under the Merger Agreement.
SECTION 3.2. Transactions To Be Effected at the
Closing. At the Closing:
(a) USTNY shall (x) deliver to New Trustco
(i) such appropriately executed bills of sale, assignments
and other instruments of transfer and conveyance as may be
reasonably required effectively to convey the Acquired
Assets to New Trustco in accordance with the provisions of
Article II and (ii) such other documents as may be necessary
or appropriate (A) to
<PAGE>25
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demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement and (B) for
the purposes of more effectively consummating the transac-
tions contemplated by this Agreement, (y) transfer to New
Trustco (by wire transfer of immediately available funds or
in such manner as is customary in the case of securities and
investments) the funds, securities and investments of USTNY
other than the funds and Eligible Investments specified in
the schedule prepared by USTNY pursuant to Section 2.7(b)
plus, in the event any Eligible Investments are so
specified, immediately available funds in an amount equal to
one day's interest, calculated at the Federal Funds Rate in
effect on the day prior to the Closing Date, on the
Liquidation Value of such Eligible Investments reflected in
the Final Processing Balance Sheet, and (z) deliver to New
Trustco (A) an appropriately executed Post-Closing Covenants
Agreement, (B) an appropriately executed Broadway Sublease,
(C) an appropriately executed Services Agreement, (D) an
appropriately executed License Agreement.
(b) New Trustco shall deliver to USTNY (i) an
appropriately executed Assumption Agreement, together with
one or more other instruments of assumption as may be
reasonably required to effect the assumption of the Assumed
Liabilities in accordance with Article II, (ii) such other
documents as may be necessary or appropriate (A) to demon-
strate satisfaction of the conditions and compliance with
the agreements set forth in this Agreement and (B) for the
purpose of more effectively consummating the transactions
contemplated by this Agreement, (iii) an appropriately
executed Post-Closing Covenants Agreement, (iv) an appropri-
ately executed Broadway Sublease, (v) an appropriately
executed Services Agreement, (vi) an appropriately executed
License Agreement.
ARTICLE IV
Representations and Warranties
SECTION 4.1. Representations and Warranties of
USTNY. USTNY hereby represents and warrants to New Trustco
as follows:
(a) Organization, Standing and Power. USTNY is a
trust company with banking powers duly organized, validly
existing and in good standing under the banking laws of the
State of New York and has all requisite corporate power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) Authority. USTNY has all requisite power and
authority to execute this Agreement and the other Documents
to which it is or will be party (collectively, the "USTNY
Documents") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this
Agreement and the other USTNY Documents and the consummation
of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of
USTNY and, to the extent required, by the stockholders of
USTNY. This Agreement has been duly executed and delivered
by USTNY and constitutes, and each other USTNY Document will
be duly executed and delivered by USTNY on or prior
<PAGE>26
25
to the Closing Date, and when so executed and delivered will
constitute, a legal, valid and binding obligation of USTNY
enforceable against it in accordance with its terms.
(c) No Conflict. The execution, delivery and
performance by USTNY of this Agreement and the other USTNY
Documents (other than the Services Agreement) will not
contravene, violate, result in a breach of or constitute a
default under (i) any provision of applicable law or of the
Certificate of Incorporation or By-laws of USTNY or its
comparable charter or organizational documents or (ii) any
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to USTNY or any of its properties or
assets.
(d) Approvals. No consent, approval, order,
authorization of, or registration, declaration or filing
with, any Governmental Entity is required other than
Required Consents of such authority in its capacity as a
customer or client in connection with Acquired Assets) in
connection with the making or performance by USTNY of this
Agreement or the other USTNY Documents, except the approval
of the Board of Governors of the Federal Reserve System and
the Banking Department of the State of New York. USTNY has
received written advice from the Banking Department of the
State of New York that the transfer of the fiduciary agency
and similar relationships of USTNY which are included in the
Acquired Assets may be transferred to and assumed by New
Trustco as contemplated by this Agreement pursuant to and in
accordance with the provisions of Section 604-a of the
Banking Law of the State of New York.
SECTION 4.2. Representations and Warranties of
New Trustco. New Trustco hereby represents and warrants to
USTNY as follows:
(a) Organization, Standing and Power. New
Trustco is a trust company with banking powers duly
organized, validly existing and in good standing under the
laws of the State of New York and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry out its business as now being
conducted.
(b) Authority. New Trustco has all requisite
power and authority to execute this Agreement the other
Documents to which it is or will be party (collectively, the
"New Trustco Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery
of this Agreement and the other New Trustco Documents and
the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on
the part of New Trustco and, to the extent required, by the
stockholders of New Trustco. This Agreement has been duly
executed and delivered by New Trustco and constitutes, and
each other New Trustco Document will be duly executed and
delivered by New Trustco on or prior to the Closing Date,
and when so executed and delivered will constitute, a legal,
valid and binding obligation of New Trustco enforceable
against it in accordance with its terms.
(c) No Conflict. The execution, delivery and
performance by New Trustco of this Agreement and the other
New Trustco Documents will not contravene, violate, result
in a breach of or constitute a default under (i) any
provision of applicable law or of the Certificate of
<PAGE>27
26
Incorporation or By-laws of New Trustco or its comparable
charter or organizational documents and (ii) any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to New Trustco or any of its properties or
assets.
(d) Approvals. No consent, approval, order,
authorization of, or registration, declaration or filing
with, any Governmental Entity is required (other than in its
capacity as a customer or a client in connection with
Acquired Assets) in connection with the making or
performance by New Trustco of this Agreement or the other
New Trustco Documents, or the acquisition of the Acquired
Assets and assumption of the Assumed Liabilities as contem-
plated hereby, except the approval of the Board of Governors
of the Federal Reserve System and the Banking Department of
the State of New York.
ARTICLE V
Covenants
SECTION 5.1. Items in Transit. USTNY shall
retain the benefit of and shall bear the risk of all
Uncollected Items and all other items which will result in
Deposits of the Processing Business which are in transit as
of the close of business on the day immediately preceding
the Closing Date. Any payments, transfers of securities,
deposits, checks or other items relating to or constituting
part of the Acquired Assets (including the Transferred
Processing Receivables) or Assumed Liabilities, or otherwise
paid or delivered for the account or benefit of the Acquired
Business or treasury operations of USTNY (including any such
items in transit or in the process of collection at the time
of the Closing) shall be for the account and benefit of New
Trustco. In furtherance of the foregoing, if funds,
securities or other items payable or deliverable to or for
the account of one party in accordance with the foregoing
are received by the other party at any time on or after the
Closing Date, such receiving party shall forthwith remit
such funds, securities or other items to the other party.
New Trustco shall be responsible for the payment of any
check, draft, payment order or similar item originating from
businesses of USTNY other than the Processing Business and
payable by or drawn upon USTNY which have not, as of the
close of business on the day immediately preceding the
Closing Date, been paid or charged against an account of
USTNY. New Trustco shall forthwith reimburse USTNY for the
amount of any item referred to in the immediately preceding
sentence which is paid by or charged to an account of USTNY
on or after the Closing Date. Funds owed to either party
pursuant to this Section shall bear interest (calculated on
the basis of a 360-day year) at the Federal Funds Rate from
the Business Day of receipt in the case of same day funds,
or the next Business Day in the case of next day funds, by a
party of such funds (or payment by USTNY of funds for the
account of New Trustco) until the date of payment of such
funds to the party entitled thereto. All payments pursuant
to this Section shall be made in immediately available funds
in New York City or, in the case of payments made with
respect to items received by mistake, of the same tenor as
the receipt. Each party shall provide the other with such
information and evidence of transactions as may be necessary
to effectuate the foregoing provisions.
<PAGE>28
27
SECTION 5.2. Further Assurances. (a) Subject to
the provisions of Section 2.6, on and after the Closing
Date, USTNY shall, with full reimbursement of its reasonable
actual costs and expenses (including attorneys' fees and
employee salaries and allocable benefits, but not overhead),
(i) give such further assurances to New Trustco and shall
execute, acknowledge and deliver all such acknowledgements
and other instruments and take such further actions as may
be reasonably necessary or appropriate effectively to vest
in New Trustco the full legal and equitable title to the
Acquired Assets and (ii) use its reasonable best efforts to
assist New Trustco in the orderly transition of the
operations acquired by New Trustco. Nothing in this Section
shall be construed to require USTNY to incur, without
reimbursement from New Trustco, any costs or expenses in
connection with any such undertakings.
(b) Subject to the provisions of Section 2.6, on
and after the Closing Date, New Trustco shall, at its
expense (except as otherwise specifically provided by the
Documents), (i) give such further assurances to USTNY and
shall execute, acknowledge and deliver all such
acknowledgements and other instruments and take such further
actions as may be necessary to relieve and discharge USTNY
effectively from the Assumed Liabilities and (ii) use its
reasonable best efforts to assist USTNY in the transfer to
New Trustco of the Acquired Assets and Assumed Liabilities.
SECTION 5.3. Certain Understandings. New
Trustco acknowledges that neither USTNY nor any other person
has made any representation or warranty, express or implied,
as to the accuracy or completeness of any information
regarding the Acquired Assets or Assumed Liabilities not
included in this Agreement, the Documents or the schedules
hereto and thereto. New Trustco acknowledges that it will
acquire the Acquired Assets without any representation or
warranty as to merchantability or fitness for any particular
purpose, in an "as is" condition and on a "where is" basis.
SECTION 5.4. Use of Name. From and after the
Closing Date, USTNY (i) shall promptly change the name on
all documents, stationery and facilities relating to the
Processing Business and the Related Back Office to a name
that is not in any way similar to USTNY's name (or any name
or initial confusingly similar to that of any existing
Affiliates of New Trustco). It is understood that USTNY is
transferring to New Trustco all right, title and interest in
and to, and all rights to use, USTNY's name (or any name or
initial similar thereto or of any existing Affiliates of
USTNY). Nothing in this Section shall require USTNY to
undertake to reissue deposits or rewrite outstanding loans,
or other agreements or other documents retained by USTNY on
the Closing Date except in the ordinary course of business,
it being understood, however, that reasonable efforts will
be used to change names in accordance with the provisions of
the first sentence of this Section.
SECTION 5.5. Transferred Processing Receivables.
From and after the Closing Date, USTNY will use its best
efforts to assist New Trustco in the collection of the
Transferred Processing Receivables; provided, however, that
the foregoing shall not require USTNY to incur any actual
cost or expense not reimbursed by New Trustco or to conduct
litigation (but USTNY shall cooperate in such ways as may
reasonably be requested by New Trustco, at New Trustco's
<PAGE>29
28
expense, in connection with any litigation commenced by New
Trustco to collect such Transferred Processing Receivables).
ARTICLE VI
Conditions Precedent
SECTION 6.1. Conditions to Each Party's
Obligation. The obligation of New Trustco to accept the
Acquired Assets and assume the Assumed Liabilities and the
obligation of USTNY to assign, convey and deliver the
Acquired Assets and Assumed Liabilities to New Trustco shall
be subject to the satisfaction (or waiver by such party, in
the case of USTNY only with the consent of CMC) prior to the
Closing of the following conditions:
(a) Regulatory Approvals. All authorizations,
consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any
governmental authority necessary for the consummation of the
transactions contemplated by this Agreement shall have been
obtained or filed or shall have occurred.
(b) No Litigation, Injunctions or Restraints.
There shall be no suit, action, or other proceeding pending
which has been initiated by any governmental authority
seeking to restrain, prohibit, invalidate or set aside in
whole or in part the consummation of the transactions
contemplated by this Agreement. No temporary restraining
order, preliminary or permanent injunction or other legal
restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement shall be in
effect.
(c) Merger Agreement. At the time of the
Closing, all conditions to the consummation of the
transactions contemplated by the Merger Agreement (other
than the closings hereunder and under the Distribution
Agreement) shall have been satisfied (or waived by the party
for whose benefit such condition exists).
SECTION 6.2. Conditions to Obligations of New
Trustco. The obligation of New Trustco to accept the
Acquired Assets and assume the Assumed Liabilities is
subject to the satisfaction on and as of the Closing of each
of the following conditions, unless waived by New Trustco:
(a) Representations and Warranties. The
representations and warranties of USTNY set forth in this
Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing as
though made on and as of the Closing (or on or as of the
date when made in the case of any representation or warranty
which specifically relates to an earlier date), except as
otherwise specifically contemplated by this Agreement, and
New Trustco shall have received a certificate signed by an
authorized officer of USTNY, dated the Closing Date, to such
effect.
<PAGE>30
29
(b) Performance of Obligations of USTNY. USTNY
shall have performed or complied in all material respects
with all obligations, conditions and covenants required to
be performed or complied with by it under this Agreement at
or prior to the Closing, and New Trustco shall have received
a certificate signed by an authorized officer of USTNY,
dated the Closing Date, to such effect.
(c) Bill of Sale. USTNY shall have delivered to
New Trustco an appropriate bill of sale conveying the
personal property included in the Acquired Assets, and such
other assignments, instruments or documents as may be
necessary or appropriate to confirm the transfer and
assignment of the Acquired Assets, in each case in form and
substance reasonably satisfactory to New Trustco.
(d) Other Agreements. Each of the Documents
shall have been executed and delivered by the parties
thereto (other than New Trustco), and shall, subject to
consummation of the transactions contemplated by the Merger
Agreement, the Distribution Agreement and this Agreement, be
effective and in force.
(e) Name Change. USTNY shall have amended its
organization certificate to change its name.
SECTION 6.3. Conditions to the Obligation of
USTNY. The obligation of USTNY to assign, convey, and
deliver the Acquired Assets and transfer the Assumed
Liabilities is subject to the satisfaction on and as of the
Closing Date of each of the following conditions, unless
waived by USTNY (with the consent of CMC):
(a) Representations and Warranties. The
representations and warranties of New Trustco set forth in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date
(or on or as of the date when made in the case of any
representation or warranty which specifically relates to an
earlier date), except as otherwise specifically contemplated
by this Agreement, and USTNY shall have received a
certificate signed by an authorized officer of New Trustco,
dated the Closing Date, to such effect.
(b) Performance of Obligations of New Trustco.
New Trustco shall have performed or complied in all material
respects with all obligations required to be performed or
complied with by it under this Agreement at or prior to the
Closing, and USTNY shall have received a certificate signed
by an authorized officer of New Trustco, dated the Closing
Date, to such effect.
(c) Assumption Agreement. New Trustco shall have
executed and delivered to USTNY the Assumption Agreement.
(d) Other Agreements. Each of the Documents
shall have been executed and delivered by the parties
thereto (other than USTNY), and shall, subject to
consummation of the
<PAGE>31
30
transactions contemplated by the Merger Agreement, the
Distribution Agreement and this Agreement, be effective and
in force.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.1. Termination. Notwithstanding
anything to the contrary in this Agreement, this Agreement
may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing by mutual written
consent of USTNY and New Trustco in the event the Merger
Agreement is terminated by any party thereto in accordance
with the terms thereof.
SECTION 7.2. Amendments and Waivers. This
Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto and
consented to by CMC. By an instrument in writing, USTNY or
New Trustco may waive compliance by the other party with any
term or provision of this Agreement that such other party
was or is obligated to comply with or perform; provided that
no such waiver by USTNY shall be effective unless consented
to by CMC.
ARTICLE VIII
General Provisions
SECTION 8.1. Notices. Any notice, request,
instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be
deemed to have been duly given (i) on the first business day
occurring on or after the date of transmission if
transmitted by facsimile (upon confirmation of receipt by
journal or report generated by the facsimile machine of the
party giving such notice), (ii) on the first business day
occurring on or after the date of delivery if delivered
personally or (iii) on the first business day following the
date of dispatch if dispatched by Federal Express or other
next-day courier service. All notices hereunder shall be
given as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to
receive such notice:
(a) if to USTNY, to
The Chase Manhattan Corporation
One Chase Manhattan Plaza
New York, New York 10081
Attention: Robert M. MacAllister
<PAGE>32
31
with a copy (which shall not constitute
notice) to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attention: William H. Satchell
and
(b) if to New Trustco, to
c/o U.S. Trust Corporation
114 West 47th Street
New York, New York 10036
Attention: Maureen Scannell Bateman
with a copy (which shall not constitute
notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: B. Robbins Kiessling
SECTION 8.2. Interpretation. When a reference
is made in this Agreement to a Section, Schedule or Exhibit,
such reference shall be to a Section, Schedule or Exhibit of
this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the
words "included", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". All accounting terms not defined in
this Agreement shall have the meanings determined by
generally accepted accounting principles.
SECTION 8.3. Survival of Representations. The
representations and warranties of New Trustco contained in
Article IV of this Agreement shall survive the closing and
shall terminate at the close of business two years following
the Closing Date. The representations and warranties of
USTNY contained in Article IV of this Agreement shall
terminate on the Closing Date.
<PAGE>33
32
SECTION 8.4. Severability. If any provision of
this Agreement, or the application thereof to any person,
place or circumstances, shall be held by a court of
competent jurisdiction to be invalid, unenforceable, or
void, the remainder of this Agreement and such provisions as
applied to other persons, places, and circumstances shall
remain in full force and effect; provided, however, that in
the event that the terms and conditions of this Agreement
are materially altered as a result of this paragraph, the
parties will renegotiate the terms and conditions of this
Agreement to resolve any inequities.
SECTION 8.5. 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 party, it
being understood that all parties need not sign the same
counterpart.
SECTION 8.6. Entire Agreement; Third Party
Beneficiaries. This Agreement, the Documents and the
documents and instruments referred to herein and therein, or
otherwise required pursuant to any Document to be delivered
in connection with the consummation of the transactions
contemplated by the Documents, (a) constitute the entire
agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof (except the
Confidentiality Agreement dated August 17, 1994 between CMC
and the Company and certain letter agreements executed
simultaneously with the Merger Agreement) and (b) except as
expressly set forth herein, this Agreement is not intended
to confer upon any person other than the parties hereto and
CMC any rights or remedies hereunder.
SECTION 8.7. Governing Law. This Agreement
shall be governed by and construed in accordance with the
laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of
conflict of laws.
SECTION 8.8. Consent to Jurisdiction; Waiver of
Jury Trial. (a) Each of USTNY and New Trustco irrevocably
submits to the non-exclusive jurisdiction of (i) the Supreme
Court of the State of New York, New York County, and
(ii) the United States District Court for the Southern
District of New York located in the borough of Manhattan in
the City of New York, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of USTNY and New
Trustco further agrees that service of process, summons,
notice or document in accordance with Section 8.1 shall be
effective service of process for any action, suit or
proceeding in New York with respect to any matters to which
it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of USTNY and New
Trustco irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of
New York, New York County or (ii) the United States District
Court for the Southern District of New York, and hereby
further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has
been brought in an inconvenient forum.
<PAGE>34
33
(b) Each of New Trustco and USTNY hereby waives,
to the fullest extent permitted by applicable law, any right
it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in
connection with this Agreement or any of the other
Documents. Each of New Trustco and USTNY (a) certifies that
no representative, agent or attorney of the other party has
represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other
party hereto has been induced to enter into this Agreement
and the other Documents, as applicable, by, among other
things, the mutual waivers and certifications in this
Section 8.8(b).
SECTION 8.9. Certain Disputes. (a) Following
the delivery of the Final Balance Sheets and Related
Schedules to USTNY, USTNY shall review such balance sheets
and schedules and New Trustco and its accountants shall
permit USTNY and its accountants full access at all
reasonable times to all of the working papers, analyses and
schedules utilized or prepared in connection with the
preparation of such balance sheets and schedules. On or
before the 50th day after the Closing Date, USTNY shall, in
a written notice to New Trustco, either accept the Final
Balance Sheets and Related Schedules or describe in
reasonable detail any proposed adjustments to such Final
Balance Sheets and Related Schedules and the reasons
therefor, and shall include pertinent calculations.
Thereafter, USTNY and its accountants shall permit New
Trustco full access at all reasonable times to all of the
working papers, analyses and schedules of USTNY and its
accountants (and relevant personnel) utilized or prepared in
connection with the preparation of such notices of proposed
adjustments. If USTNY shall not give such notice of
proposed adjustments within such 50-day period, USTNY will
be deemed irrevocably to have accepted the Final Balance
Sheets and Related Schedules. In the event that USTNY and
New Trustco disagree as to any item or amount (or the
computation or determination in accordance with the terms of
this Agreement of any item or amount) reflected, set forth
in or relating to the Final Balance Sheets or Related
Schedules, or to the calculation of the Adjustment Amount as
contemplated hereby, then any payments at the time required
to be made under this Agreement shall be made on the basis
of such items or amounts as to which the parties do not
disagree. Either party hereto shall thereupon be entitled
to request Ernst & Young (or, if said firm shall have a
conflict due to a relationship with CMC or New Holdings or
any of their subsidiaries or shall be unwilling to act
thereunder, such other firm of nationally recognized
independent accountants as USTNY and New Trustco may jointly
designate which does not at the time have a material
relationship with, USTNY, New Trustco or their Affiliates)
to determine, in accordance with the provisions of this
Agreement, such disputed item or amount (or the computations
or determination thereof). Any such request shall be in
writing and shall specify with particularity the disputed
items, amounts or computations being submitted for
determination, and the requesting party shall furnish the
other party hereto with a copy of such request at the same
time it is submitted to the independent accountants. The
firm of independent accountants to which any dispute is
referred hereunder shall within 30 days determine, in
accordance with the provisions of this Agreement, the proper
amount of any disputed item or other amount, or the computa-
tion thereof, and such determination shall be final,
conclusive and binding on all parties hereto. In acting
pursuant to this Agreement, such firm of independent
accountants shall be entitled to the privileges and
immunities of arbitrators. USTNY and New
<PAGE>35
34
Trustco shall cooperate fully in assisting such firm in
making any determination requested hereunder, including
giving such firm access to all files, books and records
relevant thereto and providing such other information as
such firm may reasonably request in connection with the
determination to be made by it hereunder. The fees and
disbursements in connection with such firm's determination
shall be borne equally by USTNY and New Trustco unless the
determination requires a party to make an additional payment
in excess of $50,000, in which case the party required to
make such payment shall bear and be responsible for the full
amount of fees and disbursements of such firm. In the event
that a determination by independent accountants pursuant to
this Section requires any previously suspended payment to be
made by any party, such payment shall be made promptly (and
in any event within ten Business Days) after receipt by such
party from such independent accountants of written notice of
such determination. Such firm of independent accountants
shall promptly and substantially simultaneously notify USTNY
and New Trustco in writing of any determination by it
hereunder. New Trustco and USTNY agree that the settlement
of amounts payable pursuant to this Section will not be
considered to be a claim for indemnification pursuant to the
Post-Closing Covenants Agreement.
(b) Any amount payable by any party to another
party pursuant to Section 8.9(a) shall be paid in
immediately available funds in New York City and shall bear
interest (calculated on the basis of a 360-day year) on each
day from the date such amount would originally have been
required to be paid hereunder had no dispute over such
amount existed to the date of payment at the Federal Funds
Rate in effect for each such day during the period involved.
(c) The party having control of the relevant
records and financial information used in connection with
any adjustment provided for in this Section shall certify
the accuracy of such records and financial information if so
requested by the other party.
SECTION 8.10. Assignment. Neither this Agreement
nor any of the rights, interest or obligations hereunder
shall be assigned by either party hereto without the prior
written consent of the other party, except that USTNY may
assign its rights, interest and obligations under this
Agreement to any successor by merger or any entity that
acquires substantially all of its assets. 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 (including any bank or trust
company which is a successor by merger to USTNY) and
assigns.
[Remainder of page intentionally left blank]
<PAGE>36
IN WITNESS WHEREOF, USTNY and New Trustco have
caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first
above written.
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
--------------------------
Name:
Title:
[NEW TRUSTCO]
By:
---------------------------
Name:
Title:
<PAGE>37
EXHIBIT A
ASSUMPTION AGREEMENT
To be prepared prior to the Closing.
<PAGE>38
EXHIBIT B
FINAL BALANCE SHEETS
<PAGE>39
Schedule 1.1A
SIGNIFICANT ACCOUNTING PRINCIPLES
<PAGE>40
Schedule 1.1B
COMPUTER LEASES
<PAGE>41
Schedule 1.1C
CUSTOMERS WHO ARE AFFILIATES;
CUSTOMERS THROUGH SUB-AGREEMENTS
<PAGE>42
Schedule 1.1D
IAS BUSINESS EXCLUSIONS
<PAGE>43
Schedule 1.1E
SEPTEMBER BALANCE SHEETS
<PAGE>44
Schedule 2.2(a)(v)
UST BRANCH OFFICES
<PAGE>45
Schedule 2.2(a)(vi)
ACQUIRED BUSINESS LEASES
<PAGE>46
Schedule 2.2(a)(xv)
OWNERSHIP INTERESTS
<PAGE>47
Schedule 2.2(a)(xxiv)
CERTAIN ACQUIRED ASSETS
<PAGE>48
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions
SECTION 1.1. Definitions . . . . . . . . . . . . 2
ARTICLE II
Contribution of Assets and Assumption of Liabilities
SECTION 2.1. Contribution . . . . . . . . . . . 12
SECTION 2.2. Acquired Assets and Retained
Assets . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3. Assumption of Certain Liabilities . 17
SECTION 2.4. Benefit Plans; Employee Matters . . 18
SECTION 2.5. Capital Notes . . . . . . . . . . . 19
SECTION 2.6. Delayed Assets and Liabilities . . 19
SECTION 2.7. Estimated and Final Balance Sheets;
Eligible Investment Retention . . . . . . . . 19
ARTICLE III
The Closing
SECTION 3.1. Closing Date . . . . . . . . . . . 21
SECTION 3.2. Transactions To Be Effected at the
Closing . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
Representations and Warranties
SECTION 4.1. Representations and Warranties of
USTNY . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.2. Representations and Warranties of
New Trustco . . . . . . . . . . . . . . . . . 22
ARTICLE V
Covenants
SECTION 5.1. Items in Transit . . . . . . . . . 23
SECTION 5.2. Further Assurances . . . . . . . . 24
SECTION 5.3. Certain Understandings . . . . . . 24
SECTION 5.4. Use of Name . . . . . . . . . . . . 24
SECTION 5.5. Transferred Processing Receivables 24
<PAGE>49
ARTICLE VI
Conditions Precedent
SECTION 6.1. Conditions to Each Party's
Obligation . . . . . . . . . . . . . . . . . 25
SECTION 6.2. Conditions to Obligations of New
Trustco . . . . . . . . . . . . . . . . . . . 25
SECTION 6.3. Conditions to the Obligation of
USTNY . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.1. Termination . . . . . . . . . . . . 26
SECTION 7.2. Amendments and Waivers . . . . . . 26
ARTICLE VIII
General Provisions
SECTION 8.1. Notices . . . . . . . . . . . . . . 27
SECTION 8.2. Interpretation . . . . . . . . . . 28
SECTION 8.3. Survival of Representations . . . . 28
SECTION 8.4. Severability . . . . . . . . . . . 28
SECTION 8.5. Counterparts . . . . . . . . . . . 28
SECTION 8.6. Entire Agreement; Third Party
Beneficiaries . . . . . . . . . . . . . . . . 28
SECTION 8.7. Governing Law . . . . . . . . . . . 29
SECTION 8.8. Consent to Jurisdiction; Waiver of
Jury Trial . . . . . . . . . . . . . . . . . 29
SECTION 8.9. Certain Disputes . . . . . . . . . 29
SECTION 8.10. Assignment . . . . . . . . . . . . 30
<PAGE>50
EXHIBITS
Exhibit A Assumption Agreement
Exhibit B Final Balance Sheets
Exhibit C Broadway Sublease Term Sheet
SCHEDULES
Schedule 1.1A Significant Accounting Principles
Schedule 1.1B Computer Leases
Schedule 1.1C Customers who are Affiliates;
Customers through Sub-Agreements
Schedule 1.1D IAS Business Exclusions
Schedule 1.1E September Balance Sheets
Schedule 2.2(a)(v) UST Branch Offices
Schedule 2.2(a)(vi) Acquired Business Leases
Schedule 2.2(a)(xv) Ownership Interests
Schedule 2.2(a)(xxiv) Certain Acquired Assets
EXHIBIT V
to Merger Agreement
TAX ALLOCATION AGREEMENT
Dated as of , 1995
Among
U.S. TRUST CORPORATION
[NEW HOLDINGS]
and
THE CHASE MANHATTAN CORPORATION
<PAGE>2
TAX ALLOCATION AGREEMENT (the "Agreement")
dated as of [ ], 1995, among
U.S. Trust Corporation, a New York corporation
(the "Company"),
[NEW HOLDINGS], a New York corporation
("New Holdings") and The Chase Manhattan Corporation,
a Delaware corporation ("Parent").
WHEREAS, the Company is currently the common
parent of an affiliated group of corporations (the
"Affiliated Group") filing consolidated Federal income Tax
returns and unitary or combined state income Tax returns
("Consolidated Returns"), pursuant to which the Company and
one or more other members of the Affiliated Group pay Taxes
on a consolidated, combined or unitary basis ("Consolidated
Taxes");
WHEREAS, on [ ], United States Trust
Company of New York, a New York State chartered bank and
trust company ("USTNY"), a wholly owned subsidiary of the
Company, transferred certain assets and liabilities
associated with USTNY's private banking and asset management
businesses to [NEW TRUSTCO], a New York State chartered bank
and trust company ("New Trustco"), a newly formed, wholly
owned subsidiary of USTNY ("Contribution No.1");
WHEREAS, immediately thereafter, USTNY distributed
the stock of New Trustco to the Company ("Spinoff No.1") in
a transaction intended to qualify as a tax-free distribution
under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, immediately thereafter, the Company
contributed the stock of New Trustco, the stock of certain
other subsidiaries of the Company and certain other assets
to New Holdings, a newly formed, wholly owned subsidiary of
the Company ("Contribution No.2");
WHEREAS, the Company intends to distribute all the
stock of New Holdings to its shareholders ("Spinoff No.2")
in a transaction intended to qualify as a tax-free spin-off
under Section 355 of the Code (Contribution No.1,
Contribution No.2, Spinoff No.1 and Spinoff No.2 are
referred to, collectively, herein as the "Spinoffs");
WHEREAS, on the beginning of the first day after
the date on which Spinoff No. 2 occurs (the "Distribution
Date"), New Holdings and its subsidiaries, including New
Trustco (collectively, the "Holdings Group"), will cease to
be members of the Affiliated Group of which the Company is
the common parent corporation, within the meaning of Section
1502 of the Code, and which has elected to file Consolidated
Returns;
WHEREAS, immediately following Spinoff No. 2
pursuant to an agreement between the Company and the Parent,
the Company shall merge with the Parent or a subsidiary of
the Parent and USTNY may merge with a subsidiary of the
Parent (collectively, the "Merger");
<PAGE>3
WHEREAS, the Company and New Holdings desire to
allocate the liability for the Taxes (including any interest
or penalties thereon and additions thereto) of members of
the Affiliated Group for any taxable period (including short
taxable periods and any portion of any taxable period) which
period (or portion) ends on or before the effective date of
the Merger (a "Pre-Merger Tax Period") and to provide for
certain other tax-related matters;
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the parties agree as follows.
1. Indemnification by the Company and USTNY.The
Company and its subsidiaries, other than USTNY, shall
indemnify and hold harmless New Holdings against any
Federal, state, local and foreign income, property, sales,
excise, transfer, withholding, employment or other taxes,
tariffs or governmental charges (and all penalties and
interest relating thereto) imposed by a governmental
authority pursuant to the exercise of its power to tax
(collectively, "Taxes") (i) imposed on the Company, USTNY or
any of their respective subsidiaries at the Effective Time
of the Merger for any taxable period (including short
taxable periods and any portion of any taxable period) which
period (or portion) begins on or after and ends after the
effective date of the Merger (a "Post-Merger Tax Period"),
(ii) imposed on any member of the Affiliated Group as a
result of the Merger failing to qualify as a reorganization
under Section 368(a) of the Code solely by reason of one or
more actions, other than a Contemplated Action, taken by the
Company, the Parent or any of their respective subsidiaries
after the Merger or (iii) imposed as a result of the
Spinoffs on any member of the Affiliated Group solely by
reason of one or more actions, other than a Contemplated
Action, taken by the Company, the Parent or any of their
respective subsidiaries after the Merger. As used herein,
"Contemplated Action" shall mean any action or inaction set
forth in the documents prepared in connection with the
Spinoffs and the Merger, and actions or inactions
contemplated to be taken as specified in writing by the
Parent to New Holdings in connection with the preparation of
a private letter ruling request to be completed in
connection with the Spinoffs and the Merger. Except as
specifically provided in this Section 1, none of Parent, the
Company nor any of their respective subsidiaries shall have
any obligation to any of New Holdings, New Trustco or any of
their respective subsidiaries for any Taxes arising from or
related to the Spinoffs or the Merger.
2. Indemnification by New Holdings. New
Holdings and each direct or indirect subsidiary thereof,
other than New Trustco, shall indemnify and hold harmless
the Parent, the Company, USTNY and each direct or indirect
subsidiary thereof against any and all Taxes, other than
Taxes for which New Holdings, New Trustco and each direct or
indirect subsidiary thereof has been indemnified under
Section 1, (i) imposed on any member of the Affiliated Group
with respect to a Pre-Merger Tax Period or (ii) imposed on
Parent, Company and each direct or indirect subsidiary
thereof as a result of the Spinoffs or the Merger.
3. Control of Tax Matters. (a) The Company
hereby irrevocably designates, and agrees to cause each of
its subsidiaries to so designate, New Holdings as its agent
to take any and all actions, at New Holdings' sole expense,
necessary or incidental to the preparation of Tax returns
and the filing of claims for refunds or forms relating to
any Pre-Merger Tax Period. For any Straddle Period (as
defined in Section 4) of the Company or any of its
subsidiaries that was a member
<PAGE>4
of the Affiliated Group for any Pre-Merger Tax Period,
Parent, at Parent's sole expense, will timely file (in a
manner consistent with past practice of the Company, unless
Parent reasonably determines that such practice is
inconsistent with the then existing state of the law) with
the appropriate Taxing authorities all Tax returns required
to be filed.
(b) If requested by New Holdings the Company will,
and will cause each of its subsidiaries that was a member of
the Affiliated Group for any Pre-Merger Tax Period to, and
New Holdings will, and will cause each of its subsidiaries
that was a member of the Affiliated Group for any Pre-Merger
Tax Period to, join in the filing of Consolidated Returns
for all Pre-Merger Tax Periods to the extent the Company,
New Holdings and their subsidiaries are respectively
eligible to join in such Consolidated Returns. Such
Consolidated Returns will be filed on behalf of the
Affiliated Group by New Holdings or, if so requested by New
Holdings, by the Company.
(c) The Company shall refrain, and shall cause
each of its subsidiaries to refrain, from making any
material tax election (including an election under Section
13261(g)(2) of the Revenue Reconciliation Act of 1993)
without the prior written consent of New Holdings that would
(i) bind New Holdings or any member of the Holdings Group or
(ii) materially affect the Tax liability of the Affiliated
Group.
(d) Without the prior written consent of Parent,
New Holdings shall refrain, and shall cause each of its
subsidiaries to refrain, from making, filing or amending any
Tax return that includes any Pre-Merger Tax Period that (i)
is inconsistent with the existing and historic method used
by the Affiliated Group in calculating the taxable income of
the Affiliated Group and (ii) would materially affect the
Tax liability of the Parent, Company and each direct or
indirect subsidiary thereof for any Post-Merger Tax Period.
4. Allocation Between Taxable Periods. (a) In
the case of any taxable period that includes but does not
end on the effective date of the Merger (a "Straddle
Period"),
(i) real, personal and intangible property
Taxes, other than transfer and similar Taxes,
("Property Taxes") allocated to the Pre-Merger Tax
Period shall be equal to the amount of such
Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which
is the number of days during the Straddle Period
that are in the Pre-Merger Tax Period and the
denominator of which is the number of days in the
Straddle Period; and
(ii) all Taxes (other than Property Taxes)
for the Pre-Merger Tax Period shall be computed
based on an actual closing of the books as if such
taxable period ended as of the close of business
on the effective date of the Merger and, in the
case of any Taxes attributable to the ownership of
any equity interest in any partnership or other
"flow through" entity, based on an actual closing
of the books as if the taxable period of such
partnership or other "flow through" entity ended
as of the close of business on the effective date
of the Merger; provided, however, the transfers
and transactions (including Taxes
<PAGE>5
attributable thereto) which occur to effectuate
the Spinoffs or the Merger shall be allocated to
the Pre-Merger Tax Period.
(b) In the case of any taxable period other than
a Straddle Period, all income, deductions and other items
shall be allocated between the Pre-Merger Tax Period and the
Post-Merger Tax Period in a manner consistent with
applicable tax accounting principles and based on an actual
closing of the books of the Company on the effective date of
the Merger except that (i) allowances or deductions that are
calculated on an annual basis (such as the deductions for
amortization, depreciation or capital allowances) and
Property Taxes shall be prorated on a daily basis, (ii)
transfers and transactions (including Taxes attributable
thereto) which occur to effectuate the Spinoffs or the
Merger shall be allocated to the Pre-Merger Tax Period, and
(iii) if the effective date of the Merger occurs on a date
other than the first day of a fiscal month of the Company,
all income, deductions and other items for such month (other
than amounts attributable to transactions not in the
ordinary course of business and other than closing
adjustments and other similar adjustments) will be prorated
on a daily basis. Any adjustments made by any Taxing
authority shall be allocated in accordance with the
principles of this Section 4(b).
(c) Without limiting the foregoing provisions of
this Section 4 setting forth the principles for allocating
income, gain, loss, deduction, credits, events or transfers
between Pre-Merger and Post-Merger Tax Periods, and any
Straddle Period, New Holdings, Parent, and the Company shall
file, or cause to be filed, all relevant Tax returns and
execute, or cause to be executed, such other documents as
may be required by any Taxing authority, on the basis that
the Spinoffs and the Merger shall occur for Tax purposes as
of the close of business on the day before the effective
date of the Merger and refrain from taking any position
inconsistent with such basis with any Taxing authority
unless the relevant Taxing authority will not accept a Tax
return filed on such basis, or unless otherwise required
under applicable law after a final determination thereof.
5. Cooperation. The Company agrees to cooperate
with New Holdings, and will cause each of its subsidiaries
to so cooperate, in a timely manner consistent with existing
practice in filing any return or consent contemplated by
this Agreement. The Company also agrees to take, and will
cause the appropriate subsidiary to take, such action or
actions as New Holdings may reasonably request, including
but not limited to the filing of requests for the extension
of time within which to file tax returns, and to cooperate
in connection with any refund claim with respect to any Pre-
Merger Tax Period. The Company further agrees to furnish
timely, and to cause each of its subsidiaries to so furnish,
New Holdings with any and all information reasonably
requested by New Holdings in order to carry out the
provisions of this Agreement. Without limiting the
generality of the foregoing sentence, the Company
specifically agrees to provide to New Holdings promptly, but
in any event within 10 days of receipt thereof, copies of
any correspondence or notices received from the Internal
Revenue Service or any other Taxing authority with respect
to Taxes of the Affiliated Group for a Pre-Merger Tax
Period. New Holdings agrees to furnish timely to the
Company any and all information requested by the Company in
order to carry out the provisions of this Agreement.
6. Refunds and Carrybacks; Carryforwards. (a)
Any refund or reduction of any Tax that results from any
refund or carryback of a loss, credit or
<PAGE>6
similar item of the Company arising from or attributable to
a Pre-Merger Tax Period to a Taxable period beginning prior
to the effective date of the Merger shall be for the account
of New Holdings. The Company shall, promptly upon receipt
by the Company, pay to New Holdings any such refund or
reduction (whether payable pursuant to a Consolidated Return
or not) together with any interest relating thereto at the
Federal statutory rate used by the Internal Revenue Service
or the relevant Taxing authority in computing the interest
payable by or to it, regardless of whether such refund is
attributable to a carryback, adjustment or any other factor.
The Company's obligations under this Section 6(a) shall be
limited to amounts (including interest) actually received by
the Company with respect to such refund. A refund or
reduction will be considered to have been received by the
Company or its affiliate (i) to the extent that the amount
of Taxes such person would be required to pay but for such
refund or carryback is reduced, or the amount of a Tax
refund such person would receive but for such refund or
carryback is increased and (ii) at the time a Tax payment or
refund referred to in clause (i) is actually paid or
received, as the case may be, by the Company or its then
existing affiliates. New Holdings and its direct and
indirect subsidiaries shall reimburse Company for any
payment (including any expenses, interest or penalties
related thereto) made by Company under this Section 6(a)
promptly upon a determination that the refund or reduction
to which such payment relates was erroneous.
(b) Any refund or reduction of any Tax that
results from any carryforward of a loss, credit or similar
item of the Company from a Taxable period beginning prior to
the effective date of the Merger to a Taxable period
beginning on or after the effective date of the Merger shall
be for the account of New Holdings. In the event the
Company, USTNY or any subsidiary of the Company that was a
member of the Affiliated Group for a Pre-Merger Tax Period
carries forward such loss, credit or similar item from a
Pre-Merger Tax Period to a taxable period ending after the
date of the Merger, the Company shall pay to New Holdings
the Tax benefit attributable to such carryforward as and
when such Tax benefit is realized. In computing the amount
of any such refund or reduction of Tax, the Company or its
affiliate will be deemed to recognize all items of income,
gain, loss, reduction or credit before recognizing any item
so carried forward. A refund or reduction will be
considered to have been received by the Company or its
affiliate (i) to the extent that the amount of Taxes such
person would be required to pay but for such carryforward is
reduced, or the amount of a Tax refund such person would
receive but for such carryforward is increased and (ii) at
the time a Tax payment or refund referred to in clause (i)
is actually paid or received, as the case may be, by the
Company or its affiliates. Such amount shall be paid by the
Company to New Holdings within five business days of a
written request therefor by New Holdings, which request
shall set forth in reasonable detail the computation of such
amount and the date such Tax benefit was received. New
Holdings and its direct and indirect subsidiaries shall
reimburse Company for any payment (including any expenses,
interest or penalties related thereto) made by Company under
this Section 6(b) promptly upon a determination that the
refund or reduction to which such payment relates was
erroneous.
(c) To the extent Parent reasonably determines
that any refund or reduction received by Company or its
direct or indirect subsidiaries which is payable to New
Holdings under this Section 6 is based on a position that is
likely to be successfully challenged by Taxing authorities,
Company shall have the right to
<PAGE>7
require New Holdings to secure its reimbursement obligation
in a manner and for a term reasonably satisfactory to
Parent; provided, further, Company's obligations hereunder
to pay such refund to New Holdings shall be conditioned upon
the prior receipt of such security. Provided, however, if
the amount Company or its direct or indirect subsidiaries
must pay to any Taxing authority with respect to any such
refund or reduction exceeds the amount of security, if any,
provided the Company pursuant to this Section 6(c), New
Holdings shall pay such excess to the Company as provided in
Sections 6(a) or 6(b), as applicable.
7. Contests. (a) Except as provided below, in
the event that any deficiencies or refund claims arise with
respect to a Tax liability of the Affiliated Group for a
Pre-Merger Tax Period, New Holdings shall control all
proceedings with respect thereto. In the event that any
issue or issues are raised during such proceedings that may
result, directly or indirectly, in deficiencies or refund
claims related to Taxes that would be required to be paid by
the Company pursuant to Section 1 hereof, both New Holdings
and Parent agree and acknowledge that the contest of any
such issue or issues shall be conducted jointly; provided,
however, all major decisions regarding the conduct of such
contest shall be made by Parent. New Holdings' right to
indemnity hereunder shall be conditioned on New Holdings'
compliance with Section 4 of the Post-Closing Covenants
Agreement except that New Holdings' shall be required to
give notice to Parent under Section 4 of the Post-Closing
Covenants Agreement upon the receipt of oral or written
notice by New Holdings from any governmental authority or
agent thereof of an issue that may result in Taxes for which
a claim for indemnity from Parent, Company or USTNY may be
made under this Agreement.
(b) New Holdings and the Company agree to
cooperate in all reasonable respects with respect to Tax
deficiencies or refund claims described in Sections 6(a) and
(b), which cooperation shall include executing and filing
such waivers, consents, forms, court petitions, refund
claims, complaints, powers of attorney and other documents
needed from time to time in order to defend, prosecute or
resolve such deficiencies or claims.
8. Computations. Other than determinations of
whether there are any indemnity obligations under this
Agreement, all computations or recomputations of Tax
liability and all determinations, computations or
recomputations of any amount or any payment (including, but
not limited to, computations of the amount of the Tax
liability, the amount or effect of any loss, credit or
deduction, the effect of a Federal statutory Tax rate change
for a Taxable year, and the amount of any interest,
penalties or additions imposed with respect to any Tax)
shall be prepared by New Holdings and submitted to Parent
for its written approval. Any disagreement as to such
computations after submission to the Parent by New Holdings
shall be resolved by a nationally recognized accounting
firm, with expertise in Tax, independent of each of the
parties hereto. Without limiting the foregoing, New
Holdings shall calculate the Taxable income of the
Affiliated Group in accordance with the existing and
historic methodology used by the Affiliated Group in
calculating Taxable income of the Affiliated Group and
submit such calculation to the Parent in accordance with the
provisions of this Section 8.
<PAGE>8
9. Offsets. No payment shall be required to be
made by either party to the other pursuant to this Agreement
to the extent that there is an amount then due and payable
under this Agreement to the party that is to make such
payment.
10. 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 any of the parties without the prior written
consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and
their respective successors and assigns.
11. Survival. The provisions of this Agreement
shall survive the effective date of the Merger and remain in
full force until all periods of limitations, including any
extensions or waiver periods, for all Taxable periods of the
Company and New Holdings prior to or including the effective
date of the Merger have expired.
12. Notices. Any notices, payments or other
communications required by this Agreement shall be made as
provided in the Section 8.2 of the Merger Agreement;
however, copies of such notices, payments or other
communications shall, for both New Holdings and the Company,
be sent to the attention of the Director of Taxes.
13. Governing Law. The principles and provisions
of Section 8.7 of the Merger Agreement shall apply to this
Agreement.
14. Entire Agreement. This Agreement (a)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this
Agreement and (b) is not intended to confer upon any person
other than the parties hereto any rights or remedies. The
parties agree that to the extent the provisions of any other
agreements executed in connection with the Spinoffs or the
Merger are inconsistent with the provisions hereof, the
provisions of this Agreement shall prevail.
15. Counterparts. The principles and provisions
of Section 8.5 of the Merger Agreement shall apply to this
Agreement.
16. Severability. If any provision of this
Agreement or the application of any such provision to any
person or circumstances shall be held invalid, illegal or
unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision
hereof.
17. Headings. Headings of sections in this
Agreement are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
18. Definitions. Any capitalized term not
defined in this Agreement shall have the meaning given to
such term by the Contribution and Assumption Agreement, the
Agreement and Plan of Distribution or the Merger Agreement.
<PAGE>9
[Remained of page intentionally left blank]
<PAGE>10
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
U.S. TRUST CORPORATION
By:
-------------------------
Name:
Title:
[NEW HOLDINGS]
By:
--------------------------
Name:
Title:
THE CHASE MANHATTAN
CORPORATION,
By:
--------------------------
Name:
Title:
EXHIBIT VI
to Merger Agreement
POST CLOSING COVENANTS
AGREEMENT
Dated as of _________________ __, 1995
among
THE CHASE MANHATTAN CORPORATION,
U.S. TRUST CORPORATION,
[OLD UNITED STATES TRUST COMPANY OF NEW YORK],
[NEW U.S. TRUST CORPORATION]
and
[NEW UNITED STATES TRUST COMPANY OF NEW YORK]
<PAGE>2
POST CLOSING COVENANTS AGREEMENT dated as of
_________ ___, 1995 (the "Agreement"), among THE CHASE
MANHATTAN CORPORATION, a Delaware corporation ("CMC"), U.S.
TRUST CORPORATION, a New York corporation (the "Company"),
[OLD UNITED STATES TRUST COMPANY OF NEW YORK], a New York
State chartered bank and trust company ("Old USTNY"), [NEW
U.S. TRUST CORPORATION], a New York corporation ("New
Holdings") and [NEW UNITED STATES TRUST COMPANY OF NEW
YORK], a New York State chartered bank and trust company and
wholly owned subsidiary of New Holdings ("New Trustco").
R E C I T A L S
WHEREAS, New Holdings and New Trustco are,
concurrently with the execution of this Agreement, entering
into an Agreement and Plan of Distribution dated as of the
date hereof ("Distribution Agreement");
WHEREAS, Old USTNY and New Trustco are,
concurrently with the execution of this Agreement, entering
into a Contribution and Assumption Agreement dated as of the
date hereof ("Contribution Agreement");
WHEREAS, the consummation of the transactions
contemplated by the Distribution Agreement and the
Contribution Agreement is a condition precedent of the
Merger (as defined below);
WHEREAS, CMC and the Company have entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated
as of November 18, 1994, providing, upon the terms and
subject to the conditions contained therein, for the merger
(the "Merger") of the Company with and into CMC immediately
after the consummation of the Contribution and the
Distribution;
WHEREAS, the execution and delivery of this
Agreement by the parties hereto is a condition to the
willingness of the parties to the Contribution Agreement,
the Distribution Agreement and the Merger Agreement to
consummate the Contribution, the Distribution and the
Merger;
WHEREAS, CMC desires to enter into this Agreement
in consideration for, among other things, the satisfaction
of the aforementioned conditions to the Merger; and
WHEREAS, the parties to this Agreement have
determined that it is necessary and desirable to set forth
certain agreements that will govern various indemnity
matters and other matters that may arise following the
Distribution and the Merger.
<PAGE>3
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this
Agreement, and the above recited consideration and other
good and valuable consideration, the parties hereto agree as
follows:
SECTION 1. Definitions. Capitalized terms used in
this Agreement without definitions will have the meanings
ascribed to such terms in the Merger Agreement, and
accounting terms used herein and accounting determinations
made hereunder will be used or made as provided in the
Merger Agreement. The following terms shall have the
following definitions:
"Accounting and Valuation Services" shall have the
meaning assigned to such term in Section 7.
"Administration Services" shall have the meaning
assigned to such term in Section 7.
"Chase Parties" means CMC, the Company and Old
USTNY.
"Company Employees" means all employees of Old
USTNY and its affiliates prior to the Effective Time.
"Custody Services" shall have the meaning assigned
to such term in Section 7.
"Indemnified Party" shall have the meaning
assigned to such term in Section 4.
"Indemnifying Party" shall have the meaning
assigned to such term in Section 4.
"Losses" means any liabilities, claims, actions,
suits, proceedings, judgments, losses, damages,
deficiencies and expenses (including reasonable
attorney's fees and expenses of investigation).
"New UST Parties" means New Holdings and New
Trustco.
"Third Party Claim" shall have the meaning
assigned to such term in Section 4.
"Transfer Agent Services" shall have the meaning
assigned to such term in Section 7.
<PAGE>4
"Trust Services" shall have the meaning assigned
to such term in Section 7.
SECTION 2. Indemnification.
(a) From and after the Effective Time, New
Holdings agrees to indemnify and hold harmless the Chase
Parties and their respective directors, officers, employees,
affiliates, agents and assigns, as applicable, against any
and all Losses, as incurred, for or on account of or arising
from or in connection with or otherwise with respect to:
(i) any breach of or any inaccuracy in any
representation or warranty of any of the New UST
Parties, the Company, Old USTNY and their subsidiaries
contained in any of the Documents;
(ii) any breach or nonperformance of any covenant
of (A) the New UST Parties or any of their subsidiaries
contained in the Documents whether to be performed
before or after the Effective Time or (B) the Company
or Old USTNY or any of their subsidiaries contained in
the Documents to be performed prior to the Effective
Time;
(iii) any Acquired Asset or Assumed Liability
(each as defined in the Contribution Agreement and the
Distribution Agreement);
(iv) any Delayed Asset or Delayed Liability (each
as defined in the Contribution Agreement);
(v) any regulatory or compliance violation that
arises out of events, actions or omissions to act of
the Company or Old USTNY occurring prior to the
Effective Time and adversely affects a Customer account
or any entity that has an interest in such Customer
account;
(vi) except for the Retained Liabilities and
actions relating to the Processing Business, claims of
any shareholders, directors, officers, employees or
agents of the Company and its subsidiaries arising from
the execution by the Company or Old USTNY of the
Documents and the consummation after the Effective Time
of transactions in accordance with the terms of the
Documents;
(vii) any untrue statement or alleged untrue
statement of any material fact contained in the Proxy
Statement, the Registration Statement or any amendment
or supplement thereto, or any omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading; but only in each
<PAGE>5
case to the extent based upon information with respect
to the New UST Parties, the Company or Old USTNY
furnished in writing by or on behalf of the New UST
Parties, or at any time prior to the Effective Time,
the Company or Old USTNY, expressly for use in the
Proxy Statement, the Registration Statement or any
amendment or supplement thereto; and
(viii) any liability arising (A) from a claim
to enforce, or to recover tort liability arising out
of, any federal, state or local law, rule or regulation
relating to the protection of the environment with
respect to any facility, site, location or business
(whether past or present and whether active or
inactive) owned, operated or leased by the Company or
Old USTNY or any of their subsidiaries prior to the
Effective Date and (B) as a result of conditions
existing during or prior to the period of time such
facility, site, location or business was owned,
operated or leased by the Company or Old USTNY or any
of their subsidiaries.
(b) From and after the Effective Time, New
Trustco agrees to indemnify and hold harmless the Chase
Parties and their respective directors, officers, employees,
affiliates, agents and assigns, as applicable, against any
and all Losses, as incurred, for or on account of or arising
from or in connection with or otherwise with respect to:
(i) any breach of or any inaccuracy in any
representation or warranty of New Trustco or Old USTNY
and their subsidiaries contained in any of the
Documents;
(ii) any breach or nonperformance of any covenant
of (A) New Trustco contained in the Documents whether
to be performed before or after the Effective Time or
(B) Old USTNY contained in the Documents to be
performed prior to the Effective Time;
(iii) any Acquired Asset or Assumed Liability
(each as defined in the Contribution Agreement);
(iv) any Delayed Asset or Delayed Liability (each
as defined in the Contribution Agreement);
(v) any regulatory or compliance violation that
arises out of events, actions or omissions to act of
Old USTNY occurring prior to the Effective Time and
adversely affecting a Customer account or any entity
with an interest in such Customer account; and
<PAGE>6
(vi) any liability arising (A) from a claim to
enforce, or to recover tort liability arising out of,
any federal, state or local law, rule or regulation
relating to the protection of the environment with
respect to any facility, site, location or business
(whether past or present and whether active or
inactive) owned, operated or leased by Old USTNY prior
to the Effective Date and (B) as a result of conditions
existing during or prior to the period of time such
facility, site, location or business was owned,
operated or leased by Old USTNY.
(c) CMC agrees to indemnify and hold harmless the
New UST Parties from any and all Losses, as incurred, for or
on account of or arising from or in connection with or
otherwise with respect to:
(i) any breach of or inaccuracy in any
representation or warranty of any of CMC contained in
any of the Documents;
(ii) any breach or nonperformance of any covenant
of (A) CMC or contained in the Documents whether to be
performed before or after the Effective Time or (B) the
Company or Old USTNY or any of their subsidiaries
contained in the Documents to be performed after the
Effective Time;
(iii) except for Losses as to which any of the
Chase Parties are entitled to indemnification pursuant
to the terms of Section 2(a) hereof, any Retained Asset
or any Retained Liability (each as defined in the
Contribution Agreement and the Distribution Agreement);
and
(iv) any untrue statement or alleged untrue
statement of any material fact contained in the Proxy
Statement, the Registration Statement or any amendment
or supplement thereto, or any omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading; but only in each case to the
extent based upon information with respect to the Chase
Parties furnished in writing by or on behalf of CMC or,
at any time after the Effective Time, the Company or
Old USTNY, expressly for use in the Proxy Statement,
the Registration Statement or any amendment or
supplement thereto.
(d) Old USTNY agrees to indemnify and hold
harmless the New UST Parties from any and all Losses, as
incurred, for or on account of or arising from or in
connection with or otherwise with respect to:
(i) any breach or nonperformance of any covenant
of Old USTNY contained in the Documents to be performed
after the Effective Time; and
<PAGE>7
(ii) except for Losses as to which any of the
Chase Parties are entitled to indemnification pursuant
to the terms of Section 2(a) hereof, any Retained Asset
or any Retained Liability (each as defined in the
Contribution Agreement).
SECTION 3. Termination of Indemnification. The
obligations to indemnify and hold harmless any party
(a) pursuant to Sections 2(a)(i), 2(b)(i) and 2(c)(i) shall
terminate on the second anniversary of the date hereof,
(b) pursuant to Sections 2(a)(v) and 2(b)(v) shall terminate
on the first anniversary of the date hereof and (c) pursuant
to the other clauses of Sections 2(a), 2(b) and 2(c) and
clause 2(d) shall not terminate; provided, however, that
such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to
be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a
notice (pursuant to Section 4 hereof in the case of Third
Party Claims) specifically identifying such claim to the
party providing the indemnification.
SECTION 4. Procedure. (a) Any party seeking any
indemnification provided for under this Agreement (the
"Indemnified Party") in respect of, arising out of or
involving a claim made by any person against the Indemnified
Party (a "Third Party Claim"), shall notify in writing (and
to the extent received, deliver copies of all related
notices and documents (including court papers) to) the party
from whom indemnification is sought (the "Indemnifying
Party") of the Third Party Claim within fifteen Business
Days after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a
result of such failure (except that the Indemnifying Party
shall not be liable for any expenses incurred during the
period in which the Indemnified Party failed to give such
notice if such Indemnified Party failed to give such notice
within the allotted fifteen Business Days). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party,
within five Business Days' time after the Indemnified
Party's receipt thereof, copies of all other notices and
documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an
Indemnified Party, the Indemnifying Party shall be entitled
to participate in the defense thereof and, if it so chooses
(except as provided in Section 4(c)), to assume the defense
thereof with experienced counsel selected by the
Indemnifying Party and reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses (except as provided below and
in Section 4(c)) subsequently incurred by the Indemnified
Party in connection with the defense thereof.
Notwithstanding the Indemnifying Party's election to assume
the defense of such Third Party Claim, the Indemnified Party
shall have the right to
<PAGE>8
employ separate counsel and to participate in the defense of
such action at its own expense; provided, however, that the
Indemnifying Party shall bear the reasonable fees, costs,
and expenses of such separate counsel if (i) the use of
counsel chosen by the Indemnifying Party to represent the
Indemnified Party would present such counsel with a conflict
of interest that would preclude such counsel from
representing the Indemnified Party pursuant to legal canons
of ethics or other applicable law; (ii) the Indemnifying
Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent it within
30 days after notice to the Indemnifying Party of the
institution of such Third Party Claim; or (iii) the
Indemnifying Party shall authorize the Indemnified Party to
employ separate counsel at the Indemnifying Party's expense.
If the Indemnifying Party chooses to defend or prosecute a
Third Party Claim, each party hereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's
request) the provision to the Indemnifying Party of records
and information which are reasonably relevant to such Third
Party Claim, and making employees available (subject to
reimbursement by the Indemnifying Party of actual expenses
incurred therewith) on a mutually convenient basis to
provide additional information and explanation of any
material provided hereunder. If the Indemnifying Party
chooses to defend or prosecute any Third Party Claim, the
Indemnified Party shall agree to any settlement, compromise
or discharge of such Third Party Claim which the
Indemnifying Party may recommend and which by its terms
obligates the Indemnifying Party to pay the full amount of
the liability in connection with such Third Party Claim and
releases the Indemnified Party completely in connection with
such Third Party Claim. Whether or not the Indemnifying
Party shall have assumed the defense of a Third Party Claim,
so long as the Indemnifying Party acknowledges in writing
its obligation to indemnify the Indemnified Party with
respect to the applicable claims, the Indemnified Party
shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent, which consent
may not be withheld unless, in the Indemnifying Party's
good-faith judgment, such settlement, compromise or
discharge is unreasonable in light of such Third Party Claim
against, and defenses available to, the Indemnified Party.
(c) Notwithstanding anything set forth in
Section 4(b) to the contrary, in the event an Indemnified
Party reasonably believes and so notifies the Indemnifying
Party in writing that the applicable claim, even if fully
indemnified for, is reasonably likely to have a material
adverse effect on the Indemnified Party's business,
financial condition or results of operations, then the
Indemnifying party shall not have the right to assume the
defense of such claim but shall have the right to employ
separate counsel and to participate in the defense of such
action at its own expense. In such an event, the
Indemnified Party and its counsel shall consult, wherever
reasonably practicable, with the Indemnifying Party and its
counsel with respect to the status of the claim and any
related litigation.
<PAGE>9
SECTION 5. Limitation on Indemnification.
Notwithstanding anything herein to the contrary, neither the
New UST Parties nor CMC or Old USTNY shall have any
liability pursuant to Sections 2(a) and 2(b) or 2(c) and
2(d), respectively, unless the aggregate amount of all
Losses relating thereto exceeds on a cumulative basis an
amount equal to $500,000 (the "Deductible Amount"), and then
only to the extent of any such excess; provided, however,
that any Loss arising from a single indemnification claim
(including any single Third Party Claim) in an amount
greater than $50,000 shall not be subject to the limitation
of this Section 5 and shall be excluded from the
determination of the Deductible Amount; provided further,
however, that amounts to be indemnified pursuant to
Section 2.3 of the Contribution Agreement and Section 4.4 of
the Distribution Agreement shall not be subject to the
limitation of this Section 5 and shall be excluded from the
determination of the Deductible Amount. In no event shall
any party be entitled to indemnification for any Loss
pursuant to Section 2 to the extent such party has been
indemnified for such Loss pursuant to any other Document.
SECTION 6. Minimum Net Worth. Until the later of
(a) three years from the date hereof or (b) the date when
the applicable statutes of limitations with respect to all
Federal income tax liabilities of the Company for periods
ending prior to or on the Closing Date have run, New
Holdings shall (i) as of any date of determination, maintain
consolidated shareholders' equity of not less than the
lesser of (x) $150,000,000 and (y) the greater of (1) 95% of
the consolidated shareholders' equity of New Holdings at
January 1, 1996, and (2) the sum of (A) $135,000,000 plus,
(B) on and after January 1, 1997, the product of
(1) $7,500,000 multiplied by (2) the number of the most
recent preceding anniversary of December 31, 1995, and
(ii) be a "well capitalized" bank holding company within the
meaning of the regulations of the Board of Governors of the
Federal Reserve System (as in effect on the date hereof);
except that, so long as its Tier 1 capital leverage ratio
(determined in accordance with regulations in effect on the
date hereof) is 4.5% or above, New Holdings shall not be
deemed to be less than well capitalized solely because its
Tier 1 capital leverage ratio is less than 5%.
SECTION 7. Noncompetition and Nonsolicitation;
Proprietary Information.
(a) Until the fourth anniversary of the Effective
Time, neither New Holdings nor any subsidiary or Affiliate
of New Holdings shall (i) in any way, directly or
indirectly, engage in the Processing Business in the United
States or Canada, or own, manage, operate, control or have
an interest greater than 5% of the voting stock or 25% of
the total equity in any enterprise which engages, directly
or indirectly, in the Processing Business in the United
States or Canada; provided, however, that nothing contained
herein shall prohibit New Holdings or any subsidiary or
Affiliate of New Holdings from directly or indirectly
acquiring a corporation or other entity or affiliated group
of corporations or other entities that is engaged in the
Processing Business (an "Acquired Person") so long as
<PAGE>10
during the twelve month period ending on the last day of the
month immediately preceding the month of such acquisition,
revenues earned from the Processing Business by such
Acquired Person constituted no more than 15% of the
aggregate revenues of such Acquired Person; provided,
however, than an Acquired Person shall be subject to this
Section 6 only with respect to customers of such Acquired
Person who were not customers on the date immediately
preceding the date such Acquired Person became an Affiliate
of New Holdings; (ii) provide any Customer or Institutional
Client with any of the following items in connection with
any assets held in custody or safekeeping by CMC or any
Affiliate, except as provided in the Services Agreement:
(1) securities lending and investment of related collateral,
(2) securities and commodities clearing services, or (3)
foreign exchange services; or (iii) provide any Customer
with any of the following items in connection with any
assets with respect to which CMC or any Affiliate provides
Processing Services: (1) cash balance sweep services,
(2) except with respect to assets for which New Holdings or
any subsidiary exercises investment management for Customers
listed on Schedule 7.1, Cash Management, or (3) extensions
of credit to investment companies and other commingled
investment funds.
(b) Until the third anniversary of the Effective
Time, except as provided in Section 5.8 of the Merger
Agreement, neither New Holdings nor any of its subsidiaries
will solicit for employment any person who is, or after the
Effective Time will be, a Retained Employee (other than a
Retained Employee whose employment with CMC and its
Affiliates or any successor thereto has been terminated or
who has been given notice of termination) or seek to
persuade any such Retained Employee to discontinue his or
her employment with CMC or any of its subsidiaries.
(c) From and after the Effective Time, except as
required by law, neither New Holdings nor any subsidiary nor
any of their respective representatives shall, at any time,
make use of, divulge or otherwise disclose, directly or
indirectly, any trade secret, confidential information or
other proprietary data (including any customer list,
employee data, record or financial information constituting
a trade secret) concerning the Processing Business and the
Related Back Office including, without limitation, the
business or policies of Old USTNY and the Company or any of
their respective subsidiaries, other than information that
is an Acquired Asset or a Delayed Asset; provided, however,
that nothing in the foregoing shall preclude New Holdings or
any subsidiary or Affiliate from providing any of the
services not specifically prohibited herein or from engaging
in the Processing Business from and after the fourth
anniversary of the Effective Time.
(d) In the event that there is a direct or
indirect Change of Control, New Holdings and New Trustco
shall cease to be bound by Section 7(a), and upon six months
notice by CMC, CMC may treat such Change of Control as a
termination of the Services Agreement by New Trustco and
cease providing Processing Services under the Services
Agreement on or after six months after the Change of
Control.
<PAGE>11
(e) Notwithstanding any other provision of this
Agreement, it is understood and agreed that the remedy of
indemnity payments pursuant to Section 2 and other remedies
at law would be inadequate in the case of any breach of the
covenants contained in Sections 7(a), 7(b), and 7(c) and
each of New Holdings and New Trustco agrees that each of
CMC, CMB and the Company shall be entitled to equitable
relief, including the remedy of specific performance, with
respect to any breach or attempted breach of such covenants.
(f) For the purposes of this Section 7:
"Accounting and Valuation Services" shall mean all
portfolio accounting and valuation services including
but not limited to the financial and tax recordkeeping
related to income, disbursements, corporate actions,
interest, dividends and expense of customers, including
the calculation of total assets, net assets, net asset
value per share or unit, the preparation of financial
statements and related functions.
"Administration Services" shall mean any or all of
the following: (i) the maintenance of corporate, trust
or partnership books and records, including Accounting
and Valuation Services and Transfer Agent Services,
(ii) the preparation of required regulatory filings and
reports and payments of required governmental fees and
expenses, (iii) the preparation and filing of tax
returns, (iv) overseeing the determination of net asset
value calculations, (v) arranging for and supervising
payments of expenses, (vi) the preparation of financial
statements, (vii) the provision of legal and regulatory
compliance services and supervision of regulatory and
compliance matters, including without limitation the
preparation and filing of registration statements and
disclosure documents required by federal or state law,
(viii) the preparation of annual and semiannual reports
and other shareholder communications, and (ix)
corporate secretary and treasury services.
"Asset and Investment Management Business" shall
mean the asset and investment management business of
USTNY and its Affiliates ("AIM"), as conducted in the
case of USTNY by its Asset Management Group, which
includes administration of personal and Family trusts
and estates, estate planning services, providing
Special Fiduciary Services, broker-dealer services,
custody services with respect to assets managed by AIM,
providing tax services and financial counseling and
acting as a discretionary trustee or an investment
manager for stocks, bonds, separately managed or pooled
accounts, common trust funds and other financial assets
for individuals and entities including without
limitation, mutual funds, institutions and employee
benefit plans.
"Bundled Services" shall mean the provision of
Administration Services, Custody Services or Trust
Services as included services, and without separate
charge,
<PAGE>12
together with the exercise of Substantial Management
Discretion over 50% or more of the investible assets in
the account for which such included services are
provided.
"Cash Management" shall mean short term investment
management of uninvested cash balances in instruments
or vehicles having an average maturity of 180 days or
less, including without limitation STIFs or money
market funds.
"Change of Control" shall mean any direct or
indirect acquisition of New Holdings or New Trustco by
any other institution, including without limitation, a
merger of New Holdings or New Trustco with an
unaffiliated institution (or any Affiliate of such
institution) having total assets of $2 billion or more
or shareholders' equity of $200 million or more.
"Corporate Trust and Agency Business" shall mean
corporate trust and agency business of USTNY and its
Affiliates, which includes acting as trustee for the
holders of interests representing obligations under
bonds, debentures, leases, structured obligations,
derivative and asset-backed securities, and voting
trusts, acting as registrar, tender agent, voting
trustee, solicitation agent, drawing agent,
authenticating agent, warrant agent, paying agent,
issuing agent, depositary or exchange agent for cash,
securities or other property (other than registered
Investment Company securities), acting as fiscal agent
under public bond resolutions, acting as an escrow
agent, transfer agent or collateral agent for public
and private corporations, partnerships (but not
registered Investment Companies) and municipalities and
acting as bond immobilization agent.
"Custody Services" shall mean the provision of
custodial trustee, safekeeping and related services to
clients with respect to their cash, securities or other
assets, including (i) custody and safekeeping of
assets, (ii) settlement of securities and asset
transactions and reporting thereof, (iii) determination
and collection of income and entitlements on securities
and other assets, (iv) making cash disbursements and
reporting cash transactions, (v) maintenance of
investment ledgers and position and income reports,
including account ledgers, statements of account, asset
status lists and investment reviews, (vi) cash balance
sweep services, (vii) securities lending and investment
of related collateral, (viii) securities and
commodities clearing services, (ix) foreign exchange
services, and (x) extensions of credit to (1)
Investment Companies for leverage and 12b-1 financing
and (2) other commingled investment funds.
"Family" shall mean an individual or group of
individuals related by blood, marriage, or similar
relationships.
<PAGE>13
"Family Office" shall mean any corporation, trust,
partnership or other entity established and operated
exclusively to manage, or as a vehicle for the common
management of, the assets or affairs of a Family. A
"Family Office" may include foundations or endowments,
provided that when aggregated, all such foundations and
endowments shall constitute less than 50% of: (i) the
investible assets of the Family Office and (ii) the
investible assets of Family Members under the
management of New Holdings or any subsidiary or
Affiliate of New Holdings. "Family Office" shall also
include any employee benefit plan trust maintained
exclusively for the benefit of Family retainers and
employees of the Family Office.
"Family Trust" shall mean any trust for the
benefit of an individual or Family.
"Institutional Client" shall mean any corporation,
trust, foundation, endowment, limited liability
company, partnership or similar entity having
investible assets of $50 million or more, other than a
Family Office.
"Private Banking Business" shall mean the private
banking business of USTNY and its Affiliates which
includes the provision of a full range of commercial
banking and fiduciary services to individuals,
Families, Family Offices, partnerships and other
entities. Services and products provided by the
Private Banking Business, include checking accounts,
money market accounts, certificates of deposit, secured
and unsecured loans, mortgage loans, lines of credit,
letters of credit, custody and securities
administration services, secured broker loans and Cash
Management services offered to securities industry
participants and financial institutions (other than
Customers).
"Processing Business" shall mean the business of
providing Administration Services, Custody Services,
or Trust Services; provided, however, that the term
"Processing Business" shall not include any services
that would, but for this proviso, constitute
"Processing Business," to the extent such services are
provided in connection with any of the following: (1)
any relationship listed in Schedule 7.2; (2) assets
with respect to which New Holdings or any subsidiary or
Affiliate of New Holdings exercises investment
management; (3) individuals, estates, Family Trusts or
Family Offices; (4) any corporation, limited liability
company, trust, partnership, foundation or endowment or
other entity having, at the time of the acceptance of
the relationship, investible assets of less than $50
million or, at any time the services are provided other
than as Bundled Services, investible assets of less
than $100 million; (5) any collective investment trust
maintained exclusively by New Trustco or another bank
or trust company Affiliate; (6) the Corporate Trust and
Agency Business of New Holdings, New Trustco or any of
their Affiliates, (7) subject to clause (4) above, the
<PAGE>14
AIM Business; (8) subject to clause (4) above, the
Private Banking Business, (9) any service provided to
New Holdings or a subsidiary or Affiliate of New
Holdings for its own account or (10) any relationship
for which CMC serves as subcustodian to New Holdings or
any subsidiary or Affiliate of New Holdings (other than
pursuant to the Services Agreement). Except as
expressly provided, the foregoing clauses (1) through
(10) operate independently and none shall be deemed to
limit the other.
"Special Fiduciary Services" shall mean any
special appointment to act as trustee or as fiduciary
with respect to employer or employer-related securities
in which the trustee or fiduciary is appointed for the
express purpose of making a special investment or
voting decision or other discretionary decisions with
respect to plan asset.
"Substantial Management Discretion" shall mean the
actual management of investible assets, directly or
through a subadvisor, whether or not the manager
exercises final decision-making power over assets.
"Transfer Agent Services" shall mean any or all of
the services, functions or activities of a transfer
agent, as defined in Section 3(a)(25) of the Exchange
Act, including but not limited to the functions of
dividend disbursing agent, registrar, and shareholder
liaison functions, and (i) the maintenance, updating
and operating of shareholder or equivalent ownership of
shares, units or partnership interests in such
accounts, (ii) the preparation and input of all orders
for purchases, exchanges, redemptions and transfers and
any reconciliations, settlements and mailings relating
thereto, (iii) responding to inquiries from existing
and prospective shareholders, unitholders or partners,
(iv) reconciling all internal accounts, such as
incoming cash and settlement wires, (v) tax
preparation, materials or reports for shareholders,
unitholders or partners (but not Investment Companies),
and reporting and compliance in connection therewith,
(vi) record-keeping for shareholders, unitholders or
partners in accordance with applicable law, rules and
regulations, and (vii) other services customarily
performed by a transfer agent.
"Trust Services" shall mean services provided as a
trustee or custodian consisting of the provision of
safekeeping and related services to clients with
respect to their cash, securities or other assets,
including the services denoted under "Custody Services"
above, and the following: (i) portfolio accounting
services including but not limited to financial and tax
recordkeeping, (ii) preparation of required regulatory
filings and reports, (iii) provision of performance
measurement and analytical services, including the
on-line delivery thereof, and (iv) benefit payments and
participant recordkeeping.
<PAGE>15
SECTION 8. Other Agreements. (a) Old USTNY
acknowledges that certain Customer Agreements (as defined in
the Contribution Agreement) of the IAS Business (as defined
in the Contribution Agreement) for Cash Management Services
relating to collective investment vehicles that will be
maintained or advised by New Trustco are part of the
Retained Assets (as defined in the Contribution Agreement).
In each such instance, New Trustco shall use its best
efforts to have the relevant Customers (as defined in the
Contribution Agreement) of the IAS Business enter into
agreements with New USTNY in order to transfer the money
management relationship of such Customers to New USTNY.
(b) From and after the Closing Date, Old USTNY
shall use its best efforts to assist New Trustco in the
collection of the Transferred Processing Receivables (as
defined in the Contribution Agreement); provided, however,
that the foregoing shall not require Old USTNY to incur any
actual cost or expense not reimbursed by New Trustco or to
conduct litigation (but Old USTNY shall cooperate in such
ways as may reasonably be requested by New Trustco, at New
Trustco's expense, in connection with any litigation
commenced by New Trustco to collect such Transferred
Processing Receivables).
SECTION 9. Validity. If any provision of this
Agreement should, for any reason whatsoever, be declared
invalid or unenforceable by a court of competent
jurisdiction, the validity or enforcement of the remainder
of the Agreement shall not thereby be adversely affected and
such provision shall be deemed deleted herefrom with
respect, and only with respect, to the operation of such
provision in the particular jurisdiction in which such
adjudication was made; provided, however, that to the extent
any such provision may be made valid and enforceable in such
jurisdiction by limitations on the scope of the activities,
geographical area or time period covered, the parties agree
that such provision instead shall be deemed limited to the
extent, and only to the extent, necessary to make such
provision enforceable to the fullest extent permissible
under the laws and public policies applied in such
jurisdiction, and any court of competent jurisdiction is
hereby authorized to enforce such provision as so limited.
SECTION 10. Notices. Any notice, request,
instruction or other document to be given hereunder by any
party to any other party shall be in writing and shall be
deemed to have been duly given (i) on the first business day
occurring on or after the date of transmission if
transmitted by facsimile (upon confirmation of receipt by
journal or report generated by the facsimile machine of the
party giving such notice), (ii) on the first business day
occurring on or after the date of delivery if delivered
personally or (iii) on the first business day following the
date of dispatch if dispatched by Federal Express or other
next-day courier service. All notices hereunder shall be
given as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to
receive such notice:
<PAGE>16
(i) if to any of the Chase Parties, c/o
The Chase Manhattan Corporation
One Chase Manhattan Plaza
New York, New York 10081
Attention: Robert M. MacAllister
Facsimile Number: (212) 552-4934
with a copy (which shall not constitute
notice) to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attention: William H. Satchell
Facsimile Number: (212) 326-2061
(ii) if to any of the New UST Parties, c/o
U.S. Trust Corporation
114 West 47th Street
New York, New York 10036
Attention: Maureen Scannell Bateman
Facsimile Number: (212) 852-1310
with a copy (which shall not constitute
notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: B. Robbins Kiessling
Facsimile Number: (212) 765-0992
SECTION 11. Books and Records. After the Closing,
upon reasonable written notice, New Trustco and Old USTNY
each shall furnish or cause to be furnished to the other and
their respective accountants, counsel and other
representatives access, during
<PAGE>17
normal business hours, to such information (including books
and records) as is reasonably necessary.
SECTION 12. Expenses. New Holdings and New Trustco
jointly and severally agree to pay all fees and expenses
incurred by Company and Old USTNY and their respective
affiliates in connection with the negotiation and execution
of the Documents and the performance of the transactions
contemplated thereby, other than transactions performed
after the Effective Time.
SECTION 13. Governing Law. This agreement shall be
governed by and construed in accordance with the laws of the
State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of
laws.
SECTION 14. Interpretation. When a reference is
made in this Agreement to a Section, Schedule or Exhibit,
such reference shall be to a Section, Schedule or Exhibit of
this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the
words "included", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". All accounting terms not defined in
this Agreement shall have the meanings determined by
generally accepted accounting principles.
SECTION 15. Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, expressed
or implied, is intended to confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under
or by reason of this Agreement.
SECTION 16. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute
on and the same agreement.
<PAGE>18
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the day and year first
above mentioned.
THE CHASE MANHATTAN
CORPORATION
By:___________________________
Name:
Title:
[OLD UNITED STATES TRUST
COMPANY OF NEW YORK]
By:___________________________
Name:
Title:
[NEW UNITED STATES TRUST
COMPANY OF NEW YORK]
By:___________________________
Name:
Title:
U.S. TRUST CORPORATION
By:___________________________
Name:
Title:
<PAGE>19
[NEW U.S. TRUST CORPORATION]
By:___________________________
Name:
Title:
<PAGE>20
SCHEDULE 7.1
Specified Cash Management Clients
Butler Capital Corp.
United Methodist
New York Hospital Retirement Fund Plan A
Cold Spring Harbor Labs
Saint Barnabas Medical Center
<PAGE>21
SCHEDULE 7.2
Specified Clients and Services
Lafayette College Endowment, Hallmark Cards, Florida Prepaid
College Program, Royce Value Trust Inc., American Capital
Bond Fund, Inc., Trust Company of the West Americas
Development Association, L.P., Excelsior Income Shares, Inc.
and the customers at the Effective Time of the following:
(1) United States Trust Company of the Pacific Northwest
(other than Standard Insurance Company of Oregon), (2)
Securities Industry Banking (lending money overnight on a
secured basis to Banks and Brokerage Firms), and (3) Special
Fiduciary Division of United States Trust Company of
California.
November 18, 1994
SERVICES AGREEMENT TERM SHEET
1. Introduction
The Chase Manhattan Corporation ("Chase") is entering
into an Agreement and Plan of Merger (the "Merger
Agreement") with U.S. Trust Corporation ("UST") under
which Chase will, among other things, acquire certain
portions of UST's processing business through a merger
of UST with Chase or one of its subsidiaries (the
"Merger"). Certain other assets of UST's business not
acquired by Chase will, prior to the Merger, be
transferred by UST to "NEW TRUSTCO."
Chase proposes to provide certain processing and
support services to NEW TRUSTCO and its present and
future affiliates, and it is further intended by Chase
and UST that those Services will be the subject of a
definitive Services Agreement (the "Services
Agreement") to be entered into between the date of the
Merger Agreement (the "Merger Execution Date") and the
closing of the Merger contemplated thereby. The
parties will use all reasonable efforts to finalize the
Services Agreement within 60 days after the Merger
Execution Date.
In the absence of the time needed by the parties to
negotiate fully all the terms and conditions of the
Services Agreement, Chase and UST have agreed to enter
into this Services Agreement Term Sheet (the "Term
Sheet") to evidence their intent to outline the
principal terms and conditions that will be included in
the definitive Services Agreement. In negotiating the
Services Agreement, both parties may suggest or shall
consider such other terms and conditions as they each
in good faith believe are consistent with the Term
Sheet, the Merger Agreement and Post-Closing Covenant
Agreements.
2. Scope of Services
2.1 Chase will provide the following services (the
"Services") to NEW TRUSTCO during the term of the
Services Agreement:
(a) the services described in the appended Attachment
1 entitled "Services Schedule"; and
(b) new or substantially changed products or services
resulting from the evolution or change of NEW
TRUSTCO's business, provided Chase offers or plans
to offer such products or services to other
clients.
It is the parties' intention that Chase will perform
all of the functions which are currently performed by
the UST personnel who are to be transferred to Chase or
whose positions or responsibilities are to be
eliminated as a result of the acquisition even if such
functions are not specifically enumerated on
<PAGE> 2
Attachment 1. In no event shall Chase provide Services
for NEW TRUSTCO's broker dealer services or securities
industry banking or provide Services in respect of any
"back-up servicer" obligations of NEW TRUSTCO or its
Affiliates. During the period of negotiation of the
Services Agreement, Chase will complete its due
diligence of UST's operations, including the functions
to be performed by Chase under the Services Agreement
and UST's budget documents regarding such functions.
If such due diligence discloses that the services
described in Attachment 1 are materially inconsistent
with the services UST has been performing for itself or
with the relevant budget documents, then the parties
will discuss and agree upon equitable adjustments to
the Fixed Fee.
2.2 Chase shall be the exclusive provider of:
(i) securities lending and the investment of related
collateral, (ii) securities and commodities clearing
services and (iii) so long as the pricing is
competitive, foreign exchange services to NEW TRUSTCO's
customers (including institutional clients), except
where a customer requests that NEW TRUSTCO use another
provider for foreign exchange services or securities
and commodities clearing services.
3. Commencement of Services and Term
The Services Agreement will have an initial term (the
"Term") of five years beginning on the Closing Date of
the Acquisition (the "Commencement Date"). NEW TRUSTCO
may extend the initial term on the same terms and
conditions for a further term of five years, subject to
[portion redacted as privileged and confidential].
Alternatively, at the end of the initial term, NEW
TRUSTCO may elect an additional two-year term subject
to [portion redacted as privileged and confidential].
4. Implementation and Transition
4.1 With the cooperation and assistance of NEW TRUSTCO,
Chase will perform the transition and implementation
activities (including systems and other modifications)
which are required for Chase to perform the Services in
a manner that is comparable to the manner in which they
are performed as of the Commencement Date. A service
is provided in a "comparable" manner if it does not (i)
materially adversely impact the functions or operations
of NEW TRUSTCO end users or materially increase NEW
TRUSTCO's costs and (ii) materially adversely impact
the way NEW TRUSTCO's customers are serviced.
4.2 The parties will cooperatively prepare an
implementation plan (the "Implementation Plan")
describing in detail how the transition and
implementation of the Services are to be accomplished.
Implementation procedures will be designed, and
activities will be conducted, so as to facilitate a
smooth transition to the Services provided by Chase.
<PAGE>3
4.3 If the implementation and transition activities are not
completed in sufficient time to enable Chase to provide
all of the Services on and from the Commencement Date
(otherwise than as a result of undue delay or
inactivity by NEW TRUSTCO), then on and from the
Commencement Date, NEW TRUSTCO shall provide the
required operational support pending assumption of the
Services by Chase; and Chase shall reimburse NEW
TRUSTCO for its cost of such support during such
period.
4.4 The parties intend NEW TRUSTCO has the right at any
time, at Chase's cost but only once during the Term, to
migrate to any asset management system used to support
Chase's private banking business.
5. Service Charges
5.1 [portion redacted as privileged and confidential]
5.2 [portion redacted as privileged and confidential]
5.3 [portion redacted as privileged and confidential]
5.4 Additional Charges for Growth and Evolution of
Services:
(a) Growth: Chase will be compensated for growth over
an agreed upon threshold through an additional
volume charge (AVC) methodology. The parties will
measure growth in each of the following business
segments: domestic custody, global custody,
corporate trust and bank services. Growth in
domestic custody will be measured based on the
number of accounts and secondary transactions;
growth in global custody will be measured based on
benchmarks to be agreed to during the negotiation
of the Services Agreement; and growth in corporate
trust and bank services will be measured based on
the number of accounts. A baseline for the
benchmark(s) used for each business segment will
be set forth in the Services Agreement. Each
baseline will include growth at a rate of [portion
redacted as privileged and confidential] per year
over UST's volume as of the Commencement Date.
NEW TRUSTCO will be
<PAGE>4
charged only for volumes above the baseline.
During the negotiation of the Services Agreement,
the parties will determine whether Chase's charges
for above baseline volumes will be based on:
[portion redacted as privileged and confidential].
(b) New Services and Products: NEW TRUSTCO will
compensate Chase for new services/products
requested by NEW TRUSTCO. Charges for new custody
or banking services/products will be based upon
[portion redacted as privileged and confidential].
(c) Computer Resources: In the event that NEW
TRUSTCO requests changes to corporate systems
which Chase is operating solely for NEW
TRUSTCO's benefit and the change increases
the total computer resource utilization for
such systems (after taking into account any
offsetting reductions in resource
utilization) above a benchmark level, NEW
TRUSTCO will be charged for such increased
utilization. [portion redacted as privileged
and confidential].
5.5 Additional Charges for Certain Accounts: Subject to
Section 7 of the Post Closing Covenants Agreement,
Chase will be compensated for Services provided in
respect of accounts established by NEW TRUSTCO or any
present or future Affiliate after the Effective Date
for any corporation, trust (other than a Family Trust),
foundation, endowment, limited liability company,
partnership or other institutional client, including
such accounts that are part of a Family or Family
Office relationship, having assets in excess of
[portion redacted as privileged and confidential].
<PAGE>5
The preceding sentence is not intended to apply to non-
institutional Family Office or individual accounts.
5.6 Acquisitions: In the Event that NEW TRUSTCO or any
subsidiary or Affiliate of NEW TRUSTCO (including its
parent NEW HOLDINGS) directly or indirectly acquires a
corporation or other entity or affiliated group of
corporations or other entities that is engaged in the
Processing Business (as defined in the Contribution and
Assumption Agreement) (an "Acquired Person") and the
revenues earned from the Processing Business by such
Acquired Person during the twelve month period ending
on the last day of the month immediately preceding the
month of such acquisition exceed $[portion redacted as
privileged and confidential], Chase shall be
compensated for all Services provided to such Acquired
Person (or its successor-in-interest) with respect to
the Processing Business in accordance with [portion
redacted as privileged and confidential].
6. Performance Standards:
6.1 It is the parties' intention that the Services will be
at least at the levels of performance achieved by UST
as of the Merger Execution Date, as well as the
standard performance levels achieved by Chase
throughout the Term for similar external Chase
customers (if such performance levels are superior to
what UST achieved during such period), in terms of
quality, accuracy, completeness, control and
responsiveness.
6.2 Attachment 1 sets forth certain standards of
performance that have been represented by UST as
standards currently being met to support NEW TRUSTCO's
business (the "Performance Standards"). The parties
will review the Performance Standards during the due
diligence period, and will agree on appropriate
adjustments to reflect UST's performance during the 12-
month period prior to the Merger Execution Date. Chase
will meet the finally adopted Performance Standards
during the Term. The Services Agreement will identify
an appropriate set of periodic reports to be issued to
NEW TRUSTCO by Chase tracking Chase's performance with
respect to the Performance Standards. The parties will
schedule periodic meetings to review contract
performance and to discuss long range planning and
strategic objectives.
6.3 Provided Chase meets the performance levels described
in Sections 6.1 and 6.2, Chase shall have control over
the manner in which it provides the Services. During
the Term, Chase shall not make any changes in the way
the Services are provided without NEW TRUSTCO's
approval if such change would (i) in any material
respect adversely impact the operations of NEW TRUSTCO
or materially increase NEW TRUSTCO's costs, or (ii) in
any material respect adversely impact the way NEW
TRUSTCO's customers are serviced (subject, however, to
changes that Chase is required to make to comply with
regulatory requirements or changes arising from events
beyond Chase's reasonable control).
<PAGE>6
7. Management and Control:
7.1 NEW TRUSTCO and Chase will each designate an
appropriate manager to serve as a primary point of
contact for all communications relating to the
Services.
7.2 The parties will negotiate provisions regarding Chase
and UST personnel.
7.3 In recognition of the importance of NEW TRUSTCO as a
Chase customer, Chase will periodically apprise NEW
TRUSTCO of Chase's technology planning activities as
they relate to the Services. As part of this process,
Chase will consult with NEW TRUSTCO on mutually
beneficial technology developments and potential joint
development efforts. Chase will endeavor to include
NEW TRUSTCO inputs in its development efforts; however,
unless a written joint development agreement is reached
on a particular development, Chase will make
development decisions in its sole discretion.
8. Intellectual Property
8.1 All data and information relating to NEW TRUSTCO's and
Chase's business (including without limitation
information pertaining to their customers and
technology) will be treated confidentially. Each party
will own all its respective data and information;
neither party will assert a lien against it,
commercially exploit it, or otherwise use it for any
purpose other than for providing or receiving the
Services. Each party will limit disclosure of the
other party's data and information to employees and
subcontractors on a need-to-know basis, and will be
responsible for any unauthorized disclosures by such
employees and subcontractors. Chase will safeguard NEW
TRUSTCO's data and information against destruction,
loss or alteration using procedures which are
equivalent to those it uses to safeguard its own
comparable data and information.
8.2 The Services Agreement will contain reasonable
provisions for the protection of each party's
intellectual property rights.
9. Termination Rights
9.1 Either party may terminate for material breaches which
are not cured within 30 days after the expiration of a
15-day informal dispute resolution process initiated by
the nonbreaching party. A series of breaches which are
not individually material may, in the aggregate, be
material.
9.2 Either party may terminate in the event that the other
party becomes insolvent or bankrupt. Either party may
terminate the Services Agreement upon certain types of
changes of control of the other party to be defined in
the Services Agreement.
9.3 [portion redacted as privileged and confidential]
<PAGE>7
[portion redacted as privileged and confidential].
9.4 Chase will provide reasonably requested termination
assistance to NEW TRUSTCO or its designee for a period
up to one year upon the expiration or prior termination
of the Services Agreement for any reason (including
termination for the material breach of NEW TRUSTCO) to
facilitate a smooth transition of the Services to NEW
TRUSTCO or its designee. Payment provisions will be
negotiated between the parties. Termination assistance
will include the following:
(a) To the extent Chase has developed a new asset
management system to support NEW TRUSTCO, Chase
will license NEW TRUSTCO or its designated third
party vendor to use such application at the then
current market value of such license. As part of
the license, NEW TRUSTCO and its third-party
vendor will be required to accept reasonable
confidentiality and use restrictions relating to
such Chase system, and Chase will provide copies
of source code and technical documentation for
such system.
(b) The parties will negotiate appropriate terms
regarding transfer of assets, contracts and
personnel in connection with termination.
10. Indemnities:
10.1 The Services Agreement will contain reasonable
indemnity provisions, including without limitation
indemnities against intellectual property
infringement, liability to third parties resulting
from acts or omissions of Chase or NEW TRUSTCO,
and employment related claims. Any loss of
principal will be resolved in accordance with
normal and customary industry practice.
11. Other Terms:
11.1 The parties will continue to perform their
respective obligations pending the resolution of
any dispute under an informal dispute-resolution
procedure involving two escalating levels of the
parties' management above the respective project
executives. NEW TRUSTCO's failure to perform any
of its responsibilities under the Services
Agreement (other than its payment obligations)
will not constitute a material breach of the
Services Agreement, but Chase's nonperformance of
its obligations will be excused if and to the
extent that it results from NEW TRUSTCO's failure
of performance and Chase uses commercially
reasonable efforts to perform.
11.2 Each party will be excused from performance delays
and failures due to acts of God and other causes
beyond the reasonable control of such party,
provided the delay could not have been avoided by
reasonable precautions (such as backup systems)
and cannot
<PAGE>8
reasonably be circumvented through the use of
alternative sources, workaround plans and other
means. If a force majeure condition materially
restricts the performance of the Services for more
than three days, NEW TRUSTCO may procure such
Services from alternative sources. The parties
will share equally the charges of such alternative
source and NEW TRUSTCO will continue to pay Chase
the Fixed Fee. If the force majeure even persists
for more than five days, NEW TRUSTCO may terminate
the Services Agreement.
11.3 The parties will negotiate appropriate audit
provisions. During the transition period, Chase
will make available EDP and other information
which will allow UST to do due diligence relevant
to the Services that Chase will provide to NEW
TRUSTCO under the Services Agreement (but only to
the extent the provision of such EDP and other
information is reasonable and customary for banks
using Chase as a service provider).
11.4 Chase and NEW TRUSTCO will maintain reasonable
insurance.
11.5 Chase may assign the bank operations processing or
data center services provided under the Services
Agreement to a third party without NEW TRUSTCO's
consent if such third party will also be providing
bank operations processing and data center
services for Chase on the same terms and
conditions; otherwise, any such assignment will
require NEW TRUSTCO's prior written consent (which
may be granted or withheld in NEW TRUSTCO's sole
discretion). Chase will not assign the remaining
services to a non-affiliated entity; however, it
may sell or transfer any business unit providing
such services. NEW TRUSTCO will not have the
right to assign the Services Agreement without
obtaining Chase's consent. Chase will not
subcontract performance of a major portion of the
Services without NEW TRUSTCO's consent unless the
subcontractor will also be providing the same
services for Chase on the same terms and
conditions.
<PAGE>9
11.6 [portion redacted as privileged and confidential].
THE CHASE MANHATTAN
CORPORATION,
By: /s/ Deborah L. Duncan
-------------------------
Name: Deborah L. Duncan
Title: Executive Vice
President and
Treasurer
U.S. TRUST CORPORATION,
By: /s/ H. Marshall Schwarz
--------------------------
Name: H. Marshall Schwarz
Title: Chairman and CEO
