Exhibit 2
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AGREEMENT AND PLAN OF SHARE ACQUISITION
DATED AS OF OCTOBER 25, 2000
BETWEEN
FIDUCIARY TRUST COMPANY INTERNATIONAL
AND
FRANKLIN RESOURCES, INC.
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Article I THE SHARE EXCHANGE................................................................2
SECTION 1.1 The Share Exchange......................................................2
SECTION 1.2 Effective Time..........................................................2
SECTION 1.3 Closing of the Share Exchange...........................................2
SECTION 1.4 Effects of the Share Exchange...........................................2
Article II EXCHANGE OF SHARES................................................................2
SECTION 2.1 Exchange of Shares......................................................2
SECTION 2.2 Dissenters' Rights......................................................3
SECTION 2.3 Exchange Fund...........................................................4
SECTION 2.4 Exchange Procedures.....................................................4
SECTION 2.5 Distributions with Respect to Unsurrendered Certificates................5
SECTION 2.6 No Further Ownership Rights in the Shares...............................5
SECTION 2.7 Fractional Shares of Parent Common Stock................................5
SECTION 2.8 Termination of Exchange Fund............................................6
SECTION 2.9 No Liability............................................................6
SECTION 2.10 Investment of the Exchange Fund.........................................6
SECTION 2.11 Lost Certificates.......................................................6
SECTION 2.12 Withholding Rights......................................................7
SECTION 2.13 Stock Transfer Books....................................................7
SECTION 2.14 Affiliates..............................................................7
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................8
SECTION 3.1 Organization and Qualification; Subsidiaries............................8
SECTION 3.2 Capitalization of the Company and Its Subsidiaries......................8
SECTION 3.3 Authority Relative to This Agreement....................................9
SECTION 3.4 Reports; Financial Statements..........................................10
SECTION 3.5 No Undisclosed Liabilities.............................................11
SECTION 3.6 Absence of Changes.....................................................11
SECTION 3.7 Information Supplied...................................................13
SECTION 3.8 No Violations..........................................................14
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SECTION 3.9 No Default.............................................................14
SECTION 3.10 Property...............................................................14
SECTION 3.11 Litigation.............................................................14
SECTION 3.12 Compliance with Applicable Law.........................................15
SECTION 3.13 Employee Plans.........................................................15
SECTION 3.14 Environmental Liability................................................17
SECTION 3.15 Tax Matters............................................................17
SECTION 3.16 Ineligible Persons.....................................................19
SECTION 3.17 Material Contracts.....................................................20
SECTION 3.18 Funds..................................................................20
SECTION 3.19 Insurance..............................................................21
SECTION 3.20 Risk Management Instruments............................................21
SECTION 3.21 Intellectual Property..................................................21
SECTION 3.22 Labor and Employment Matters...........................................22
SECTION 3.23 Restrictive Covenants..................................................22
SECTION 3.24 Clients................................................................22
SECTION 3.25 Opinion of Financial Advisor...........................................23
SECTION 3.26 Brokers................................................................23
SECTION 3.27 Accounting Matters;....................................................23
SECTION 3.28 Tax Matters............................................................23
Article IV REPRESENTATIONS AND WARRANTIES OF PARENT.........................................23
SECTION 4.1 Organization and Qualification.........................................23
SECTION 4.2 Capitalization of Parent and its Subsidiaries..........................24
SECTION 4.3 Authority Relative to this Agreement...................................25
SECTION 4.4 SEC Reports; Financial Statements......................................25
SECTION 4.5 Absence of Changes.....................................................26
SECTION 4.6 No Undisclosed Liabilities.............................................26
SECTION 4.7 Information Supplied...................................................26
SECTION 4.8 ConsentsandApprovals;NoViolations......................................27
SECTION 4.9 No Default.............................................................27
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SECTION 4.10 Compliance with Applicable Law.........................................27
SECTION 4.11 Ineligible Persons.....................................................28
SECTION 4.12 Parent Funds; Advisory Agreements......................................28
SECTION 4.13 Brokers................................................................28
Article V COVENANTS RELATED TO CONDUCT OF BUSINESS.........................................29
SECTION 5.1 Conduct of Business of the Company.....................................29
SECTION 5.2 Conduct of Business of Parent..........................................32
SECTION 5.3 Access to Information..................................................33
Article VI ADDITIONAL AGREEMENTS............................................................33
SECTION 6.1 Preparation of S-4 and the Proxy Statement.............................33
SECTION 6.2 Regulatory Matters.....................................................34
SECTION 6.3 Letter of Accountants..................................................35
SECTION 6.4 Meeting................................................................36
SECTION 6.6 Company Fund Meetings..................................................36
SECTION 6.7 Non-Investment Company Advisory Contract Consents......................37
SECTION 6.8 Acquisition Proposals..................................................37
SECTION 6.9 Public Announcements...................................................38
SECTION 6.10 Indemnification........................................................38
SECTION 6.11 Notification of Certain Matters........................................39
SECTION 6.12 Pooling................................................................40
SECTION 6.13 Employee Matters.......................................................40
SECTION 6.14 Affiliate Letters......................................................41
SECTION 6.15 Application of Section 16 of the Exchange Act..........................41
SECTION 6.16 Fees and Expenses......................................................42
SECTION 6.17 Listing of Stock.......................................................42
SECTION 6.18 Authorized Parent Stock................................................42
SECTION 6.19 Antitakeover Statutes..................................................42
SECTION 6.20 Certain Agreements.....................................................42
SECTION 6.21 Tax-Free Share Exchange................................................44
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Article VII CONDITIONS TO CONSUMMATION OF THE SHARE EXCHANGE.................................45
SECTION 7.1 Conditions to Each Party's Obligations to Effect the Share Exchange....45
SECTION 7.2 Conditions to Obligations of Parent....................................46
SECTION 7.3 Conditions to the Obligations of the Company...........................47
Article VIII TERMINATION; AMENDMENT; WAIVER...................................................47
SECTION 8.1 Termination by Mutual Agreement........................................47
SECTION 8.2 Termination by Either Parent or the Company............................47
SECTION 8.3 Termination by the Company.............................................48
SECTION 8.4 Termination by Parent..................................................48
SECTION 8.5 Effect of Termination and Abandonment..................................49
SECTION 8.6 Amendment..............................................................49
SECTION 8.7 Extension; Waiver......................................................50
Article IX MISCELLANEOUS....................................................................50
SECTION 9.1 Nonsurvival of Representations and Warranties..........................50
SECTION 9.2 Entire Agreement; Assignment...........................................50
SECTION 9.3 Notices................................................................50
SECTION 9.4 Governing Law..........................................................51
SECTION 9.5 Descriptive Headings...................................................51
SECTION 9.6 Parties in Interest....................................................51
SECTION 9.7 Severability...........................................................52
SECTION 9.8 Specific Performance...................................................52
SECTION 9.9 Counterparts...........................................................52
SECTION 9.10 Interpretation.........................................................52
SECTION 9.11 Definitions............................................................53
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Glossary of Defined Terms
-------------------------
Defined Terms Defined in Section
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"PARENT AVERAGE CLOSING PRICE"..........................................3
6.20(A) PROVISIONS.....................................................42
ACQUISITION AGREEMENT...................................................1
ACQUISITION PROPOSAL:..................................................53
ADVISERS ACT...........................................................53
AGREEMENT...............................................................1
APB 16..................................................................1
AUDIT DATE.............................................................11
BENEFICIAL OWNERSHIP:..................................................53
BENEFICIALLY OWN:......................................................53
CERTIFICATES:...........................................................4
CLOSING DATE:...........................................................2
CLOSING:................................................................2
CODE....................................................................1
COMPANY.................................................................1
COMPANY BOARD:.........................................................10
COMPANY DISCLOSURE SCHEDULE:............................................8
COMPANY EMPLOYEE BENEFIT PLAN..........................................15
COMPANY EMPLOYEE BENEFIT PLANS.........................................15
COMPANY FUND...........................................................53
COMPANY PERMITS........................................................15
COMPANY REPORTS:.......................................................11
COMPANY REQUISITE VOTE:................................................10
COMPANY SECURITIES:.....................................................9
COMPANY SHAREHOLDER MEETING:...........................................36
COMPANY SHARES..........................................................1
COMPANY SUBSEQUENT DETERMINATION.......................................36
COMPANY:................................................................1
CONFIDENTIALITY AGREEMENT:.............................................33
DCP TRUST...............................................................3
DEEMED ASSIGNMENT......................................................37
DISSENTING SHARES.......................................................3
Effective Time:.........................................................2
ERISA..................................................................15
ERISA AFFILIATE........................................................16
EXCESS SHARES...........................................................6
EXCHANGE ACT...........................................................53
EXCHANGE AGENT:.........................................................4
EXCHANGE FUND:..........................................................4
EXCHANGE RATIO..........................................................3
FDIC...................................................................10
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Defined Terms Defined in Section
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FINANCIAL ADVISOR:.....................................................23
FRACTIONAL INTEREST.....................................................5
FRS.....................................................................3
FUND...................................................................53
GAAP:..................................................................11
GOVERNMENTAL ENTITY.....................................................6
INDEMNIFIED PARTIES:...................................................38
INDEMNIFIED PARTY:.....................................................38
INSURANCE AMOUNT.......................................................39
INTELLECTUAL PROPERTY..................................................22
INVESTMENT COMPANY ACT.................................................53
INVESTMENT COMPANY ADVISORY AGREEMENT..................................54
IRS....................................................................16
KNOW:..................................................................54
KNOWLEDGE:.............................................................54
LAW:...................................................................14
LIEN:...................................................................9
MATERIAL ADVERSE EFFECT:...............................................54
MATERIAL CONTRACTS.....................................................20
NICAAS.................................................................37
NON-INVESTMENT COMPANY ADVISORY AGREEMENT..............................54
NYBL....................................................................1
NYSE....................................................................6
PARENT..................................................................1
PARENT BOARD...........................................................25
PARENT COMMON STOCK:....................................................3
PARENT DISCLOSURE SCHEDULE:............................................23
PARENT EMPLOYEE BENEFIT PLANS..........................................40
PARENT FUND............................................................54
PARENT INVESTMENT COMPANY ADVISORY AGREEMENT...........................54
PARENT PERMITS:........................................................27
PARENT SEC REPORTS:....................................................25
PARENT SECURITIES:.....................................................24
PARENT SHARES...........................................................1
PARENT:.................................................................1
PBGC...................................................................16
PERIOD.................................................................43
PERSON:................................................................54
POOLING OF INTERESTS:..................................................23
PROXY STATEMENT:.......................................................13
REGULATORY DOCUMENTS...................................................10
RULE 145................................................................1
S-4:...................................................................13
SEC.....................................................................1
SECURITIES ACT..........................................................7
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Defined Terms Defined in Section
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SECURITIES LAWS........................................................54
SHARE EXCHANGE.......................................................2, 1
SHARE EXCHANGE CONSIDERATION............................................3
SHARE TRUST.............................................................6
SHARES..................................................................2
STOCK OPTION AGREEMENT..................................................1
SUBSECTION (A) CONTRACTS...............................................20
SUBSIDIARY.............................................................54
SUPERINTENDENT..........................................................1
TAKEOVER STATUTES......................................................42
TAX RETURNS:...........................................................19
TAX:...................................................................19
TAXES:.................................................................19
TERMINATION DATE:......................................................48
TERMINATION FEE........................................................49
TITLE IV PLANS.........................................................16
UNITED STATES REAL PROPERTY HOLDING COMPANY:...........................18
WHOLLY-OWNED SUBSIDIARY................................................55
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AGREEMENT AND PLAN OF SHARE ACQUISITION
THIS AGREEMENT AND PLAN OF SHARE ACQUISITION (this
"AGREEMENT"), dated as of October 25, 2000, is between Fiduciary Trust Company
International, a bank organized under the New York State Banking Law (the
"COMPANY"), and Franklin Resources, Inc., a Delaware corporation ("PARENT").
WHEREAS, Parent is a corporation having capital divided into
shares organized and existing under the Delaware General Corporation Law;
WHEREAS, the Company is a bank organized and existing under
Article III of the New York State Banking Law (the "NYBL");
WHEREAS, Section 143-a of the NYBL provides that a company
having capital stock divided into shares which desires to acquire all the
capital stock of one or more corporations organized under or subject to the
provisions of Article III of the NYBL may submit a written plan of acquisition
of such stock to the Superintendent of Banks of the State of New York (the
"SUPERINTENDENT");
WHEREAS, Parent desires to acquire all of the Shares (as
hereinafter defined) in accordance with the provisions of Section 143-a of the
NYBL and, to that end, Parent and the Company wish to adopt this Agreement which
shall constitute the "plan of acquisition" within the meaning of such Section
143-a;
WHEREAS, the Company Board and the Parent Board (as
hereinafter defined), each has, in light of and subject to the terms and
conditions set forth herein, resolved to deem this Agreement and the
transactions contemplated hereby, including the Share Exchange (as hereinafter
defined) provided for herein, advisable to and in the best interest of their
respective shareholders;
WHEREAS, for United States federal income tax purposes, it is
intended that the Share Exchange shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"CODE");
WHEREAS, for accounting purposes, it is intended that the
Share Exchange be accounted for as a "pooling of interests" under Opinion 16 of
the Accounting Principles Board ("APB 16") and the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"); and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, as a condition and an inducement to the willingness of Parent to
enter into this Agreement, the Company is entering into a stock option agreement
with Parent in the form of Exhibit A hereto (the "STOCK OPTION AGREEMENT"),
pursuant to which the Company has granted Parent an option to purchase Shares
under the terms and conditions set forth in the Stock Option Agreement;
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NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company and Parent hereby agree as
follows:
ARTICLE I
THE SHARE EXCHANGE
SECTION 1.1 The Share Exchange. At the Effective Time (as
hereinafter defined) and upon the terms and subject to the conditions of this
Agreement and in accordance with the NYBL, each outstanding share of common
stock, par value $1.00 per share, of the Company (the "SHARES"), other than as
provided in Section 2.1(a) hereof, shall be deemed to be exchanged for the
number of shares of Parent Common Stock (as hereinafter defined) provided for in
Section 2.1(a) below (the "SHARE EXCHANGE"). Following the Share Exchange and as
a result thereof, the Company shall be a wholly-owned Subsidiary of Parent. The
separate corporate existence of each of Parent and the Company shall continue
following the Share Exchange.
SECTION 1.2 Effective Time. Subject to the provisions of this
Agreement, the Share Exchange shall be consummated and become effective at such
time as the Superintendent files this Agreement, together with all required
certificates, as provided in Section 143-a.3 of the NYBL (the "EFFECTIVE TIME").
SECTION 1.3 Closing of the Share Exchange. (a) The closing of
the Share Exchange (the "CLOSING") will take place at a time and on a date to be
specified by the parties (the "CLOSING DATE"), which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153, or at such other time, date or place as agreed to in
writing by the parties hereto. Unless the parties otherwise agree, the Effective
Time shall occur on the Closing Date.
(b) At the Closing, Parent and the Company shall instruct
their respective representatives to make or confirm the filing of all required
certificates in the office of the Superintendent pursuant to Section 143-a of
the NYBL.
SECTION 1.4 Effects of the Share Exchange. The Share Exchange
shall have the effects set forth in the NYBL.
ARTICLE II
EXCHANGE OF SHARES
SECTION 2.1 Exchange of Shares. (a) At the Effective Time,
each Share issued and outstanding immediately prior to the Effective Time
including Shares held by the Company's Deferred Compensation Plan Trust (the
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"DCP TRUST") but excluding (x) Shares held by the Company for its own account,
(y) Shares held by Parent, or (z) Dissenting Shares (as defined in Section 2.2
hereof)) shall, by virtue of the Share Exchange and without any action on the
part of Parent, the Company or the holder thereof, be deemed exchanged in
consideration for the right to receive fully paid and non-assessable shares of
common stock, par value $0.10 per share, of Parent ("PARENT COMMON STOCK") equal
to (A) divided by (B) (the "EXCHANGE RATIO"), with (A) being the quotient
obtained by dividing 825,000,000 by the Parent Average Stock Price; provided
that such quotient shall not be less than 19,466,700 or more than 23,791,000 and
(B) being the number of Shares outstanding as of the Effective Time to be
exchanged for shares of Parent Common Stock pursuant to the terms of this
Agreement. For purposes of this Agreement, PARENT AVERAGE CLOSING PRICE means
the average closing price per share of the Parent Common Stock on the New York
Stock Exchange, Inc. during the twenty (20) trading days ending immediately
prior to the date that the Board of Governors of the Federal Reserve System (the
"FRS") (i) approves the Application (as hereinafter defined) of Parent to the
FRS to acquire the Shares and become a bank holding company and (ii) determines
that the election by Parent to become a financial holding company pursuant to
Sections 4(k) and (l) of the Bank Holding Company Act will become effective at
the Effective Time. An example of the calculation of the Exchange Ratio is set
forth in Schedule 2.1 of the Parent Disclosure Schedule (as hereinafter
defined). (All such shares of Parent Common Stock issued, together with any cash
in lieu of fractional shares of Parent Common Stock to be paid pursuant to
Section 2.7, are referred to herein as the "Share Exchange Consideration".)
(b) At the Effective Time, each Share held by Parent or the
Company for its own account immediately prior to the Effective Time shall, by
virtue of the Share Exchange and in accordance with the terms of this Agreement,
and without any action on the part of Parent or the Company be canceled, retired
and cease to exist and no payment shall be made with respect thereto.
(c) If, between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Common Stock shall have been increased,
decreased, changed into or exchanged for a different number of shares or a
different class of shares by reason of any stock dividend, subdivision,
reclassification, reorganization, recapitalization, stock split, reverse stock
split, combination or exchange of shares or any similar event, the amount of
shares of Parent Common Stock constituting the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, reorganization, recapitalization, stock split, reverse stock
split, combination or exchange of shares or such similar event.
SECTION 2.2 Dissenters' Rights. Notwithstanding anything in
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Share
Exchange and who has complied with the procedures of Section 6022 of the NYBL
for appraisal of such Shares ("DISSENTING SHARES"), shall not be exchanged into
the right to receive the Share Exchange Consideration, as provided herein,
unless and until such holder fails to perfect or effectively withdraws or
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otherwise loses the right to appraisal and payment under such Section 6022. If,
after the Effective Time, any such holder fails to perfect or effectively
withdraws or otherwise loses the right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been exchanged as of the Effective
Time into the right to receive the Share Exchange Consideration, without
interest thereon. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and, prior to the Effective
Time, Parent shall have the right to direct all negotiations and proceedings
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands. All payments made to
the holders of Dissenting Shares pursuant to Sections 143-a.4 and 6022 of the
NYBL shall be made solely from the assets of the Company.
SECTION 2.3 Exchange Fund. Prior to the Effective Time, Parent
shall appoint a commercial bank or trust company headquartered in New York City
reasonably acceptable to the Company to act as exchange agent hereunder for the
purpose of exchanging Shares for the Share Exchange Consideration (the "EXCHANGE
AGENT"). At or prior to the Effective Time, Parent shall deposit with the
Exchange Agent, in trust for the benefit of holders of Shares, certificates
representing the Parent Common Stock issuable pursuant to Section 2.1 in
exchange for outstanding Shares. Parent agrees to make available to the Exchange
Agent in accordance with Section 2.7, cash sufficient to pay any dividends and
other distributions pursuant to Section 2.5. Any cash and certificates of Parent
Common Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "EXCHANGE FUND." No holder of Shares shall be required to pay any stock
transfer or similar Tax (as hereinafter defined) upon the exchange of Shares
pursuant to the terms of this Agreement unless the transfer of such Shares to
the holder thereof was not registered in the transfer records of the Company, in
which case the provisions of the last sentence of Section 2.4 shall apply.
SECTION 2.4 Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Parent 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 (the "CERTIFICATES")
(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 which letter shall be in customary
form and have such other provisions as Parent may reasonably specify after
consultation with the Company; and (ii) instructions for effecting the surrender
of such Certificates in exchange for the applicable Share Exchange
Consideration, together with any dividends or distributions which a holder of
Certificates has a right to receive pursuant to Section 2.5. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, 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 shares of
Parent Common Stock representing, in the aggregate, the whole number of shares
that such holder has the right to receive pursuant to Section 2.1 (after taking
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into account all Shares then held by such holder) and a check representing an
aggregate amount of (x) any cash payable in lieu of fractional shares of Parent
Common Stock to which the holder is entitled pursuant to Section 2.7 and (y) any
dividends or distributions which such holder has a right to receive pursuant to
Section 2.5. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.5 or 2.7. In the event of a transfer of ownership of the
Shares which is not registered in the transfer records of the Company, shares of
Parent Common Stock evidencing, in the aggregate, the proper number of shares of
Parent Common Stock, a check in the proper amount of cash in lieu of any
fractional shares of Parent Common Stock pursuant to Section 2.7 and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.5, may be issued with respect to such Shares to such a transferee if
the Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer Taxes have been paid.
SECTION 2.5 Distributions with Respect to Unsurrendered
Certificates. No dividends or other distributions declared or made with respect
to shares of Parent Common Stock with a record date at or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock that such holder would be entitled to
receive upon surrender of such Certificate and no cash payment in lieu of
fractional shares of Parent Common Stock shall be paid to any such holder
pursuant to Section 2.7 until such holder shall surrender such Certificate in
accordance with Section 2.4. Subject to the effect of applicable Laws (as
hereinafter defined), following surrender of any such Certificate, there shall
be paid to such holder of shares of Parent Common Stock issuable in exchange
therefor, without interest thereon, (a) promptly after the time of such
surrender, the amount of dividends or other distributions with a record date at
or after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock, and (b) at the appropriate payment date, the amount of
dividends or other distributions with a record date at or after the Effective
Time but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such shares of Parent Common Stock.
SECTION 2.6 No Further Ownership Rights in the Shares. All
shares of Parent Common Stock issued and cash paid upon the exchange of the
Shares in accordance with the terms of Article I and this Article II (including
any cash paid pursuant to Sections 2.5 and 2.7) shall be deemed to have been
issued or paid in full satisfaction of all rights pertaining to the Shares.
SECTION 2.7 Fractional Shares of Parent Common Stock. No
fraction of a share of Parent Common Stock will be issued to holders of Shares,
but each holder of Shares otherwise entitled to receive a fraction of a share of
Parent Common Stock will be entitled to receive in accordance with the
provisions of this Section 2.7 from the Exchange Agent a cash payment in lieu of
such fraction of a share of Parent Common Stock, as applicable (each a
"FRACTIONAL INTEREST") representing such holder's proportionate interest in the
net proceeds from the sale by the Exchange Agent on behalf of all such holders
of the aggregate of the fractions of shares of Parent Common Stock which would
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otherwise be issued ("EXCESS SHARES"). The sale of the Excess Shares by the
Exchange Agent shall be executed on the New York Stock Exchange, Inc. (the
"NYSE") through one or more member firms of the NYSE, as the case may be, and
shall be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the holders of Shares
otherwise entitled to receive Fractional Interests, the Exchange Agent will hold
such proceeds in trust for such holders of shares (the "SHARE TRUST"). The
Company shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation, of the Exchange
Agent incurred in connection with such sale of the Excess Shares. The Exchange
Agent shall determine the portion of the Share Trust to which each holder of
Shares shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds comprising the Share Trust by a fraction, the numerator of which is the
amount of Fractional Interests to which such holder of Shares is entitled and
the denominator of which is the aggregate amount of Fractional Interests to
which all holders of Shares are entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of Shares in
lieu of any Fractional Interests, the Exchange Agent shall make available such
amounts to such holders of Shares without interest.
SECTION 2.8 Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates for six
(6) months after the Effective Time shall be delivered to Parent or otherwise on
the instruction of Parent, and any holders of the Certificates who have not
theretofore complied with this Article II shall thereafter look only to Parent
for the Share Exchange Consideration with respect to the Shares formerly
represented thereby to which such holders are entitled pursuant to Sections 2.1,
2.4 and 2.7 and any dividends or distributions with respect to shares of Parent
Common Stock to which such holders are entitled pursuant to Section 2.5. Any
such portion of the Exchange Fund remaining unclaimed by holders of Shares five
(5) years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
U.S. or non-U.S. federal, state or local court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "GOVERNMENTAL ENTITY"))
shall, to the extent permitted by Law, become the property of Parent free and
clear of any claims or interest of any person previously entitled thereto.
SECTION 2.9 No Liability. None of Parent, the Company or the
Exchange Agent shall be liable to any person in respect of any Share Exchange
Consideration from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
SECTION 2.10 Investment of the Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange Fund as directed by Parent
on a daily basis. Any interest and other income resulting from such investments
shall promptly be paid to Parent.
SECTION 2.11 Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, the
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posting by such person of a bond in such reasonable and customary amount as
Parent may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will deliver in exchange
for such lost, stolen or destroyed Certificate the applicable Share Exchange
Consideration with respect to the Shares formerly represented thereby, any cash
in lieu of fractional shares of Parent Common Stock and unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof,
pursuant to this Agreement.
SECTION 2.12 Withholding Rights. Parent shall be entitled to
deduct and withhold from the Share Exchange Consideration otherwise payable
pursuant to this Agreement and/or from any cash in the amount of dividends or
other distributions to which a holder of Parent Common Stock is entitled
pursuant to Section 2.5 such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of a Tax Law. To the extent
that amounts are so withheld by Parent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect to which such deduction and withholding was made by Parent.
SECTION 2.13 Stock Transfer Books. The stock transfer books of
the Company shall be closed immediately upon the Effective Time and there shall
be no further registration of transfers of Shares thereafter on the records of
the Company. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Parent for any reason shall be converted into the Share
Exchange Consideration with respect to the Shares formerly represented thereby,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.7 and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section 2.5.
SECTION 2.14 Affiliates. Notwithstanding anything to the
contrary herein, no shares of Parent Common Stock or cash shall be delivered
pursuant to the Share Exchange to a person who may be deemed an "affiliate" of
the Company in accordance with Section 6.14 hereof for purposes of Rule 145
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or for
purposes of qualifying the Share Exchange for "pooling of interests" under APB
16 and the applicable SEC rules and regulations until such person has executed
and delivered to Parent the written agreement contemplated by Section 6.14. The
Company believes that the individuals listed on Schedule 2.14 of the Company
Disclosure Schedule (as hereinafter defined) are the "affiliates" of the Company
as of the date of this Agreement for the purposes of the transactions
contemplated hereby and the Parent agrees that, absent a material change in
circumstances, such individuals are the only persons who will be required to
execute and deliver the written agreements contemplated by Section 6.14.
SECTION 2.15 Consultation Regarding Dividends. Prior to any change of the
regularly scheduled record dates for the payment of dividends, the Company and
Parent shall consult with the other party and hereby agree that no such change
will have the effect of causing the Company's shareholders to fail to receive a
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regular quarterly dividend payment either as a Parent or Company shareholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by
the Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein), the Company hereby represents and warrants to Parent as follows:
SECTION 3.1 Organization and Qualification; Subsidiaries. (a)
Each of the Company and its Subsidiaries (as hereinafter defined) is a
corporation or legal entity duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite corporate, partnership or similar power and authority to own, lease
and operate its properties and to carry on its businesses as now conducted and
proposed by the Company to be conducted, except where the failure to be duly
organized, existing and in good standing or to have such power and authority
does not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (as hereinafter defined) on the Company.
(b) Section 3.1 of the Company Disclosure Schedule sets forth
a list of all Subsidiaries of the Company.
(c) Each of the Company and its Subsidiaries is duly qualified
or licensed and in good standing to do business 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 does not
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company.
(d) Except as set forth on Schedule 3.1(d) of the Company
Disclosure Schedule, the Company has heretofore delivered to Parent accurate and
complete copies of the organizational certificate and bylaws, as currently in
effect, of each of the Company and its U.S. Subsidiaries. There are no
provisions or requirements contained in any organizational or governing
documents of the Company's non-U.S. Subsidiaries that do or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
SECTION 3.2 Capitalization of the Company and Its
Subsidiaries. (a) The authorized capital stock of the Company consists of:
15,000,000 Shares, of which 7,276,168 Shares were issued and outstanding as of
the close of business on October 24, 2000. All of the issued and outstanding
Shares have been validly issued, and are duly authorized, fully paid,
non-assessable and free of preemptive rights, except and to the extent provided
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in Sections 114 and 6029 of the NYBL. Except as set forth above, as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of the Company; (ii) no securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company; (iii) no options or other rights to acquire
from the Company or any of its Subsidiaries, and no obligations of the Company
or any of its Subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company; and (iv) no equity equivalents, interests in the
ownership or earnings of the Company or any of its Subsidiaries or other similar
rights, including stock appreciation rights (collectively, "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
There are no shareholder agreements (other than the voting agreements entered
into in connection with the transactions contemplated hereby), voting trusts or
other agreements or understandings to which the Company or any of its
Subsidiaries is a party or to which it is bound relating to the voting of any
shares of capital stock of the Company.
(b) Except for minority positions held by foreign nationals in
non-U.S. Subsidiaries of the Company as required by applicable Law, all of the
outstanding capital stock of the Company's Subsidiaries is owned by the Company,
directly or indirectly, free and clear of any Lien (as hereinafter defined) or
any other limitation or restriction (including any restriction on the right to
vote or sell the same, except as may be required as a matter of Law). There are
no securities of the Company or its Subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from the Company or its
Subsidiaries, and no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly of, any capital stock or other ownership interests in, or any other
securities of, any Subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its Subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any Subsidiary of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, security interest or encumbrance
in respect of such asset.
SECTION 3.3 Authority Relative to This Agreement. (a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. No other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the Stock Option
Agreement or to consummate the transactions contemplated hereby and thereby
(other than, with respect to the Share Exchange and this Agreement, the Company
Requisite Vote (as hereinafter defined)). This Agreement and the Stock Option
Agreement have been duly and validly executed and delivered by the Company and
constitute valid, legal and binding agreements of the Company, enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability related to or affecting creditors' rights or by general equity
principles.
(b) The Board of Directors of the Company (the "COMPANY
BOARD") has duly and validly authorized the execution and delivery of this
Agreement and the Stock Option Agreement and approved the consummation of the
transactions contemplated hereby and thereby, and taken all corporate actions
required to be taken by the Company Board for the consummation of such
transactions, including the Share Exchange, and has resolved (i) to deem this
Agreement and the transactions contemplated hereby, including the Share
Exchange, taken together, advisable to and in the best interest of the Company
and its shareholders; and (ii) to recommend that the shareholders of the Company
approve and adopt this Agreement. Pursuant to Section 143-a of the NYBL, the
Company Board has directed that this Agreement be submitted to the shareholders
of the Company for their approval. The affirmative approval of the holders of at
least two-thirds (2/3) of the outstanding Shares (voting as a single class) as
of the record date for the Company Shareholder Meeting (as hereinafter defined)
(the "COMPANY REQUISITE VOTE") is the only vote of the holders of any class or
series of capital stock of the Company necessary to adopt this Agreement and
approve the transactions contemplated hereby, including the Share Exchange.
SECTION 3.4 Reports; Financial Statements.(a) Since January 1,
1998, the Company has timely filed all reports and other documents, together
with any amendments required to be made with respect thereto, that were required
to be filed with any Governmental Entity, including the SEC (the "REGULATORY
DOCUMENTS"), and has paid all fees and assessments due and payable in connection
therewith.
(b) As of their respective dates, the Regulatory Documents of
the Company complied in all material respects with the applicable requirements
of the Securities Laws (as hereinafter defined), and the rules and regulations
of the SEC promulgated thereunder applicable to such Regulatory Documents, and
none of the Company's Regulatory Documents, as of their respective dates,
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. The Company has previously delivered or made available to Parent a
complete copy of each Regulatory Document filed with the SEC, the Federal
Deposit Insurance Company (the "FDIC") or the New York State Banking Department
after January 1, 1998, including a Form ADV for any Subsidiary of the Company
that is a registered Investment Advisor (as defined in the Advisers Act (as
hereinafter defined)), and will deliver to Parent promptly after the filing
thereof a complete copy of each Regulatory Document filed with the SEC, the FDIC
or the New York State Banking Department after the date hereof and prior to the
Closing Date. There (i) is no unresolved violation with respect to any report or
statement relating to any examinations or inspections of the Company or any of
its Subsidiaries by any Governmental Entity and (ii) have been no material
disagreements or disputes with any Governmental Entity with respect to the
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business, operations, policies or procedures of the Company since January 1,
1998.
(c) The Company has made available to Parent: (i) its Annual
Reports to Shareholders for each of the fiscal years ended December 31, 1998 and
1999; (ii) unaudited financial statements as of and for the quarters ended March
31, June 30 and September 30, 2000; (iii) all definitive proxy statements
relating to the Company's meetings of shareholders (whether annual or special)
held since January 1, 1998; and (iv) all other reports either filed by the
Company with the SEC or distributed to shareholders since January 1, 1998 (each
such reports, financial statements, proxy statements and other reports, together
with the amendments thereto, the "COMPANY REPORTS"). None of such Company
Reports contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the Company Reports
complied as to form in all material respects with generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as may be indicated in
the notes thereto or in the case of quarterly statements except for the absence
of notes thereto), and accurately reflected in accordance with GAAP the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments). Since
January 1, 2000, there has not been any material change, or any application or
request for any material change, by the Company or any of its Subsidiaries in
accounting principles, methods or policies for financial accounting or Tax
purposes, except for such change required by Law, SEC regulation or generally
applicable changes in GAAP.
SECTION 3.5 No Undisclosed Liabilities. Except for those
liabilities that are fully reflected or reserved against on the latest balance
sheet as of September 30, 2000 and liabilities incurred in the ordinary course
of business consistent with past practice since the date of such balance sheet,
none of the Company or its Subsidiaries has any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by GAAP to be reflected in or reserved against in a consolidated balance sheet
of the Company and no liabilities that would be required by GAAP to be disclosed
in the notes thereto, other than liabilities disclosed in the Company Reports or
incurred in the ordinary course of business consistent with past practice, were
not otherwise disclosed to Parent.
SECTION 3.6 Absence of Changes. Except as set forth in Section
3.6 of the Company Disclosure Schedule, or to the extent publicly disclosed by
the Company in the Company Reports, since December 31, 1999 (the "AUDIT Date"),
there have been no events, changes or developments with respect to the Company
or its Subsidiaries, which do or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
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Except as set forth in Section 3.6 of the Company Disclosure
Schedule or to the extent publicly disclosed in the Company Reports, since the
Audit Date, the Company and its Subsidiaries have conducted their business in
the ordinary and usual course consistent with past practice and there has not
been:
(a) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the Company
(other than payment of the Company's regular quarterly cash dividend on the
Shares in the amount of $0.35 per Share), or any repurchase, redemption or other
acquisition by the Company or any Subsidiary of any Company Securities;
(b) any amendment of any term of any outstanding security of
the Company or any Subsidiary that would materially increase the obligations of
the Company or such Subsidiary under such security;
(c) (i) any incurrence or assumption by the Company or any
Subsidiary of any indebtedness for borrowed money, other than in the ordinary
and usual course of business consistent with past practice (it being understood
that any indebtedness incurred prior to the date hereof in respect of capital
expenditures shall be considered to have been in the ordinary and usual course
of business consistent with past practice), or (ii) any guarantee, endorsement
or other incurrence or assumption of liability (whether directly, contingently
or otherwise) by the Company or any Subsidiary for the obligations of any other
person (other than any Wholly-Owned Subsidiary), other than in the ordinary and
usual course of business consistent with past practice;
(d) any creation or assumption by the Company or any
Subsidiary of any Lien on any material asset of the Company or any Subsidiary
other than in the ordinary and usual course of business consistent with past
practice;
(e) any making of any loan, advance or capital contribution to
or investment in any person by the Company or any Subsidiary other than (i)
investments made in the ordinary and usual course of business consistent with
past practice, (ii) loans, advances or capital contributions to or investments
in Wholly-Owned Subsidiaries or (iii) loans or advances made in the ordinary and
usual course of business consistent with past practice;
(f) (i) any contract or agreement entered into by the Company
or any Subsidiary on or prior to the date hereof relating to any material
acquisition or disposition of any assets or business or (ii) any modification,
amendment, assignment, termination or relinquishment by the Company or any
Subsidiary of any contract, license or other right (including any insurance
policy naming it as a beneficiary or a loss payable payee) that does or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, other than, in the case of (i) and (ii),
transactions, commitments, contracts or agreements in the ordinary and usual
course of business consistent with past practice;
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(g) other than in the ordinary and usual course of business
consistent with past practice, any (i) grant of any material severance or
termination pay to any director, officer or employee of the Company or any of
its Subsidiaries; (ii) entering into of any material employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company or any of its
Subsidiaries; (iii) material increase in benefits payable under any existing
severance or termination pay policies or employment agreements; or (iv) material
increase in compensation, bonus or other benefits payable to directors, officers
or employees of the Company or any of its Subsidiaries other than merit
increases in salaries of employees at regularly scheduled times in customary
amounts consistent with past practices; or
(h) any making or rescission of any material express or deemed
election relating to Taxes, settlement or compromise of any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or except as may be required by applicable Law,
making of any change to any of its material methods of reporting income or
deductions for federal income Tax purposes from those employed in the
preparation of its most recently filed federal income Tax return.
SECTION 3.7 Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of Parent Common Stock as required by
the terms of this Agreement pursuant to the Share Exchange (the "S-4"), at the
time the S-4 is filed with the SEC and at the time it becomes effective under
the Securities Act, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) the proxy statement relating to the
Company Shareholder Meeting to be held in connection with the Share Exchange
(the "PROXY STATEMENT") will, at the date mailed to shareholders and at the time
of the meeting of shareholders to be held in connection with the Share Exchange,
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
and (iii) the Applications (as hereinafter defined) will, at the date of filing
and through and including the date of action by the appropriate Governmental
Entities thereon, 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, or will otherwise fail to comply in all material respects
with applicable Law. If at any time prior to the Effective Time any event with
respect to the Company, its officers and directors or any of its Subsidiaries
should occur which is required to be described in an amendment of, or a
supplement to, the S-4, the Proxy Statement or an Application, the Company shall
promptly so advise Parent and such event shall be so described, and such
amendment or supplement (which Parent shall have a reasonable opportunity to
review) shall be, as required by Law, disseminated to the shareholders of the
Company or filed with the relevant Governmental Entity.
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SECTION 3.8 No Violations. Except as set forth in Section 3.8
of the Company Disclosure Schedule, neither the execution, delivery and
performance of this Agreement or the Stock Option Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby or
thereby will violate, conflict with or result in any breach of, require any
consent, waiver or notice under any term of, or result in the reduction, loss or
cancellation of any benefit or the creation or acceleration of any right or
obligation under (i) any provision of the respective organizational certificate
or bylaws (or similar governing documents) of (x) the Company or (y) any of its
Subsidiaries, (ii), any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound (other than advisory agreements that contain change of control or
non assignment provisions or are otherwise terminable under applicable Law,) or
(iii) any Law applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets (assuming the making by Parent of all
required filings with, and the receipt by Parent of all required permits,
authorizations, consents and approvals of all applicable Governmental Entities),
except in the case of (i)(y), (ii) or (iii) to the extent that does not or would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
SECTION 3.9 No Default. Neither the Company nor any of its
Subsidiaries is in violation of any term of (i) its organizational certificate
or bylaws (or similar governing documents), (ii) any agreement to which it is a
party or by which it is bound, or (iii) any non-U.S. or domestic law, order,
writ, injunction, decree, ordinance, award, stipulation, statute, rule or
regulation entered by a Governmental Entity ("LAW") applicable to the Company,
its Subsidiaries or any of their respective properties or assets, the
consequence of which violation does or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 3.10 Property. (a) The Company owns no real property.
(b) Each of the Company and its Subsidiaries has valid
leasehold interests in all of its leased real property.
(c) Each of the Company and its Subsidiaries enjoy peaceful
and undisturbed possession under, and has complied in all material respects with
the terms of, all leases to which it is a party, and all such leases are in full
force and effect, except to the extent that does not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
SECTION 3.11 Litigation. Except as set forth in Section 3.11
of the Company Disclosure Schedule or to the extent publicly disclosed by the
Company in the Company Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries or any of their respective properties or
assets which (a) seeks damages in excess of $250,000, (b) seeks material
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equitable relief or remediation, (c) does or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
or (d) as of the date hereof, questions the validity of this Agreement, the
Stock Option Agreement or any action to be taken by the Company in connection
with the consummation of the transactions contemplated hereby or thereby or
could otherwise prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as set forth in Section 3.11 of the
Company Disclosure Schedule or to the extent publicly disclosed by the Company
in the Company Reports, none of the Company or its Subsidiaries is subject to
any outstanding material order, writ, injunction, decree or cease and desist
order.
SECTION 3.12 Compliance with Applicable Law. The Company and
its Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "COMPANY PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, order and approvals which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure to so
comply does not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The businesses of the
Company and its Subsidiaries are not being conducted in violation of any Law
applicable to the Company or its Subsidiaries except for violations or possible
violations which do not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. To
the Company's knowledge, no investigation by any Governmental Entity other than
periodic examinations conducted in the ordinary course with respect to the
Company or its Subsidiaries is pending or threatened, nor, to the Company's
knowledge, has any Governmental Entity indicated an intention to conduct the
same.
SECTION 3.13 Employee Plans. (a) Section 3.13(a) of the
Company Disclosure Schedule sets forth a list of all material "employee benefit
plans," as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all material bonus or other incentive
compensation, stock option, stock award, stock purchase or equity-based
compensation, deferred compensation, severance, sick leave, vacation, salary
continuation, medical, life insurance, scholarship, company car, or employee
loan plan, policy or agreement except government-mandated plans (each a "COMPANY
EMPLOYEE BENEFIT PLAN" and collectively, the "COMPANY EMPLOYEE BENEFIT PLANS")
which the Company or any of its Subsidiaries has any obligation to or liability
for contingent or otherwise with respect to any current or former employee or
director. None of the Company Employee Benefit Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA or is or has been subject to Sections 4063 or
4064 of ERISA.
(b) True, correct and complete copies of the following
documents, with respect to each of the Company Employee Benefit Plans have been
made available to Parent by the Company: (i) any plans and related trust
documents, and amendments thereto; (ii) the most recent Forms 5500 and schedules
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thereto; (iii) the most recent Internal Revenue Service ("IRS") determination
letter; (iv) the most recent financial statements and actuarial valuations, if
applicable; (v) summary plan descriptions; and (vi) written communications to
employees relating to the Company Employee Benefit Plans within the preceding
twelve (12) months.
(c) As of the date hereof, (i) all material payments required
to be made by or under any Company Employee Benefit Plan, any related trusts, or
any collective bargaining agreement or pursuant to Law have been made by the due
date thereof (including any valid extension); (ii) the Company and its
Subsidiaries have performed all material obligations required to be performed by
them under any Company Employee Benefit Plan; (iii) the Company Employee Benefit
Plans, have been administered in material compliance with their terms and the
requirements of ERISA, the Code and other applicable Laws; (iv) there are no
material actions, suits, arbitrations or claims (other than routine claims for
benefit) pending or, to the Company's knowledge, threatened with respect to any
Company Employee Benefit Plan; and (v) the Company and its Subsidiaries have no
material liability as a result of any "prohibited transaction" (as defined in
Section 406 of ERISA and Section 4975 of the Code) for any excise Tax or civil
penalty.
(d) Except as set forth in Section 3.13(d) of the Company
Disclosure Schedule:
(i) As of the date hereof, there is no "amount of
unfunded benefit liabilities" as defined in Section 4001(a)(18) of ERISA
in any of the respective Company Employee Benefit Plans subject to Title
IV of ERISA ("TITLE IV PLANS"). As of the date hereof, each of the
respective Title IV Plans are fully funded in accordance with the
actuarial assumptions used by the Pension Benefit Guaranty Corporation
("PBGC") to determine the level of funding required in the event of the
termination of such Title IV Plan and the "benefit liabilities" as defined
in Section 4001(a)(16) of ERISA of such Title IV Plan using such PBGC
assumptions do not exceed the assets of such Title IV Plan.
(ii) Neither the Company nor any person under common
control or treated as a single employer with the Company ("ERISA
AFFILIATE") has terminated any Title IV Plan; or
(e) Each of the Company Employee Benefit Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so "qualified" and the trusts maintained
pursuant thereto are exempt from federal income taxation under Section 501 of
the Code, and the Company knows of no fact which would adversely affect the
qualified status of any such Plan or the exemption of such trust.
(f) Except as set forth in Section 3.13(f) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
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the consummation of the transactions contemplated hereby will by itself or in
combination with any other event, except as expressly contemplated by this
Agreement, (i) result in any payment becoming due, or increase the amount of
compensation or benefits to any current or former employee or director of the
Company or any of its Subsidiaries; or (ii) result in the acceleration of the
time of payment or vesting of any compensation or benefits to any current or
former employee and director of the Company or any of its Subsidiaries or
increase any benefits under any Company Employee Benefit Plan.
SECTION 3.14 Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or that could
reasonably result in the imposition, on the Company of any liability or
obligation arising under common law or under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, pending or threatened against the Company, which liability or
obligation will, either individually or in the aggregate, have a Material
Adverse Effect on the Company. To the knowledge of the Company, there is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any such liability or obligation on the Company.
The Company is not subject to any agreement, order, judgment, decree, letter or
memorandum by or with any Governmental Entity or third party imposing any
liability or obligation with respect to the foregoing that would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on the Company.
SECTION 3.15 Tax Matters. (a) The Company and each of its
Subsidiaries, and each affiliated combined or unitary group of which the Company
or any of its Subsidiaries is or has been a member, has timely filed all
federal, state, local and non-U.S. income and franchise Tax Returns (as
hereinafter defined) and all other material Tax Returns and reports required to
be filed by it or has timely filed requests for extensions of the filing
deadline on such Tax Returns. All such Tax Returns are complete and correct in
all material respects. The Company and each of its Subsidiaries has paid (or the
Company has paid on its Subsidiaries' behalf) all Taxes shown as due on such Tax
Returns for the periods covered by such Tax Returns and there are no other Taxes
due for which adequate reserves have not been established.
(b) The Company is a "bank" as defined in Section 581 of the
Code.
(c) No deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any of its Subsidiaries that have not been
fully paid or adequately provided for in the appropriate financial statements of
the Company and its Subsidiaries, no requests for waivers of the time to assess
any Taxes are pending, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority.
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(d) No material liens for Taxes exist with respect to any
assets or properties of the Company or any of its Subsidiaries, except for
statutory liens for Taxes not yet due.
(e) None of the Company or any of its Subsidiaries is a party
to or is bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
(f) The Company and its Subsidiaries have complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes and has duly and timely withheld from employee salaries,
wages and other compensation and has paid to the appropriate taxing authorities
all material amounts required to be so withheld and paid over for all periods
under all applicable laws.
(g) No material federal, state, local or non-U.S. audits or
other administrative proceedings or court proceedings are presently pending with
regard to any federal, state, local or non-U.S. income or franchise Taxes or
material other federal, state, local or non-U.S. Taxes or Tax Returns of the
Company or its Subsidiaries and neither the Company nor any of its Subsidiaries
has received a written notice of any pending audit or proceeding. No material
issues relating to Taxes have been raised in writing by the relevant taxing
authority during any presently pending audit or examination.
(h) Neither the Company nor any of its Subsidiaries has agreed
to or is required to make any material adjustment under Section 481(a) of the
Code or any similar provision of non-U.S. law that would affect any taxable year
beginning after the date hereof.
(i) Neither the Company nor any of its Subsidiaries has with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company
or any of its Subsidiaries.
(j) The Company is not currently, has not been within the last
five (5) years, and does not anticipate becoming a "United States Real Property
Holding Company" within the meaning of Section 897(c) of the Code.
(k) No Subsidiary of the Company owns any Shares.
(l) Each Company Fund (as hereinafter defined) which is
qualified as a "registered investment company" under subchapter M of the Code
has been managed in a manner consistent with its qualification as a "registered
investment company" under Subchapter M of the Code. No such Company Fund is
subject to the payment of Tax for any taxable year by reason of its failure to
satisfy the minimum distribution requirements of Section 852(a)(1) of the Code.
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(m) At the Effective Time, none of the Shares will be subject
to a substantial risk of forfeiture within the meaning of Section 83 of the
Code.
(n) Neither the Company nor any Subsidiary of the Company has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two (2) years prior to the date of this Agreement or (ii) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Share Exchange.
(o) None of the transactions contemplated by this Agreement
will cause any gains or losses to be recognized by the Company or any of its
Subsidiaries by reason of the consolidated return regulation promulgated under
Section 1502 of the Code.
(p) For purposes of this Agreement, "TAX" or "TAXES" shall
mean all taxes, charges, fees, imposts, levies, gaming or other assessments,
including, without limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to Tax or additional amounts
imposed by any taxing authority (domestic or non-U.S.) and shall include any
transferee liability in respect of Taxes, any liability in respect of Taxes
imposed by contract, Tax sharing agreement, Tax indemnity agreement or any
similar agreement (whether oral or written). "TAX RETURNS" shall mean any
report, return, document, declaration or any other information or filing
required to be supplied to any taxing authority or jurisdiction (non-U.S. or
domestic) with respect to Taxes, including, without limitation, information
returns, any document with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
SECTION 3.16 Ineligible Persons. Subject to the provisions of
Section 202(a)(11) and Section 202(a)(26) of the Advisers Act, and to the
provisions of Section 3(a)(4) and Section 3(a)(5) of the Exchange Act (a)
neither the Company, nor any "affiliated person" (as defined in the Investment
Company Act) thereof, is ineligible pursuant to Section 9(a) or 9(b) of the
Investment Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a registered investment
company;
(b) Neither the Company nor any "associated person" (as
defined in the Advisers Act) thereof, is ineligible pursuant to Section 203 of
the Advisers Act to serve as an investment adviser or as an associated person to
a registered investment advisor; and
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(c) Neither the Company nor any "associated person" (as
defined in the Exchange Act) thereof, is ineligible pursuant to Section 15(b) of
the Exchange Act to serve as a broker-dealer or as an associated person to a
registered broker-dealer.
SECTION 3.17 Material Contracts. (a) Section 3.17 of the
Company Disclosure Schedule sets forth a list of all Subsection (a) Contracts
(as hereinafter defined). The Company has heretofore made available to Parent
true, correct and complete copies of all: (i) contracts or agreements (other
than Company Employee Benefit Plans) that would be required to be filed by Item
10 of Form 10-K if the Company were required to file a Form 10-K with the SEC on
the date hereof; (ii) the Global Plus License Agreement; and (iii) commitments
and agreements to enter into any of the foregoing (collectively, the "SUBSECTION
(A) CONTRACTS").
(b) Each of the Subsection (a) Contracts, any agreements
providing for investment advisory services by the Company or any of its
Subsidiaries ("advisory agreements") and any commitments or agreements to enter
into such advisory agreements (collectively "MATERIAL CONTRACTS," and each a
"Material Contract") is in full force and effect. There is no material default
under any Material Contract either by the Company or, to the Company's
knowledge, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a material
default thereunder by the Company or, to the Company's knowledge, any other
party.
(c) Each Investment Company Advisory Agreement (as hereinafter
defined) subject to Section 15 of the Investment Company Act has been duly
approved by the Company or its Subsidiary at all times in compliance with
Section 15 of the Investment Company Act and all other applicable Laws. Each
such Investment Company Advisory Agreement has been performed by Company in
accordance with the Investment Company Act and all other applicable Laws.
SECTION 3.18 Funds. (a) Schedule 3.18 sets forth a true,
complete and correct list, as of the date hereof, of each Fund for which the
Company or any of its Subsidiaries acts as investment adviser or subadviser.
Each Company Fund (as hereinafter defined) that is an entity is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization and has the requisite corporate, trust or partnership power and
authority to own its properties and to carry on its business as it is now
conducted, and is qualified to do business in each jurisdiction where it is
required to do so under applicable Law, except where the failure to have such
power, authority or qualification does not or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. Each Company Fund is, and at all times as required under the Securities
Laws since prior to its initial public offering of Securities (as defined in the
Securities Act) has been, duly registered with the SEC, to the extent such
registration is required, as an investment company under the Investment Company
Act.
(b) Except as set forth in Schedule 3.18 of the Company
Disclosure Schedule, (i) the shares of each Company Fund are qualified for
public offering and sale in each jurisdiction where offers are made to the
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extent required under applicable Law and (ii) each Company Fund has been
operated since its organization and is currently operating in compliance in all
material respects with applicable Law.
SECTION 3.19 Insurance. Section 3.19 of the Company Disclosure
Schedule sets forth a list of insurance policies (including information on the
premiums payable in connection therewith and the scope and amount of the
coverage provided thereunder) maintained by the Company or any of its
Subsidiaries, which policies have been issued by insurers, which, to the
Company's knowledge, are reputable and financially sound and provide coverage
for the operations conducted by the Company and its Subsidiaries of a scope and
coverage consistent with customary industry practice.
SECTION 3.20 Risk Management Instruments. To the Company's
knowledge, all interest rate swaps, caps, floors, collars, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for the Company's own account, or for the account of one or
more of the Company's Subsidiaries or their customers, were entered into (a) in
accordance with prudent business practices and all applicable Laws and
regulatory policies and (b) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of the Company or one of its Subsidiaries, enforceable in
accordance with its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting creditors' rights
or by general equity principles, and is in full force and effect. Neither the
Company nor any of its Subsidiaries, nor to the Company's knowledge, any other
party thereto, is in material breach of any of its obligations under any such
agreement or arrangement.
SECTION 3.21 Intellectual Property. To the knowledge of the
Company:
(a) the Company and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any material Liens), all
Intellectual Property (as defined below) necessary for the conduct of its
business as currently conducted;
(b) the use of any Intellectual Property by the Company and
its Subsidiaries does not infringe on or otherwise violate in any material
respect the rights of any person and is in accordance with any applicable
license pursuant to which the Company or any Subsidiary acquired the right to
use any Intellectual Property;
(c) no Person is challenging, infringing on or otherwise
violating any material right of the Company or any of its Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
its Subsidiaries; and
(d) Except as set forth in Section 3.21 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received any written notice of any pending claim with respect to any material
Intellectual Property used by the Company and its Subsidiaries and no such
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Intellectual Property owned and/or licensed by the Company or its Subsidiaries
is being used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Agreement, "INTELLECTUAL PROPERTY" shall mean trademarks, service marks,
brand names, certification marks, trade dress and other indications of origin,
the goodwill associated with the foregoing and registrations in any jurisdiction
of, and applications in any jurisdiction to register, the foregoing, including
any extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; any similar intellectual
property or proprietary rights.
SECTION 3.22 Labor and Employment Matters. Except as set forth
in Section 3.22 of the Company Disclosure Schedule, (a) no collective bargaining
arrangement or agreement or similar arrangement or agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association, exists which is binding on the Company, (b) the Company
is, and has at all other times been, in material compliance with the Worker
Adjustment and Retraining Notification Act and all other applicable Laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work, and occupational safety and health, (c) there
are not material controversies pending or, to the Company's knowledge,
threatened, between the Company and any of its employees, (d) there are no
unfair labor practice complaints pending against the Company before the National
Labor Relations Board, (e) there are no strikes, slowdowns, work stoppages,
lockouts, or to the Company's knowledge, threats thereof, by or with respect to
any employees of the Company and (f) there are no employment contracts currently
in effect or which will become effective upon the consummation of the
transactions contemplated hereby.
SECTION 3.23 Restrictive Covenants. Except as set forth in
Schedule 3.23 of the Company Disclosure Schedule, the Company is not a party to
any contract containing non-competition or exclusivity dealing provisions that
would limit Parent's ability after the Closing to engage in business in any area
or to compete against any person or entity.
SECTION 3.24 Clients. As of the date hereof, except as set
forth on Schedule 3.24 of the Company Disclosure Schedule, the Company has not
received any notice that any client or clients that individually or in the
aggregate are material to the business of the Company are terminating or are
planning to terminate their relationship with the Company or will reduce
materially its or their use of the services of the Company. For the purposes of
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this Section 3.24, each of the Company Funds will be deemed to be material to
the Company.
SECTION 3.25 Opinion of Financial Advisor. Goldman, Sachs &
Co. (the "FINANCIAL ADVISOR") has delivered to the Company Board its opinion,
dated the date of this Agreement, to the effect that, as of such date and based
upon and subject to the matters set forth therein, the Share Exchange
Consideration is fair to the holders of Shares from a financial point of view,
and such opinion has not been withdrawn or modified.
SECTION 3.26 Brokers. No broker, finder or investment banker
(other than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to Parent) is entitled to any brokerage, finder's or
other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company or any of its affiliates.
SECTION 3.27 Accounting Matters;. (a) To the Company's
knowledge, based upon discussions with Ernst & Young LLP, the Company has not
taken or agreed to take any action that would prevent the Share Exchange from
qualifying as a "pooling of interests" under APB 16 and the applicable SEC rules
and regulations other than as previously disclosed to Parent as specified in
Schedule 3.27 of the Company Disclosure Schedule.
SECTION 3.28 Tax Matters. The Company has neither directly or
indirectly taken or agreed to take any action, that would prevent the Share
Exchange from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the disclosure schedule delivered by
Parent to the Company prior to the execution of this Agreement (the "PARENT
DISCLOSURE SCHEDULE") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein), Parent hereby represents and warrants to the Company as follows:
SECTION 4.1 Organization and Qualification. (a) Each of Parent
and its Subsidiaries, is a corporation or legal entity 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 businesses as now conducted or
proposed by Parent to be conducted, except where the failure to be duly
organized, existing and in good standing or to have such power and authority
does not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
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(b) Each of Parent and its Subsidiaries is duly qualified or
licensed and in good standing to do business 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 does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
(c) Parent has heretofore delivered to the Company accurate
and complete copies of the certificate of incorporation and bylaws of Parent as
currently in effect.
SECTION 4.2 Capitalization of Parent and its Subsidiaries. (a)
The authorized capital stock of Parent consists of: (i) 500,000,000 shares of
Parent Common Stock, of which 243,730,139 shares of Parent Common Stock were
issued and outstanding as of the close of business on September 30, 2000, and
(ii) 1,000,000 shares of preferred stock, $1.00 par value per share, none of
which are outstanding. All of the issued and outstanding shares of Parent Common
Stock have been validly issued, and are duly authorized, fully paid,
non-assessable and free of preemptive rights. As of September 30, 2000, no more
than 2,221,000 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options. Except as described in Section 4.2 of the Parent Disclosure
Schedule, the Parent SEC Reports (as hereinafter defined) or as set forth above,
as of the date hereof, there are outstanding (i) no shares of capital stock or
other voting securities of Parent, (ii) no securities of Parent or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of Parent, (iii) no options or other rights to acquire from
Parent or any of its Subsidiaries, and no obligations of Parent or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent, and (iv) other than in connection with Parent's Employee Benefit Plans
and Programs, no equity equivalents, interests in the ownership or earnings of
Parent or any of its Subsidiaries or other similar rights (including stock
appreciation rights) (collectively, "PARENT SECURITIES"). There are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Parent Securities. Except as set forth in the
Parent SEC Reports, there are no shareholder agreements, voting trusts or other
agreements or understandings to which Parent or any of its Subsidiaries is a
party or to which it is bound relating to the voting of any shares of capital
stock of Parent.
(b) Except for minority positions held by foreign nationals in
non-U.S. Subsidiaries as required by applicable Law, all of the outstanding
capital stock of Parent's Subsidiaries is owned by Parent, directly or
indirectly, free and clear of any Lien or any other limitation or restriction
(including any restriction on the right to vote or sell the same, except as may
be provided as a matter of Law). There are no securities of Parent or its
Subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from Parent or its Subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other ownership
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interests in, or any other securities of, any Subsidiary of Parent. There are no
outstanding contractual obligations of Parent or its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any Subsidiary of Parent.
SECTION 4.3 Authority Relative to this Agreement. (a) Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. No other corporate proceedings on the part of
Parent are necessary to authorize this Agreement and the Stock Option Agreement
or to consummate the transactions contemplated hereby or thereby. This Agreement
and the Stock Option Agreement have been duly and validly executed and delivered
by Parent and constitute valid, legal and binding agreements of Parent,
enforceable against Parent in accordance with their respective terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability related to or affecting creditors' rights or by general equity
principles.
(b) The Board of Directors of Parent (the "PARENT BOARD") has
duly and validly authorized the execution and delivery of this Agreement and the
Stock Option Agreement and the consummation of the transactions contemplated
hereby and thereby, and taken all corporate actions required to be taken by the
Parent Board for the consummation of such transactions.
SECTION 4.4 SEC Reports; Financial Statements. (a) Parent has
filed all required forms, reports and documents, together with any amendments
required to be made thereto, with the SEC since January 1, 1998, each of which
has complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each as in effect on the dates such forms,
reports and documents were filed. Parent has heretofore delivered to the
Company, in the form filed with the SEC (including any amendments thereto), (i)
its Annual Reports on Form 10-K for the fiscal years ended September 30, 1998
and 1999, (ii) all definitive proxy statements relating to Parent's meetings of
shareholders (whether annual or special) held since January 1, 1998, and (iii)
all other reports or registration statements filed by Parent with the SEC since
January 1, 1998 (the "PARENT SEC REPORTS"). None of such forms, reports or
documents, contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in the Parent SEC Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and fairly present, in conformity with GAAP on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments). Since October 1, 1999, there has
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not been any material change, or any application or request for any material
change, by Parent or any of its Subsidiaries in accounting principles, methods
or policies for financial accounting or Tax purposes, except for such change
required by Law, SEC regulation or generally applicable changes in GAAP. There
is (i) no unresolved violation with respect to any report or statement relating
to any examinations or inspections of Parent or any of its Subsidiaries by any
Governmental Entity and (ii) has been no material disagreements or disputes
with, any Governmental Entity with respect to the business, operations, policies
or procedures of Parent since January 1, 1998. Parent has not filed any document
that would constitute a Parent SEC Report since October 15, 2000.
SECTION 4.5 Absence of Changes. Except as and to the extent
publicly disclosed by Parent in the Parent SEC Reports, since June 30, 2000, the
business of Parent and its Subsidiaries has been carried on in the ordinary and
usual course consistent with past practice, and there have been no events,
changes or developments with respect to Parent or its Subsidiaries, which do or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
SECTION 4.6 No Undisclosed Liabilities. Except for those
liabilities that are fully reflected or reserved against on the latest balance
sheet included in the Parent SEC Reports as of June 30, 2000 and liabilities
incurred in the ordinary course of business consistent with past practices since
the date of such balance sheet, neither Parent nor its Subsidiaries has any
material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted or
unasserted, which would be required by GAAP to be reflected in, reserved against
or otherwise described in a consolidated balance sheet of Parent (including the
notes thereto).
SECTION 4.7 Information Supplied. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 is filed with the SEC and at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) the Proxy
Statement will, at the date mailed to shareholders and at the time of the
Company Shareholder Meeting, 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 and (iii) the Applications will, at the date of
filing and through and including the date of action by the appropriate
Governmental Entities thereon, 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 statement therein, in light of the circumstances under which
they are made, not misleading, or will otherwise fail to comply in all material
respects with applicable Law. If at any time prior to the Effective Time any
event with respect to Parent, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the S-4, the Proxy Statement or an Application, Parent shall
promptly so advise the Company and such event shall be so described, and such
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amendment or supplement (which the Company shall have a reasonable opportunity
to review) shall be promptly filed with the SEC or the relevant Governmental
Entity, as the case may be. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
SECTION 4.8 Consents and Approvals; No Violations. (a) Neither
the execution, delivery and performance of this Agreement or the Stock Option
Agreement by Parent nor the consummation by Parent of the transactions
contemplated hereby or thereby will violate, conflict with or result in any
breach of, require any consent, waiver or notice under any term of, or result in
the reduction, loss, or cancellation of any benefit or the creation or
acceleration of any right or obligation under (i) any provision of the
respective certificate of incorporation or bylaws (or similar governing
documents) of (x) Parent or (y) any of Parent's Subsidiaries, (ii) any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) any Law applicable to
Parent or any of its Subsidiaries or any of their respective properties or
assets (assuming the making by the Company of all required filings with, and the
receipt by the Company of all required permits, authorizations, consents and
approvals of all applicable Governmental Entities), except in the case of, (i)
(y), (ii) or (iii) for violations, breaches or defaults which do not or would
not be expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
SECTION 4.9 No Default. Neither Parent nor any of its
Subsidiaries is in violation of any term of (i) its certificate or articles of
incorporation, or bylaws or similar governing documents, (ii) any agreement to
which it is a party or by which it is bound, or (iii) any Law applicable to
Parent, its Subsidiaries or any of their respective properties or assets, the
consequence of which violation does or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
SECTION 4.10 Compliance with Applicable Law. Except as or to
the extent publicly disclosed by Parent in the Parent SEC Reports Parent and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "PARENT PERMITS"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which do not or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Except as and to the extent publicly
disclosed by Parent in the Parent SEC Reports, Parent and its Subsidiaries are
in compliance with the terms of the Parent Permits, except where the failure so
to comply does not or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent. Except as and to the
extent publicly disclosed by Parent in the Parent SEC Reports, the businesses of
Parent and its Subsidiaries are not being conducted in violation of any Law,
ordinance or regulation of any Governmental Entity applicable to Parent or its
Subsidiaries, except for violations or possible violations which do not and
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would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Except as or to the extent publicly disclosed
by Parent in the Parent SEC Reports, to Parent's knowledge, no investigation or
review by any Governmental Entity other than periodic examinations conducted in
the ordinary course with respect to Parent or its Subsidiaries is pending or
threatened, nor, to Parent's knowledge, has any Governmental Entity indicated an
intention to conduct the same.
SECTION 4.11 Ineligible Persons. Neither Parent, nor any
"affiliated person" (as defined in the Investment Company Act) thereof, is
ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to
serve as an investment adviser (or in any other capacity contemplated by the
Investment Company Act) to a registered investment company. Neither Parent nor
any "associated person" (as defined in the Advisers Act) thereof, is ineligible
pursuant to Section 203 of the Advisers Act to serve as an investment adviser or
as an associated person to a registered investment adviser. Neither Parent nor
any "associated person" (as defined in the Exchange Act) thereof, is ineligible
pursuant to Section 15(b) of the Exchange Act to serve as a broker-dealer or as
an associated person to a registered broker-dealer.
SECTION 4.12 Parent Funds; Advisory Agreements. (a) Each
Parent Fund (as hereinafter defined) that is an entity is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization and has the requisite corporate, trust or partnership power and
authority to own its properties and to carry on its business as it is now
conducted, and is qualified to do business in each jurisdiction where it is
required to do so under applicable Law, except where the failure to have such
power, authority or qualification, does not or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Parent.
Each Parent Fund is, and at all times as required under the Securities Laws
since prior to its initial public offering of Securities (as defined in the
Securities Act) has been, duly registered with the SEC, to the extent such
registration is required, as an investment company under the Investment Company
Act.
(b) (i) The shares of each Parent Fund are qualified for
public offering and sale in each jurisdiction where offers are made to the
extent required under applicable Law and (ii) each Parent Fund has been operated
since its organization and is currently operating in compliance in all material
respect with applicable Law.
(c) Each Parent Investment Company Advisory Agreement (as
hereinafter defined) subject to Section 15 of the Investment Company Act has
been duly approved by Parent or its Subsidiary at all times in compliance with
Section 15 of the Investment Company Act and all other applicable Laws. Each
such Parent Investment Company Advisory Agreement has been performed by Parent
in accordance with the Investment Company Act and all other applicable Laws.
SECTION 4.13 Brokers. No broker, finder or investment banker
(other than Merrill Lynch & Company) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
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Agreement based upon arrangements made by and on behalf of Parent or any of
their affiliates.
SECTION 4.14 Tax Matters. Parent has neither directly or
indirectly taken or agreed to take any action that would prevent the Share
Exchange from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, the Company will, and will cause each of its Subsidiaries to,
conduct its operations in the ordinary and usual course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of this Agreement,
seek to preserve intact its current business organizations, seek to keep
available the services of its current officers and employees and seek to
preserve its relationships with clients, customers, suppliers and others having
business dealings with it to the end that goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement or in
the Company Disclosure Schedule, prior to the Effective Time, neither the
Company nor any of its Subsidiaries will, without the prior written consent of
Parent (such consent not to be unreasonably withheld or delayed);
(a) amend its certificate of incorporation or bylaws (or other
similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities convertible into or exchangeable
for any stock or any equity equivalents (including, without limitation, any
stock options or stock appreciation rights) other than grants of restricted
stock pursuant to the Company's Deferred Compensation Plan in the ordinary and
usual course of business consistent with past practice or pursuant to the terms
of any Company Employee Benefit Plan in existence on the date hereof as listed
in the Company Disclosure Schedule;
(c) (i) split, combine or reclassify any shares of its capital
stock; (ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, except the declaration and payment of regular quarterly cash
dividends not in excess of $0.35 per Share with usual record and payments dates
in accordance with past dividend practice and dividends paid by Wholly-Owned
Subsidiaries; (iii) make any other actual, constructive or deemed distribution
in respect of any shares of its capital stock or otherwise make any payments to
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shareholders in their capacity as such; or (iv) redeem, repurchase or otherwise
acquire for its own account any of its securities or any securities of any of
its Subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries;
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any Subsidiary;
(f) (i) incur or assume any long-term or short-term debt or
issue any debt securities, except in the ordinary and usual course of business
consistent with past practice; (ii) guarantee, endorse or otherwise incur or
assume any liability (whether directly, contingently or otherwise) for the
obligations of any other person, other than in the ordinary and usual course of
business consistent with past practice and in amounts not material to the
Company and its Subsidiaries, taken as a whole, and except for obligations of
any Wholly-Owned Subsidiaries of the Company; (iii) make any loans, advances or
capital contributions to any other person, other than to Wholly-Owned
Subsidiaries of the Company or customary loans or advances made in the ordinary
and usual course of business consistent with past practice and in amounts not
material to the maker of such loan or advance; (iv) pledge or otherwise encumber
shares of capital stock of the Company or its Subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien thereupon;
(g) except as may be required by Law, or preexisting
contractual commitment and except for actions taken in the ordinary course of
business consistent with past practice, enter into, adopt or amend or terminate
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund,
award or other arrangement for the benefit or welfare of any director, officer
or employee in any manner, or increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance units);
(h) acquire, sell, lease or dispose of any assets outside the
ordinary and usual course of business consistent with past practice or any
assets which in the aggregate are material to the Company and its Subsidiaries
taken as a whole, or enter into any commitment or transaction outside the
ordinary and usual course of business consistent with past practice;
(i) except as may be required as a result of a change in Law
or in GAAP, change any of the accounting principles or practices used by it;
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(j) revalue in any material respect any of its assets, other
than in the ordinary and usual course of business consistent with past practice
or as required by GAAP;
(k) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof; (ii) other than in the ordinary and usual course of business
consistent with past practice, enter into any contract or agreement or make any
material amendment to any of the Material Contracts, other than advisory
agreements; (iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $1,000,000 or, in the aggregate, are in excess of
$5,000,000; or (iv) enter into or amend any contract, agreement, commitment or
arrangement providing for the taking of any action that would be prohibited
hereunder;
(l) make or rescind any material express or deemed election
relating to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or except as may be required by applicable Law, make any
change to any of its material methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of its most
recently filed federal income tax return;
(m) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
and usual course of business consistent with past practice of liabilities
reflected or reserved against in, the consolidated financial statements of the
Company and its Subsidiaries or incurred in the ordinary and usual course of
business consistent with past practice;
(n) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby;
(o) take any action (including any action otherwise permitted
by this Section 5.1) to the Company's knowledge, after discussions with Ernst &
Young LLP, that would prevent or impede the Share Exchange from qualifying as a
"pooling of interests" under APB 16 and the applicable SEC rules and
regulations, other than as previously disclosed to Parent as specified in
Schedule 3.27 of the Company Disclosure Schedule;
(p) enter into any agreement or arrangement that limits or
otherwise restricts the Company or any of its Subsidiaries or affiliates
(including Parent) or any successor thereto, from engaging or competing in any
line of business or in any geographic area;
(q) take any action that would materially impede or delay the
ability of the parties to obtain any necessary approvals of any Governmental
Entity required for the transactions contemplated hereby or by Stock Option
Agreement;
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(r) take any action that would reasonably be likely to prevent
or impede the Share Exchange from qualifying as a reorganization within the
meaning of Section 368(a) of the Code;
(s) voluntarily divest itself of the management of any mutual
fund or other assets currently under management other than in the ordinary and
usual course of business consistent with past practice; or
(t) take, propose to or agree in writing or otherwise to take,
any of the actions described in Sections 5.1(a) through 5.1(s)
SECTION 5.2 Conduct of Business of Parent. Except as otherwise
expressly provided in this Agreement or as set forth in the Parent Disclosure
Schedule, prior to the Effective Time, neither Parent nor any of its
Subsidiaries will, without the prior written consent of the Company (such
consent not to be unreasonably withheld or delayed):
(a) except for such actions that are adjusted for pursuant to
Section 2.1(c), (i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, except the declaration and payment of regular quarterly cash
dividends with usual record and payments dates in accordance with past dividend
practice; (ii) make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
shareholders in their capacity as such; or (iii) redeem, purchase or otherwise
acquire any of its securities or any securities of any of its Subsidiaries;
(b) except as may be required as a result of a change in Law
or in GAAP, change any of the accounting practices used by it;
(c) revalue in any material respect any of its assets, other
than in the ordinary and usual course of business consistent with past practice
or as required by GAAP;
(d) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof, if Parent in good faith believes such acquisition would
materially delay the consummation of the transactions contemplated by this
Agreement;
(e) take any action that would materially impede or delay the
ability of the parties to obtain any necessary approvals of any Governmental
Entity required for the transactions contemplated hereby or by the Stock Option
Agreement;
(f) take any action (including any action otherwise permitted
by this Section 5.2), to Parent's knowledge, after discussions with
PricewaterhouseCoopers LLP, that would prevent or impede the Share Exchange from
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qualifying as a "pooling of interests" under APB 16 and the applicable SEC rules
and regulations, other than as previously disclosed to the Company;
(g) take any action that would reasonably be likely to prevent
or impede the Share Exchange from qualifying as a reorganization within the
meaning of Section 368(a) of the Code; or
(h) take, propose or agree in writing or otherwise to take,
any of the actions described in Section 5.2(a) through 5.2(g).
SECTION 5.3 Access to Information. (a) Between the date hereof
and the Effective Time, the Company will give Parent and its authorized
representatives (including counsel, financial advisors and auditors) reasonable
access during normal business hours to all employees, offices and other
facilities and to all books and records of the Company and its Subsidiaries,
will permit Parent to make such inspections as Parent may reasonably require and
will cause the Company's officers and those of its Subsidiaries to furnish
Parent with such financial and operating data and other information with respect
to the business, properties and personnel of the Company and its Subsidiaries as
Parent may from time to time reasonably request, provided that no investigation
pursuant to this Section 5.3(a) shall affect or be deemed to modify any of the
representations or warranties made by the Company.
(b) Between the date hereof and the Effective Time, the
Company shall furnish to Parent within two (2) business days after the delivery
thereof to management, such monthly financial statements and data as are
regularly prepared for distribution to Company management.
(c) From the date hereof to the Effective Time, Parent shall
comply with the reasonable requests of the Company to make officers available to
respond to the reasonable inquiries of the Company in connection with the
transactions contemplated hereby and to make available information regarding
Parent and its Subsidiaries as the Company may reasonably request.
(d) Parent and the Company each will hold and will cause its
authorized representatives to hold in confidence all documents and information
concerning the other furnished to it in connection with the transactions
contemplated by this Agreement pursuant to the terms of that certain
Confidentiality Agreement entered into between the Company and Parent dated
October 12, 2000 (the "CONFIDENTIALITY AGREEMENT").
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of S-4 and the Proxy Statement. Parent
and the Company will, as promptly as practicable, jointly prepare the Proxy
Statement in connection with the vote of the shareholders of the Company with
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respect to the Share Exchange. Parent will, as promptly as practicable, prepare
and file with the SEC the S-4, containing a proxy statement/prospectus and form
of proxy, in connection with the registration under the Securities Act of the
shares of Parent Common Stock issuable upon the Share Exchange and the other
transactions contemplated hereby. Parent will, and will cause its accountants
and lawyers to, use all reasonable best efforts to have or cause the S-4
declared effective as promptly as practicable after filing with the SEC,
including, without limitation, causing its accountants to deliver necessary or
required instruments, such as opinions, consents and certificates, and will take
any other action required or necessary to be taken under federal or state
securities Laws or otherwise in connection with the registration process (other
than qualifying to do business in any jurisdiction which it is not now so
qualified or to file a general consent to service of process in any
jurisdiction). To the extent necessary, the Company will cooperate with Parent
to complete the foregoing. The Parent shall, as promptly as practicable after
the receipt thereof, provide to the Company copies of any written comments and
advise the Company of any oral comments, with respect to the S-4 received from
the staff of the SEC. The Company will use its reasonable best efforts to cause
the Proxy Statement to be mailed to its shareholders at the earliest practicable
date.
SECTION 6.2 Regulatory Matters. (a) Subject to the conditions
set forth in Article VII hereof, each of Parent and the Company shall, and shall
cause its Subsidiaries to, consult and cooperate with each other and in good
faith promptly (i) take, or cause to be taken, all actions necessary, proper or
advisable to comply with all legal requirements which may be imposed on such
party or its Subsidiaries with respect to the transactions contemplated herein,
to consummate the transactions contemplated by this Agreement and (ii) prepare
and file all necessary documentation, effect all applications, notices,
petitions and filings with, and use their reasonable best efforts to obtain as
promptly as practicable all permits, consents, approvals and authorizations of,
all Governmental Entities, including without limitation, the FRS, which are
necessary or advisable to consummate the transactions contemplated by this
Agreement.
(b) In particular, Parent shall prepare and file all requisite
notices and Applications with respect to the transactions contemplated by this
Agreement required to be made by Parent with the Federal Reserve Board or any
other Governmental Entities, as promptly as practicable after the date of this
Agreement.
(c) Parent and the Company shall have the right to review in
advance and, to the extent practicable, each will consult the other on, in each
case subject to applicable Laws relating to the exchange of information, all the
information relating to the Company or Parent, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
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(d) Parent and the Company shall keep the other reasonably
informed as to the status of all notices and Applications and, subject to
applicable Law relating to the exchange of information, provide to each other,
promptly after filing, copies of such notices and applications and all
supplemental or related filed materials.
(e) Parent and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with or any statement, filing, notice or application
made by or on behalf of Parent, the Company any of their respective Subsidiaries
to any Governmental Entity in connection with the transactions contemplated by
this Agreement.
(f) Parent and the Company shall promptly advise each other
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any required approval of any Governmental Entity will not be
obtained or that the receipt of any such approval will be materially delayed.
(g) Subject to the conditions set forth in Article VII hereof,
if any administrative or judicial action or proceeding, including any proceeding
by a private party, is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any Law, each of
Parent and the Company shall cooperate in all respects with each other and use
its respective commercially reasonable best efforts to contest and resist any
such action or proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether temporary, preliminary
or permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
(h) Notwithstanding the foregoing, neither Parent nor the
Company shall be required to disclose to the other any personal financial
statements or other similar information concerning their directors, officers,
shareholders or their respective individual affiliates.
SECTION 6.3 Letter of Accountants. To the extent appropriate
and/or required by either party:
(a) The Company shall use all reasonable best efforts to cause
to be delivered to Parent a letter of Ernst & Young LLP, the Company's
independent auditors, dated a date within two (2) business days before the date
on which the S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
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(b) Parent shall use all reasonable best efforts to cause to
be delivered to the Company a letter of PricewaterhouseCoopers LLP, Parent's
independent auditors, dated a date within two (2) business days before the date
on which the 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 S-4.
SECTION 6.4 Meeting. (a) The Company shall take all lawful
action to (i) cause a special meeting of its shareholders (the "COMPANY
SHAREHOLDER MEETING") to be duly called and held as soon as practicable after
the S-4 is declared effective for the purpose of voting on the approval and
adoption of this Agreement and (ii) solicit proxies from its shareholders to
obtain the Company Requisite Vote for the approval and adoption of this
Agreement. The Company Board shall (i) recommend that the shareholders of the
Company adopt this Agreement and thereby approve the transactions contemplated
by this Agreement and (ii) take all lawful action (including the solicitation of
proxies) to solicit such adoption; provided, however, that the Company Board
may, at any time prior to the time of the Company Shareholder Meeting, withdraw,
modify or change any such recommendation to the extent that the Company Board
determines in good faith, after consultation with outside legal counsel, that
such withdrawal, modification or change of its recommendation is necessary to
comply with its fiduciary duties to the Company's shareholders under applicable
Law (a "COMPANY SUBSEQUENT DETERMINATION"), but only at a time that is after the
fifth business day following Parent's receipt of written notice advising Parent
that the Company Board intends to make a Company Subsequent Determination. After
providing such notice, Company shall provide a reasonable opportunity to Parent
to make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with its recommendation to its shareholders
without a Company Subsequent Determination; provided, however, that any such
adjustment shall be at the discretion of the parties at the time.
SECTION 6.5 [Intentionally Omitted]
SECTION 6.6 Company Fund Meetings. If and to the extent
necessary, the Company shall assist each of the Company Funds to prepare and
file with the SEC, or other applicable Governmental Entity, as soon as is
reasonably practicable a preliminary proxy statement, together with a form of
proxy, to be used in connection with the meeting of the shareholders of each
such Company Fund for the purpose of approving new Investment Company Advisor
Agreements, or other applicable agreements, with the current advisor of each
such Fund, substantially on the terms of the current Investment Company Advisor
Agreements, to take effect at the Effective Time, and, as promptly as
practicable thereafter, subject to compliance with the rules and regulations of
the SEC to the extent applicable, a definitive proxy statement with respect to
such meeting shall be mailed to the shareholders of such Company Fund. Each such
proxy statement shall comply as to form in all material respects with all
applicable Law.
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SECTION 6.7 Non-Investment Company Advisory Contract Consents.
(a) As soon as reasonably practicable after the date thereof, the Company shall
inform the Funds, that are not Company Funds, of the transactions contemplated
by this Agreement and request that such Funds take such actions as may be
necessary in connection with the deemed assignment, as defined in Section 202(c)
of the Investment Advisers Act of 1940, as amended (the "Advisers Act") (the
"DEEMED ASSIGNMENT") of the advisory agreements to which the Company or any of
its Subsidiaries its Subsidiaries is a party relating to such Fund.
(b) As soon as reasonably practicable after the date thereof,
the Company shall inform its investment advisory clients that are parties to
Non-Investment Company Advisory Agreements ("NICAAS") of the transactions
contemplated by this Agreement. The Company shall request written consent of
each such client to the deemed assignment of its NICAA and use its best efforts
to obtain such consent; or in the case of NICAAs which prohibit assignment or
state by their terms that they terminate upon assignment, the Company will use
its best efforts to enter into new agreements to in substantially identical
terms be effective upon Closing and the deemed assignment. Parent agrees that,
except in the case of NICAAs that prohibit assignment or state by their terms
that they terminate upon assignment or do not, by their terms, require written
consent of the client, the Company may obtain consent by requesting written
consent as aforesaid and informing such client: (a) of the Company's intention
to effect a deemed assignment of such NICAAs; (b) of the Company's intention to
continue the advisory services, pursuant to the NICAAs with such client after
the Closing if such client does not terminate such NICAAs prior to the Closing;
and (c) that the consent of such client will be implied if such client continues
to accept such advisory services for at least 30 days after receipt of the
Closing without termination (to the extent permitted by the Advisers Act, and
any rules, regulations or interpretations of the SEC thereunder).
SECTION 6.8 Acquisition Proposals. From the date hereof until
the termination hereof and except as expressly permitted by the following
provisions of this Section 6.8, the Company will not, nor will it permit any of
its Subsidiaries to, nor will it authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant or other advisor or
representative of, the Company or any of its Subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage the submission of any
Acquisition Proposal (as hereinafter defined) or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate, any Acquisition
Proposal or any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal; provided, however,
that nothing contained in this Section 6.8 shall prohibit the Company from
furnishing information to, or entering into discussions or negotiations with,
any person that makes an unsolicited bona fide written Acquisition Proposal
after the date hereof if, and only to the extent that (A) the Company
Shareholder Meeting shall not have occurred, (B) the Company Board, after
consultation with and receipt of advice of independent legal counsel, determines
in good faith that such action is necessary for the Company Board to comply with
its fiduciary duties to the Company's shareholders under applicable Law, (C) the
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Company Board determines, after consultation with and receipt of advice of its
financial advisor and after taking into account the strategic benefits to be
derived from the Share Exchange and the long-term prospects of Parent and its
Subsidiaries, that such Acquisition Proposal is reasonably likely, if
consummated, to result in a transaction more favorable to the Company's
shareholders from a financial point of view than the Share Exchange, and (D)
prior to taking such action, the Company (x) provides reasonable notice to
Parent to the effect that it is taking such action and (y) receives from such
person an executed confidentiality/standstill agreement in reasonably customary
form and in any event containing terms at least as stringent as those contained
in the Confidentiality Agreement between Parent and the Company. Prior to
providing any information to or entering into discussions or negotiations with
any person in connection with an Acquisition Proposal by such person, the
Company shall notify Parent of any Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it) as promptly as practicable (but in no case later than 24
hours) after its receipt thereof, and shall provide Parent with a copy of any
written Acquisition Proposal or amendments or supplements thereto, and shall
thereafter inform Parent on a prompt basis of the status of any discussions or
negotiations with such a third party, and any material changes to the terms and
conditions of such Acquisition Proposal, and shall promptly give Parent a copy
of any information delivered to such person which has not previously been
reviewed by Parent. Immediately after the execution and delivery of this
Agreement, the Company will, and will cause its Subsidiaries and affiliates, and
their respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any possible Acquisition Proposal. The Company agrees that it will take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section 6.8.
SECTION 6.9 Public Announcements. Each of Parent and the
Company will consult with one another before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Share
Exchange, 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 or by obligations pursuant to any listing agreement with a securities
exchange, as determined by Parent or the Company, as the case may be.
SECTION 6.10 Indemnification. (a) From and after the Effective
Time, Parent shall, to the fullest extent permitted by applicable Law,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, a
director, officer or employee of the Company or any of its Subsidiaries (each an
"INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED PARTIES") against all
losses, expenses (including reasonable attorneys' fees and expenses), claims,
damages or liabilities or amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
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claimed prior to, at or after the Effective Time that are in whole or in part
(i) based on, or arising out of the fact that such person is or was a director,
officer or employee of such party or a Subsidiary of such party or (ii) based
on, arising out of or pertaining to the transactions contemplated by this
Agreement.
(b) In the event Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in either
such case, proper provision shall be made so that the successors and assigns of
Parent shall assume the obligations set for in this Section 6.10.
(c) Parent shall use commercially reasonable efforts to cause
the persons serving as officers and directors of the Company immediately prior
to the Effective Time to be covered for a period of six (6) years from the
Effective Time by the directors' and officers' liability insurance policy
maintained by the Company (provided that Parent may substitute therefor policies
of at least the same coverage and amounts containing terms and conditions which
are not less advantageous than such policy with an insurance company with the
same or better rating by A.M. Best Company or otherwise reasonably approved by
the Company Board) with respect to acts and omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such; provided, however, that in no event shall Parent be required
to expend on an annual basis more than 200% of the current annual amount
expended by the Company (the "INSURANCE AMOUNT") to maintain or procure
insurance coverage pursuant hereto and further provided, that if Parent is
unable to maintain or obtain the insurance called for by this Section 6.10(c),
Parent shall use commercially reasonable efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(d) To the fullest extent permitted by Law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of the Company and its Subsidiaries
with respect to their activities as such prior to the Effective Time, as
provided in the Company's certificate of incorporation or bylaws and those of
its Subsidiaries, in effect on the date hereof, shall survive the Share Exchange
and shall continue in full force and effect from the Effective Time and Parent
shall provide substantially similar terms of indemnification for such persons
with respect to their activities as such following the Effective Time.
(e) The provisions of this Section 6.10 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
SECTION 6.11 Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) any notice or other communication from any third party (other
than parties to investment advisory agreements) alleging that the consent of
such third party is or may be required in connection with the transactions
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contemplated by this Agreement, or (ii) the failure or prospective failure to
satisfy any condition to the consummation of the transactions contemplated by
this Agreement set out in Article VII hereof, or the occurrence or
non-occurrence of any event which would permit the termination of this
Agreement; provided, however, that the delivery of any notice pursuant to this
Section 6.11 shall not cure such non-compliance or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.12 Pooling.Parent shall take reasonable actions as
are within its control necessary to cause the accounting of the Share Exchange
to be treated as a "pooling of interests" under APB 16 and the applicable rules
and regulations of the SEC.
SECTION 6.13 Employee Matters. (a) Parent will cause the
Company to honor the obligations of the Company or any of its Subsidiaries under
the provisions of all employment, consulting, termination, severance, change in
control and indemnification agreements (set forth on Sections 3.13(a) and 3.22
of the Company Disclosure Schedule or made available to Parent) between and
among the Company or any of its Subsidiaries and any current or former officer,
director, consultant or employee of the Company or any of its Subsidiaries.
Parent acknowledges that the consummation of the Share Exchange shall constitute
a "change in control" for all purposes under the agreements specified in the
immediately preceding sentence and the applicable Company Employee Benefit
Plans.
(b) As promptly as practicable following the Effective Time,
Parent shall arrange for each employee of the Company or any Subsidiary to
participate in the Employee Benefit Plans covering employees of the Parent
("PARENT EMPLOYEE BENEFIT PLANS") in accordance with the eligibility criteria,
provided that (i) such participants shall receive full credit, without
duplication, for years of service with the Company or any Subsidiary (and
service otherwise credited by the Company or any Subsidiary) prior to the
Effective Time for which such service was recognized under the Company Employee
Benefit Plans, for eligibility to participate and vesting and levels of
benefits, but not benefit accrual, under similar compensation or employee
benefit plans of Parent and its Subsidiaries, (ii) such participants and their
dependents (to the extent that the terms and conditions of each Parent Employee
Benefit Plan provide for coverage and/or benefits of eligible employees'
dependents) shall participate in the Parent Employee Benefit Plans on terms no
less favorable than those offered by Parent to similarly situated employees of
Parent, (iii) Parent shall cause any and all pre-existing condition limitations,
eligibility waiting periods and evidence of insurability requirements under any
group plans to be waived with respect to such participants and their eligible
dependents to the same extent waived under the Company Employee Benefit Plans
and shall provide each such participant with credit for any co-payments and
deductibles paid during the portion of the calendar year prior to the Effective
Time which includes the Closing Date for purposes of satisfying any applicable
deductible, out-of-pocket, or similar requirements during such calendar year
under all Parent Employee Benefit Plans in which such participants are eligible
to participate after the Effective Time, (iv) during the 18-month period
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following the Effective Time, Parent will provide each current and former
employee or director of the Company and each Subsidiary with benefits and
compensation that are, in the aggregate, no less favorable than the benefits and
compensation received by such employee or director prior to the Effective Time,
(v) retiree medical (including prescription drug and dental) insurance benefits
currently provided to retired employees of the Company and its Subsidiaries
shall continue to be provided to such retired employees, shall be provided upon
retirement to all employees of the Company or any of its Subsidiaries who as of
the Closing Date are at least 55 years old and have been employed by the Company
or any of its Subsidiaries for at least 10 years and shall not be reduced from
the levels provided prior to the Effective Time. Notwithstanding any of the
foregoing to the contrary, none of the provisions contained herein shall operate
to duplicate any benefit provided to any employee of the Company or the funding
of any such benefit.
(c) Parent will create and fund a retention pool in the amount
of $85,000,000 for Company's employees from and after the Effective Time in
accordance with the terms set forth in Section 6.13 of the Parent Disclosure
Schedule.
SECTION 6.14 Affiliate Letters. Pursuant to Section 2.14
hereof, Section 6.14 of the Company Disclosure Schedule sets forth a list of all
individuals who are, and all individuals who to the Company's knowledge will be
at the Closing Date, "affiliates" of the Company for purposes of Rule 145 under
the Securities Act or for purposes of qualifying the Share Exchange for
"pooling-of-interests" accounting treatment under APB 16 and applicable SEC
rules, and Section 6.14 of the Parent Disclosure Schedule sets forth a list of
all persons who are, and all persons who to Parent's knowledge will be deemed at
the Closing Date, "affiliates" of Parent for purposes of qualifying the Share
Exchange for "pooling of interests" under APB 16 and the applicable SEC rules
and regulations. The Company and Parent will each respectively cause such lists
to be updated promptly through the Closing Date. Not later than 45 days prior to
the date of the Company Shareholder Meeting, the Company shall cause its
"affiliates" to deliver to Parent a written agreement substantially in the form
attached as Exhibit B, and Parent shall cause its "affiliates" to deliver to the
Company a written agreement substantially in the form attached as Exhibit C.
SECTION 6.15 Application of Section 16 of the Exchange Act.
Assuming the Company delivers to Parent the necessary information, prior to the
Effective Time, Parent and the Company shall take all such steps as may be
required to cause the transactions contemplated by this Agreement, including any
dispositions of Shares (including derivative securities with respect to Shares)
and acquisitions of Parent Common Stock (including derivative securities with
respect to Parent Common Stock) by each person who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company,
or who will be subject to such requirements with respect to Parent, to be exempt
under Rule 16b-3 promulgated under the Exchange Act.
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SECTION 6.16 Fees and Expenses. Whether or not the Share
Exchange is consummated, all Expenses (as hereinafter defined) incurred in
connection with this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
Expenses, except Expenses incurred in connection with the filing and printing of
the Proxy Statement and the S-4 shall be incurred by Parent and Expenses
incurred in connection with the mailing of the Proxy Statement and the S-4,
shall be incurred by the Company. As used in this Agreement, "EXPENSES" includes
all out-of-pocket expenses (including, without limitation, all fees and expenses
of counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with, or related to, the authorization, preparation, negotiation, execution and
performance of this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby, including the preparation, filing, printing and
mailing of the Proxy Statement and the S-4 and the solicitation of shareholder
approval and all other matters related to the transactions contemplated hereby.
SECTION 6.17 Listing of Stock. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in connection
with the Share Exchange to be approved for listing on the NYSE on or prior to
the Closing Date, subject to official notice of issuance.
SECTION 6.18 Authorized Parent Stock. Parent has reserved
sufficient shares of Parent Common Stock from its authorized and unissued
capital stock to accomplish the transactions contemplated by this Agreement,
including the Share Exchange, and shall maintain such reservation as necessary
to accomplish the transactions contemplated hereby.
SECTION 6.19 Antitakeover Statutes. If any "fair price",
"moratorium", "control share acquisition", "affiliate transaction", "business
combination" or other antitakeover Laws statute or regulation enacted under
state or federal laws (collectively, "TAKEOVER STATUTES") is or may become
applicable to the Share Exchange or the Stock Option Agreement, each of Parent
and the Company shall take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any Takeover Statute on the Share Exchange.
SECTION 6.20 Certain AgreementS. Parent envisages that the
Company will continue to function as an independent Subsidiary with its current
name and Company Board. In light of the importance of this independence, Parent
and the Company agree as follows:
(a) The Company's By-laws will be amended to include the
provisions set forth in clauses (i) -- (iii) of this subsection (a) of Section
6.20(a) (the "6.20(A) PROVISIONS"):
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(i) The Parent, as the holder of all of the outstanding
Shares, shall elect directors of the Company. Persons eligible to serve on
the Company Board shall be:
(A) the Company's directors in office
immediately prior to the effective
time;
(B) two (2) designees of Parent's chief
executive officer; and
(C) upon the departures of persons
referred to in clause (A) by reason
of death, retirement, resignation,
or removal for cause, persons
nominated by the Nominating
Committee of the Company Board. For
each vacancy the Nominating
Committee of the Company Board
shall nominate three persons. The
Parent shall be entitled to vote
the Shares in its discretion in
this regard.
(ii) The corporate name, bank regulatory status and
location of the principal place of business of the Company in New York
shall not be changed without the prior approval of the Company Board.
(iii) The size of the Company Board will not be altered
(other than to the extent necessary in connection with the appointment of
the two (2) designees of Parent's Chief Executive Officer), and the
provisions of the Company's By-Laws regarding the removal of directors
without cause will not be amended or altered without the approval of a
majority of the Company Board.
Until the third anniversary of the Closing Date (such three (3) year
period is referred to as the "PERIOD") the 6.20(a) Provisions will not be
modified or removed from the Company's By-laws without the approval of a
majority of the Company Board.
(b) The parties agree further that for the Period:
(i) The Company shall be maintained as a separate
wholly-owned Subsidiary of Parent. Subject to the provisions of subsection
(b)(ii) below, Parent shall consult with the Company Board with regard to
any reorganization of the operations and corporate structures of the
Subsidiaries of the Company and/or the integration of such operations and
corporate structures with Parent's businesses and Subsidiaries that Parent
may wish to effect following the Effective Time, with the goal of
achieving maximum efficiencies and synergies;
(ii) The global high net-worth individual businesses of
the Company and Parent as of the Effective Time, excluding Parent's
wrap-fee business, will be developed and managed by the Company in
consultation with Parent. Parent will advance the expansion of the global
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institutional separate account businesses of the Company for a full range
of growth equities, fixed income and real estate securities;
(iii) The Chief Executive Officer of the Company shall
report directly to the Chief Executive Officer of Parent. Personnel
decisions and the reporting structure concerning the executives, officers
and employees of Company shall be in the discretion of the Chief Executive
Officer of the Company within the framework of an overall budget and
within a context jointly developed by Parent and the Company. In
furtherance of the foregoing, the policies and procedures applicable to
the executives, officers and employees of the Company and its Subsidiaries
on a functional basis shall be consistent with the analogous policies and
procedures of Parent in existence from time to time;
(iv) The salary, benefits and terms of employment of the
Company's Chief Executive Officer shall not be modified without the prior
approval of Parent. Any vacancy in the office of Chief Executive Officer
of the Company by reason of death, retirement, resignation or otherwise
shall be filled by the Company Board with the prior consent of Parent;
(v) (a) Anne M. Tatlock will be a member of the Parent
Board, as long as she meets the requirements to be a director of a
corporation organized under the Delaware General Corporation Law and (b)
the Chief Executive Officer of the Company will be a member of office of
the chairman of Parent, for so long as such office is in existence,
reporting directly to the Chief Executive Officer of Parent; and
(vi) Parent will involve the management of the Company
in the future management of the Parent group.
(c) Following the execution of this Agreement, the Company and
Parent will form an integration committee, whose members will be
jointly agreed upon but will include William Y. Yun and Michael O.
Magdol. The integration committee will report directly to the Chief
Executive Officers of Parent and the Company. The integration committee
will study, among other things, technology development and integration
and back office consolidation.
SECTION 6.21 Tax-Free Share Exchange. Each of Parent and the
Company will use its reasonable best efforts, and each agrees to cooperate with
the other and provide one another with such documentation, information and
materials as may be reasonably necessary, proper and advisable to cause the
Share Exchange to qualify as a reorganization within the meaning of Section
368(a) of the Code.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE SHARE EXCHANGE
SECTION 7.1 Conditions to Each Party's Obligations to Effect
the Share Exchange. The respective obligations of each party to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Effective Time of each of the following conditions, any or all of
which may be waived in whole or in part by the party being benefited thereby, to
the extent permitted by applicable Law:
(a) This Agreement shall have been approved and adopted by the
Company Requisite Vote.
(b) The approvals of the FRS (and confirmation by the FRS that
Parent's election to be a financial holding company is effective) and of all
other relevant Federal and state bank and thrift regulators required for Parent
to acquire the Company and its Subsidiaries shall have been obtained and shall
remain in full force and effect, and Parent shall have duly and validly elected
to become and shall have qualified to become, a "financial holding company" (as
such term is defined in 12 U.S.C. Section 1841(p)). All other regulatory
approvals required to consummate the transactions contemplated hereby, and all
other statutory waiting periods, the failure of any of which to be obtained or
observed would be reasonably likely to have a Material Adverse Effect on Parent
or a Material Adverse Effect on the Company, shall have been obtained and remain
in full force and effect or, in the case of waiting periods, shall have expired
or been terminated. Such approvals referred to in the preceding two (2)
sentences shall have been obtained without any limitation, restriction or
condition that has or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or Parent, provided,
however, that except with respect to Parent's investment advisory or mutual fund
related businesses, no limitation, restriction or other requirement imposed on
Parent and its Subsidiaries (including the Company and its Subsidiaries
following the Effective Time) by reason of Parent's becoming a bank holding
company and a financial holding company under the BHCA will be deemed, directly
or indirectly, to have individually or in the aggregate, a Material Adverse
Effect on Parent or the Company;
(c) The S-4 shall have been declared effective by the SEC and
shall be effective at the Effective Time, and no stop order suspending
effectiveness shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the Securities Act or Exchange Act relating to the issuance or trading
of the Parent Common Stock shall have been received.
(d) The Parent Common Stock required to be issued hereunder
shall have been approved for listing on the NYSE, subject only to official
notice of issuance.
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(e) No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and enjoins or prohibits or
prevents the consummation of the Share Exchange or any of the other material
transactions contemplated by this Agreement.
(f) The Company shall have received an opinion of Cleary,
Gottlieb, Steen & Hamilton, in form and substance reasonably satisfactory to the
Company and Parent dated as of the Closing Date, substantially to the effect
that, on the basis of the facts and assumptions described in the opinion, the
Share Exchange constitutes a reorganization within the meaning of Section 368(a)
of the Code. In rendering this opinion, counsel may require and rely upon
representations (including tax representation letters in customary form) of each
of Parent and the Company.
SECTION 7.2 Conditions to Obligations of Parent. The
obligations of Parent to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the following additional conditions, any or all of which may be waived
in whole or part by Parent, to the extent permitted by applicable Law:
(a) The representations and warranties of the Company
contained herein shall be true and correct as of the date hereof, without regard
to any Material Adverse Effect qualifications, except where any such failure of
the representations and warranties to be true and correct as of the date hereof,
does not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed or complied in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the time of the Closing.
(c) The Company shall have delivered to Parent a certificate,
dated the Closing Date, signed by the President or any Vice President of the
Company (but without personal liability thereon), certifying as to the
fulfillment of the conditions specified in Sections 7.2(a) and 7.2(b).
(d) Not later than 45 days prior to the date of the Company
Shareholder Meeting, Parent shall have received from the Company's "affiliates"
as listed on Schedule 2.14 of the Company Disclosure Schedule, a written
agreement substantially in the form attached as Exhibit B.
(e) The holders of not more than five percent (5%) of the
Shares outstanding immediately prior to the Effective Time shall have properly
exercised dissenter rights under the applicable provisions of the NYBL.
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(f) Four of the Five persons listed on Schedule 7.2 of the
Company Disclosure Schedule shall have entered into an employment agreement with
the Company, which agreements shall continue to be in effect as of the Closing
Date, on terms no less favorable than the employment and benefit arrangements
from the Company applicable to such employee on the date hereof, unless said
employee is, as of the Closing Date, deceased or unable to be employed due to
his or her permanent disability.
SECTION 7.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the following additional conditions, any or all of which may be waived
in whole or in part by the Company to the extent permitted by applicable Law:
(a) The representations and warranties of Parent contained
herein shall be true and correct as of the date hereof, without regard to any
Material Adverse Effect qualifications, except where any such failure of the
representations and warranties to be true and correct as of the date hereof,
does not or would not reasonably be expected to have individually, or in the
aggregate, a Material Adverse Effect on Parent.
(b) Parent shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) Parent shall have delivered to the Company a certificate,
dated the Closing Date, signed by the President or any Vice President of Parent
(but without personal liability thereon), certifying as to the fulfillment of
the conditions specified in Section 7.3(a) and 7.3(b).
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination by Mutual Agreement. This Agreement
may be terminated and the Share Exchange may be abandoned at any time prior to
the Effective Time, whether before or after the approval of the Share Exchange
by the Company Requisite Vote, by mutual written consent of the Company and
Parent by action of their respective Boards of Directors.
SECTION 8.2 Termination by Either Parent or the Company. This
Agreement may be terminated and the Share Exchange may be abandoned at any time
prior to the Effective Time by action of the Board of Directors of either Parent
or the Company if:
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(a) the Share Exchange shall not have been consummated by
October 25, 2001, whether such date is before or after the date of approval of
the Share Exchange by the Company Requisite Vote (the "TERMINATION DATE");
(b) the Company Requisite Vote shall not have been obtained at
the Company Shareholder Meeting or at any adjournment or postponement thereof;
(c) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Share Exchange shall become final and
non-appealable (whether before or after the approval of the Share Exchange by
the Company Requisite Vote); or
(d) any Governmental Entity shall have failed to issue any
consent, order, decree or ruling or to take any other action which is necessary
to fulfill the conditions set forth in 7.1(b), and such denial of a request to
issue such consent, order, decree, ruling or take such other action shall have
been final and nonappealable.
Notwithstanding the foregoing, the right to terminate this
Agreement pursuant to this Section 8.2 shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Share Exchange to be consummated.
SECTION 8.3 Termination by the Company. This Agreement may be
terminated and the Share Exchange may be abandoned at any time prior to the
Effective Time by action of the Company Board if there is a breach by Parent of
any representation, warranty, covenant or agreement contained in this Agreement
that (i) is not cured by the earlier of 60 calendar days after receipt of
written notice from the Company to Parent or the Termination Date or (ii) cannot
be cured by the Termination Date, and would cause a condition set forth in
Section 7.1, 7.3(a) or 7.3(b) to be incapable of being satisfied as of the
Termination Date.
SECTION 8.4 Termination by Parent. This Agreement may be
terminated and the Share Exchange may be abandoned at any time prior to the
Effective Time by action of the Parent Board, if:
(a) the Company Board (i) fails to include in the Proxy
Statement its recommendation without modification or qualification that
shareholders approve this Agreement and the Share Exchange, (ii) withdraws or
modifies in an adverse manner its approval or recommendation of this Agreement
or the Share Exchange, (iii) fails to reaffirm such approval or recommendation
upon Parent's request within five (5) business days of such request, (iv)
approves or recommends any Acquisition Proposal (other than the Share Exchange)
or (v) resolves to take any actions specified in this Section 8.4(a); or
(b) there is a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement that (i) is not
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cured by the earlier of 60 calendar days after receipt of written notice from
the Parent to the Company or the Termination Date or (ii) cannot be cured by the
Termination Date and would cause a condition set forth in Section 7.1, 7.2(a),
or 7.2(b) to be incapable of being satisfied as of the Termination Dates;
SECTION 8.5 Effect of Termination and Abandonment. (a) In the
event of termination of this Agreement and the abandonment of the Share Exchange
pursuant to this Article VIII, this Agreement (other than this Section 8.5 and
Sections 5.3(d), 6.16 and Article IX) shall become void and of no effect with no
liability on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal and financial advisors or other representatives);
provided, however, except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
willful breach of this Agreement.
(b) If this Agreement is terminated (i) by Parent pursuant to
Section 8.4(a) hereof, or (ii) by Parent or the Company pursuant to Section
8.2(b) and in either case within 12 months after the termination of this
Agreement, the Company consummates or enters into a definitive agreement to
consummate an Acquisition Proposal with any third party, then the Company shall
pay to Parent a termination fee of $25,000,000 (the "TERMINATION Fee"). The
Termination Fee shall be payable in cash and shall be due and owing no later
than one business day following the date such third party consummates such
Acquisition Proposal with the Company or its shareholders.
(c) If this Agreement is terminated pursuant to (i) Section
8.2 (d) at a time when Parent has not received the requisite approvals of the
FRS or the requisite approval pursuant to the NYBL to consummate the
transactions contemplated hereby or (ii) Section 8.2(a) at a time when Parent
has not received the requisite approvals of the FRS or the requisite approval
pursuant to the NYBL to consummate the transactions contemplated hereby then
Parent shall pay the Company a termination fee of $25,000,000, such fee shall be
payable in cash and due and owing no later one business day following the date
of termination. Payment of such fee shall be in full satisfaction and settlement
of any claims the Company or Parent otherwise might have against each other in
respect of or under this Agreement.
(d) The Company agrees that the agreements contained in this
Section 8.5 are an integral part of the transactions contemplated by this
Agreement and the Stock Option Agreement.
SECTION 8.6 Amendment. This Agreement may be amended by action
taken by the Company and Parent at any time before or after approval of the
Share Exchange by the Company Requisite Vote but, after any such approval, no
amendment shall be made which requires the approval of such shareholders under
applicable Law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
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SECTION 8.7 Extension; Waiver. At any time prior to the
Effective Time, each party hereto may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto, or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of either party hereto 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 either party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement survive beyond the
date hereof. None of the covenants and agreements in this Agreement or in any
exhibit, schedule or instrument delivered pursuant to this Agreement shall
survive beyond the Effective Time, except to the extent set forth in those
covenants and agreements contained herein and therein that by their terms apply
or are to be performed in whole or in part after the Effective Time and this
Article IX. This Section 9.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 9.2 Entire Agreement; Assignment. (a) This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, other than the Stock Option Agreement or the
Confidentiality Agreement.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of Law (including, but not
limited to, by Share Exchange or consolidation) or otherwise. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors.
SECTION 9.3 Notices. All notices, requests, instructions or
other documents to be given under this Agreement shall be in writing and shall
be deemed given, (i) five (5) business days following sending by registered or
certified mail, postage prepaid, (ii) when sent if sent by facsimile; provided
that the fax is promptly confirmed by telephone confirmation thereof, (iii) when
delivered, if delivered personally to the intended recipient or (iv) one
business day following sending by overnight delivery via a national courier
service, and in each case, addressed to a party at the following address for
such party:
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if to Parent, to: Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Attention: Martin Flanagan
Facsimile: (650) 312-2804, and
Attention: Leslie M. Kratter
Facsimile: (650) 312-2804
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Raymond O. Gietz, Esq.
Jeffrey E. Tabak, Esq.
Facsimile: (212) 310-8007
if to the Company, to: Fiduciary Trust Company International
2 World Trade Center
New York, NY 10048
Attention: Michael O. Magdol
Carol K. Demitz
Facsimile: (212) 524-5029
with a copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention: Laurent Alpert, Esq.
Facsimile: (212) 225-3999
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 9.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of New York.
SECTION 9.5 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and its
successors and, except as provided in Sections 6.10 and 6.20 after the Effective
Time, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
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SECTION 9.7 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or any circumstance, is invalid or unenforceable, (a) if
necessary, a suitable and equitable provision shall be substituted therefor in
order to carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
SECTION 9.8 Specific Performance. 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.
SECTION 9.9 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 9.10 Interpretation. (a) The words "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." All terms defined in
this Agreement shall have the defined meanings contained herein when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time, amended, qualified or supplemented, including (in
the case of agreements and instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and all attachments
thereto and instruments incorporated therein. References to a person are also to
its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date
hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to October 25, 2000. The phrase "made available" in
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this agreement shall mean that the information referred to has been actually
delivered to the party to whom such information is to be made available.
(c) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
SECTION 9.11 Definitions. (a) "ACQUISITION PROPOSAL" means an
inquiry, an offer or proposal regarding any of the following (other than the
transactions contemplated by this Agreement) involving the Company or any of its
Subsidiaries: (i) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20 percent (20%) or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of related transactions; (iii) any purchase or
other acquisition (including by way of merger, consolidation, share exchange or
otherwise) of beneficial ownership of securities representing 20 percent (20%)
or more of the outstanding Shares; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(b) "APPLICATION" shall mean any application, notice,
document, election, declaration or other filing made by either Parent or the
Company to any Governmental Entity, with respect to the transactions
contemplated by this Agreement.
(c) "ADVISERS ACT" shall mean the Investment Advisers Act of
1940, as amended, and the rules and regulations of the SEC thereunder.
(d) "BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" shall have
the meaning provided in Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
(e) "COMPANY FUND" shall mean any Fund bearing the Fiduciary
Trust name or a derivative, thereof.
(f) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(g) "FUND" shall mean any U.S. or non-U.S. registered or
unregistered investment company or series thereof for which the Company or any
of its Subsidiaries provides advisory or subadvisory services pursuant to an
Investment Company Act Advisory Agreement or otherwise.
(h) "INVESTMENT COMPANY ACT" shall mean the Investment Company
Act of 1940, as amended, and the rules and regulations of the SEC thereunder.
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(i) "INVESTMENT COMPANY ADVISORY AGREEMENT" shall mean an
investment advisory agreement entered into by the Company or any of its
Subsidiaries for the purpose of providing investment advisory or subadvisory
services to a registered investment company or series thereof.
(j) "KNOW" or "KNOWLEDGE" means, with respect to any party,
the knowledge of such party's executive officers after due inquiry, including
inquiry of such party's counsel and other officers of such party responsible for
the relevant matter.
(k) "MATERIAL ADVERSE EFFECT" means with respect to any
entity, any change, circumstance or effect that, individually or in the
aggregate with all other changes, circumstances and effects, is or is reasonably
likely to be materially adverse to (i) the assets, properties, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole or (ii) the ability of such entity to consummate the transactions
contemplated by this Agreement on a timely basis.
(l) "NON-INVESTMENT COMPANY ADVISORY AGREEMENT" shall mean any
investment advisory agreement entered into by Company or any of its Subsidiaries
for the purpose of providing investment advisory services to a client other than
a registered investment company or series thereof.
(m) "PARENT FUND" shall mean any Fund sponsored by Parent or
any of its Subsidiaries and sold under the Franklin, Templeton or Mutual Series
brand name.
(n) "PARENT INVESTMENT COMPANY ADVISORY AGREEMENT" shall mean
an investment advisory agreement entered into by Parent or any of its
Subsidiaries for the purpose of providing investment advisory or subadvisory
services to a registered investment company or series thereof.
(o) "PERSON" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(p) "SECURITIES LAWS" shall mean the Securities Act; the
Investment Company Act; the Advisers Act; state "blue sky" laws and any
comparable regulations of any non-U.S. Governmental Entities.
(q) "SUBSIDIARY" of a person shall mean a second person fifty
percent (50%) or more of the voting stock (or of any other form of general
partnership or other voting or controlling equity interest in the case of a
person that is not a corporation) of which is beneficially owned by the first
person directly or indirectly through one or more other persons. For avoidance
of doubt, the Company's Deferred Compensation Plan and the Profit Sharing,
Savings and Employee Stock Ownership Plan shall not be considered a Subsidiary
of the Company.
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(r) "WHOLLY-OWNED SUBSIDIARY" shall mean a Subsidiary of the
Company all of the voting stock (or of any other form of general partnership or
other voting or controlling equity interest in the case of a Subsidiary that is
not a corporation) of which is beneficially owned by the Company, except, in the
case of Subsidiaries that are incorporated outside the United States, for any
portion of such voting stock (or of any other form of general partnership or
other voting or controlling equity interest in the case of a Subsidiary that is
not a corporation) that is held by one or more persons for the purposes of
complying with applicable local laws or regulations.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
FRANKLIN RESOURCES, INC.
By:/s/ Charles B. Johnson
--------------------------------------------
Name: Charles B. Johnson
Title: Chairman
FIDUCIARY TRUST COMPANY INTERNATIONAL
By:/s/ Anne M. Tatlock
--------------------------------------------
Name: Anne M. Tatlock
Title: Chief Executive Officer
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Exhibit A
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of October 25, 2000 (the
"Agreement"), by and between Fiduciary Trust Company International, a bank
organized under the New York State Banking Law ("Issuer"), and Franklin
Resources, Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently herewith Issuer and Grantee are entering
into an Agreement and Plan of Share Acquisition of even date herewith (the "Plan
of Acquisition"), providing for, among other things, the acquisition of Issuer
by Grantee; and
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Plan of Acquisition and in consideration therefor,
Issuer has agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Plan of Acquisition, Issuer and Grantee agree as follows:
Section 1. Grant of Option; Adjustment. (a) Subject to the
terms and conditions set forth herein, Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase that number of
fully paid and non-assessable shares of common stock, par value $1.00 per share,
of Issuer ("Common Stock") equal to 19.9% of the currently issued and
outstanding shares of Common Stock, without giving effect to any shares subject
to or issued pursuant to the Option, at a purchase price of $65 per share (the
"Option Price"). The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of this Agreement,
the number of shares of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance or redemption,
repurchase, retirement or other action, such number equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect to
any shares subject or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer
or Grantee to breach any provision of the Plan of Acquisition.
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Section 2. Exercise of Option. (a) The holder of the Option
(the "Holder") may exercise the Option, in whole or in part, at any time or from
time to time, if, but only if, a Triggering Event (as hereinafter defined) shall
have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined); provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (d) of this Section 2) within
90 days following such Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined in the Plan of
Acquisition) of the Share Exchange (as defined in the Plan of Acquisition); (ii)
termination of the Plan of Acquisition in accordance with the provisions
thereof, other than pursuant to Sections 8.2(b) or 8.4(a); or (iii) the passage
of 12 months after termination of the Plan of Acquisition pursuant to Sections
8.2(b) or 8.4(a) thereof, unless during such 12-month period, the Company
consummates or enters into a definitive agreement to consummate an Acquisition
Transaction (as hereinafter defined) with any person (as hereinafter defined)
other than Grantee, in which case the Exercise Termination Event shall be the
passage of six months from the consummation of such Acquisition Transaction
whether or not a Notice Date has occurred.
(b) The term "Triggering Event" shall mean the consummation by
Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"), without having
received Grantee's prior written consent, of an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
rules and regulations promulgated thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary"). For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger, consolidation, share
exchange, recapitalization, business combination or other similar transaction,
involving Issuer or any Subsidiary of Issuer, (x) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets of
Issuer and its Subsidiaries, taken as a whole, in a single transaction or series
of related transactions or (y) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of beneficial ownership
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) of securities representing 20% or more of the voting
power of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more Issuer Subsidiaries or
involving only any two or more Issuer Subsidiaries, be deemed to be an
Acquisition Transaction.
(c) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event, it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(d) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than ten days nor later than 60 business days from the Notice Date
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for the closing of such purchase (a "Closing"; and the date of such Closing, a
"Closing Date"); provided that if prior notification to or approval of the Board
of Governors of the Federal Reserve System or any other Governmental Entity is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated, or such approvals have been obtained, and any
requisite waiting period or periods shall have passed. For purposes of
determining the timeliness of exercise, any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(e) At a Closing, the Holder shall pay to Issuer an amount
equal to the Option Price multiplied by the number of shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Issuer and surrender this
Agreement to Issuer, provided that failure or refusal of Issuer to designate
such a bank account or to surrender this Agreement shall not preclude the Holder
from exercising the Option.
(f) At such Closing, simultaneously with the delivery of
immediately available funds and the surrender of this Agreement as provided in
subsection (e) of this Section 2, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares of Common Stock
purchased by the Holder, which shares shall be free and clear of all liens,
charges or encumbrances, and, if the Option should be exercised in part only, a
new Option evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder, and the Holder shall deliver to Issuer a
letter agreeing that the Holder will not offer to sell or otherwise dispose of
such shares in violation of applicable Law or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a Closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer, dated as of October 25,
2000, and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that:
(i) The reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel,
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in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) The reference to the provisions to this
Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of
such reference; and
(iii) The legend shall be removed in its entirety if
the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend
as may be required by Law.
(h) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (d) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer may then be closed or that certificates
representing such shares of Common Stock may not then be actually delivered to
the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
Section 3. Additional Covenants of Issuer. Issuer agrees: (a)
that it shall at all times maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Common Stock so that the Option
may be exercised without additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other rights
to purchase Common Stock; (b) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (c) promptly to take all action as may from time to time be
required by the Board of Governors of the Federal Reserve System or any other
Governmental Entity in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(d) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
Section 4. Loss, Theft, etc. of Agreement. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
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Section 5. Adjustments upon Changes in Capitalization, etc. In
addition to the adjustment in the number of shares of Common Stock that are
purchasable upon exercise of the Option pursuant to subsection (b) of Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of reclassifications,
recapitalizations, stock dividends, stock splits, split-ups, mergers,
combinations, subdivisions, conversions, exchanges of shares, dividends,
dividends payable in other securities, distributions on or in respect of the
Common Stock, or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof and the Option Price therefor (including for
purposes of repurchase thereof pursuant to Section 7) shall be appropriately
adjusted in such manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement governing any such
transaction to provide for such proper adjustment and the full satisfaction of
the Issuer's obligations hereunder.
Section 6. Reserved.
Section 7. Repurchase of Option. (a) From and after a
Triggering Event, (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (x) the Market/Offer Price (as defined below) exceeds (y)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10), Issuer shall repurchase such number of
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated, provided, however, that the Option
Purchase Price and Option Share Repurchase Price shall be subject to the
limitations set forth in Section 23. The term "Market/Offer Price" shall mean
the highest of (i) the price per share of Common Stock at which a tender offer
or exchange offer therefor has been made, (ii) the price per share of Common
Stock to be paid by any third party pursuant to an agreement with Issuer, (iii)
the highest closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, and (iv) in the event of a sale of all or
a substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer,
less the current market value of the remaining liabilities of Issuer, each such
value as determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
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investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Such notice or notices shall also contain representations and
warranties to the effect that the Holder owns the Option Shares to be
repurchased, free and clear of all Liens, with full power, right and authority
to present such Option Shares for repurchase hereunder. Within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof, if any, that Issuer is not then prohibited under applicable Law from so
delivering.
(c) To the extent that Issuer is prohibited under applicable
Law or as a consequence of administrative policy arising thereunder from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable Law or as a consequence of administrative policy arising
thereunder from repurchasing the Option or the Option Shares, as the case may
be, or from delivering to the Holder and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices, in
each case as promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition, whereupon, in
the latter case, Issuer shall promptly (i) deliver to the Holder and/or the
Owner, as appropriate, that portion of the Option Repurchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (x) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is the Option
Repurchase Price less the portion thereof theretofore delivered to the Holder
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and the denominator of which is the Option Repurchase Price, or (y) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
Section 8. Substitute Option. (a) In the event that prior to
an Exercise Termination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or a Grantee
Subsidiary, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or a
Grantee Subsidiary, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other person or cash or any other property or the then
outstanding shares of Common Stock shall after such merger represent less than
50% of the outstanding voting shares and voting share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or a Grantee Subsidiary, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or
(y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (y) Issuer in a merger in which Issuer
is the continuing or surviving person, and (z) the transferee of all or
substantially all of Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
common stock issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
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and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then holder or holders of the
Substitute Option (the "Substitute Option Holder") in substantially the same
form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
Section 9. Repurchase of Substitute Option. (a) At the request
of the Substitute Option Holder, the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
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(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable Law and
regulation or as a consequence of administrative policy arising thereunder from
so delivering.
(c) To the extent the Substitute Option Issuer is prohibited
under applicable Law or as a consequence of administrative policy arising
thereunder from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer following, or in connection
with, a request for repurchase pursuant to this Section 9 shall immediately so
notify the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable Law or
regulation or as a consequence of administrative policy arising thereunder from
delivering to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute Option Issuer shall
use its best efforts to obtain all required regulatory and legal approvals, in
each case as promptly as practicable, in order to accomplish such repurchase),
the Substitute Option Holder or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case, the Substitute
Option Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (x) to the Substitute Option Holder, a new Substitute Option
evidencing the right of the Substitute Option Holder to purchase that number of
shares of the Substitute Common Stock obtained by multiplying the number of
shares of the Substitute Common Stock for which the surrendered Substitute
Option was exercisable at the time of delivery of the notice of repurchase by a
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fraction, the numerator of which is the Substitute Option Repurchase Price less
the portion thereof theretofore delivered to the Substitute Option Holder and
the denominator of which is the Substitute Option Repurchase Price, or (y) to
the Substitute Share Owner, a certificate for the Substitute Common Shares it is
then so prohibited from repurchasing.
Section 10. Extension of Exercise Period. The relevant period
for exercise of certain rights under Sections 2, 7 and 9 shall be extended: (a)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights and for the expiration of all statutory waiting periods; and (b) to
the extent necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
Section 11. Representations and Warranties of Issuer. Issuer
hereby represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
Section 12. Representations and Warranties of Grantee. Grantee
hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly and validly executed and delivered by
Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
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transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
Section 13. Assignment. Neither of the parties hereto may
assign any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party.
Section 14. Further Assurances. Each of Grantee and Issuer
will use its reasonable best efforts to make all filings with, and to obtain
consents of, all third parties and any Governmental Entity necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to OTC Bulletin Board and, to the extent
required, the Board of Governors of the Federal Reserve System and any other
Governmental Entity for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to banking authorities for approval to
acquire the shares of Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so and Issuer shall not be obligated to apply to
banking authorities for approval to issue the shares of Common Stock issuable
hereunder until such time as Parent makes such application.
Section 15. Equitable Relief. The parties hereto acknowledge
that damages would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other equitable relief.
Section 16. Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the
full number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
Section 17. Delivery. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telecopy or telex, or by registered or
certified mail (postage prepaid, return receipt requested) at the respective
addresses of the parties set forth in the Plan of Acquisition.
Section 18. 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 thereof (except to the extent that mandatory provisions of federal or
state law apply).
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Section 19. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 20. Expenses. Except as otherwise expressly provided
herein, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
Section 21. Entire Agreement; No Third Party Beneficiaries.
Except as otherwise expressly provided herein or in the Plan of Acquisition,
this Agreement contains the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
Section 22. Capitalized Terms. Capitalized terms used in this
Agreement and not defined herein shall have the meanings assigned thereto in the
Plan of Acquisition.
Section 23. Limitation on Grantee's Total Profit. (a)
Notwithstanding any other provision herein, in no event shall Grantee's Total
Profit (as defined in subsection (c) of this Section 23) exceed $25 million (the
"Maximum Profit"), and, if the Total Profit would otherwise exceed such amount,
Grantee, at its sole election, shall either (i) reduce the number of shares
subject to the Option (and any Substitute Option), (ii) deliver to Issuer, or
Substitute Issuer, as the case may be, for cancellation shares of Common Stock
or Substitute Common Stock, as the case may be, previously purchased by Grantee
valued at fair market value at the time of delivery, (iii) pay cash to Issuer,
or Substitute Issuer, as the case may be, (iv) reduce the amount of the Section
7 Option Repurchase Price or Section 9 Substitute Option Repurchase Price, or
(v) undertake any combination of the foregoing, so that Grantee's actually
realized Total Profit shall not exceed the Maximum Profit after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined in subsection (d) of
this Section 23) of more than the Maximum Profit and, if exercise of the Option
would otherwise result in the Notional Total Profit exceeding such amount,
Grantee, in its discretion, may take any of the actions specified in subsection
(a) of this Section 23 so that the Notional Total Profit shall not restrict any
subsequent exercise of the Option which at such time complies with this
sentence.
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(c) For purposes of this Agreement, the term "Total Profit"
shall mean the aggregate amount (before taxes) of the following: (i) the excess
of (x) the net cash amounts or fair market value of any property received by
Grantee pursuant to the sale of the Option or the Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, other than any amount received by Grantee upon the
repurchase of the Option or the Option Shares, respectively, by Issuer pursuant
to Section 7 hereof, after payment of applicable brokerage or sales commissions
and discounts, over (y) Grantee's aggregate purchase price for such Option
Shares (or other securities), plus (ii) all amounts received by Grantee upon the
repurchase of the Option or the Option Shares by Issuer pursuant to Section 7
hereof, (iii) all equivalent amounts with respect to the Substitute Option and
Substitute Shares and any amounts paid pursuant to Section 9 hereof, plus (iv)
the amount of any Termination Fee paid to Grantee pursuant to Section 8.5 of the
Plan of Acquisition.
(d) For purposes of this Agreement, the term "Notional Total
Profit" with respect to any number of shares as to which Grantee may propose to
exercise the Option shall be the Total Profit, determined as of the date of such
proposed exercise assuming that the Option were exercised on such date for such
number of shares, and assuming that such shares, together with all other Option
Shares held by Grantee and its affiliates as of such date, were sold for cash at
the closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions). For purposes of
this Section 23, transactions by a wholly-owned subsidiary transferee of Grantee
in respect of the Option Shares transferred to it shall be treated as if made by
Grantee.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
FIDUCIARY TRUST COMPANY INTERNATIONAL
By:/s/ Anne M. Tatlock
--------------------------------------------
Name: Anne M. Tatlock
Title: Chief Executive Officer
FRANKLIN RESOURCES, INC.
By:/s/ Charles B. Johnson
--------------------------------------------
Name: Charles B. Johnson
Title: Chairman
Signature Page to Stock Option Agreement
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<PAGE>
Exhibit B
[FORM OF COMPANY AFFILIATE LETTER TO PARENT]
[Date]
Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Dear Sir/Madam:
Reference is made to the provisions of the Agreement and Plan
of Share Acquisition, dated as of October 25, 2000 (together with any amendments
thereto, the "ACQUISITION AGREEMENT"), between Fiduciary Trust Company
International, a bank organized and existing under Article III of the New York
State Banking Law (the "COMPANY") and Franklin Resources, Inc., a Delaware
corporation ("PARENT"), pursuant to which the Company Shares (as defined below)
shall be exchanged for Parent Shares (as defined below) (the "SHARE EXCHANGE").
Following the Share Exchange, the Company will be a wholly-owned subsidiary of
Parent. This letter constitutes the undertakings of the undersigned contemplated
by the Share Exchange Agreement, as is being furnished pursuant to Section 6.14
thereof.
I understand that I may be deemed to be an "affiliate" of the
Company, as such term is defined for purposes of paragraphs (c) and (d) of Rule
145 ("RULE 145") promulgated under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Execution of this letter shall not be construed as an
admission of "affiliate" status nor as a waiver of any rights that I may have to
object to any claim that I am an "affiliate" on or after the date of this
letter.
If in fact I were to be deemed an "affiliate" of the Company
under paragraphs (c) and (d) of Rule 145, my ability to sell, transfer or
otherwise dispose of any shares of the common stock, par value $.10 per share,
of Parent (the "PARENT SHARES") received by me in exchange for any shares of
common stock, par value $1.00 per share, of the Company (the "COMPANY SHARES")
pursuant to the Share Exchange may be restricted.
I hereby represent, warrant and covenant to Parent that:
(a) I will not sell, pledge, transfer or otherwise dispose of
any of the Parent Shares unless (i) such sale, pledge, transfer or other
disposition has been registered under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the provisions of Rule
145 under the Securities Act (as such rule may be amended from time to time), or
(iii) in the opinion of counsel in form and substance reasonably satisfactory to
Parent, or under a "no-action" letter obtained by me from the staff of the SEC,
such sale, pledge, transfer or other disposition will not violate or is
otherwise exempt from registration under the Securities Act;
(b) I will not (i) sell, pledge, transfer or otherwise dispose
of any Company Shares during the 30-day period prior to the Effective Time (as
defined in the Acquisition Agreement) or (ii) sell or otherwise reduce my risk
(within the meaning of the Securities and Exchange Commission's Financial
Reporting Release No. 1., "Codification of Financial Reporting Policies",
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<PAGE>
Section 201.01 47 F.R. 21028 (April 15, 1982)) relative to any Parent Shares
until after such time as consolidated financial results (including combined
sales and net income) covering at least 30 days of post-Share Exchange combined
operations of Parent and the Company have been published by Parent, except as
permitted by Staff Accounting Bulletin No. 76 issued by the Securities and
Exchange Commission; and
(c) I have not knowingly taken and will not knowingly take or
agree to take any action that would prevent the Share Exchange from qualifying,
or being accounted for, as a "pooling of interests".
I hereby acknowledge that, except as otherwise provided in the
Acquisition Agreement, Parent is under no obligation to register the sale,
transfer, pledge or other disposition of the Parent Shares or to take any other
action necessary for the purpose of making an exemption from registration
available.
I understand that Parent will issue stop transfer instructions
to its transfer agents with respect to the Parent Shares and that a restrictive
legend will be placed on certificates delivered to me evidencing the Parent
Shares in substantially the following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"),
and may be sold or otherwise disposed of only in accordance with the
terms of a letter agreement, dated _____________, between the holder of
this certificate and the issuer of this security (a copy of which is on
file in the principal office of such issuer) which contains further
restrictions on the transferability of the shares represented hereby."
The term Parent Shares as used in this letter shall mean and
include not only the common stock of Parent as presently constituted, but also
any other stock which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Shares.
I hereby acknowledge that Parent and its independent public
accountants will be relying upon this letter in connection with the
determination that the Share Exchange will qualify and be accounted for as a
"pooling of interests", and that I understand the requirements of this letter
and the limitations imposed upon the transfer, sale or other disposition of the
Company Shares and the Parent Shares.
Very truly yours,
--------------------------------------
Name:
B-2
<PAGE>
Exhibit C
[FORM OF PARENT AFFILIATE LETTER TO COMPANY]
[Date]
Fiduciary Trust Company International
2 World Trade Center
New York, NY 10048
Dear Sir/Madam:
Reference is made to the provisions of the Agreement and Plan
of Acquisition, dated as of October 25, 2000 (together with any amendments
thereto, the "ACQUISITION AGREEMENT"), between Fiduciary Trust Company
International, a bank organized and existing under Article III of the New York
State Banking Law (the "COMPANY") and Franklin Resources, Inc., a Delaware
corporation ("PARENT"), pursuant to which the Company Shares (as defined below)
shall be exchanged for Parent Shares (as defined below) (the "SHARE EXCHANGE").
Following the Share Exchange the Company will be a wholly owned subsidiary of
Parent. This letter constitutes the undertakings of the undersigned contemplated
by the Share Exchange Agreement, as is being furnished pursuant to Section 6.14
thereto.
I hereby represent, warrant and covenant to the Company that:
1. I will not (i) sell, pledge, transfer or otherwise dispose of
any shares of common stock, par value $.10 per share, of the
Company ("COMPANY SHARES") during the 30-day period prior to
the Effective Time (as defined in the Share Exchange
Agreement) or (ii) sell or otherwise reduce my risk (within
the meaning of the Securities and Exchange Commission's
Financial Reporting Release No. 1., "Codification of Financial
Reporting Policies", Section 201.01 47 F.R. 21028 (April 15,
1982)) relative to any shares of common stock, par value $.10
per share, of Parent ("PARENT SHARES") until after such time
as consolidated financial results (including combined sales
and net income) covering at least 30 days of post-Share
Exchange combined operations of Parent and the Company have
been published by Parent, except as permitted by Staff
Accounting Bulletin No. 76 issued by the Securities and
Exchange Commission; and
2. I have not knowingly taken and will not knowingly take or
agree to take any action that would prevent the Share Exchange
from qualifying, or being accounted for, as a "pooling of
interests".
The term Parent Shares as used in this letter shall mean and
include not only the common stock of Parent as presently constituted, but also
any other stock which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Shares.
I hereby acknowledge that the Company and its independent
public accountants will be relying upon this letter in connection with the
determination that the Share Exchange will qualify and be accounted for as a
"pooling of interests", and that I understand the requirements of this letter
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<PAGE>
and the limitations imposed upon the transfer, sale or other disposition of
Parent Shares.
Very truly yours,
--------------------------------------
Name:
C-2
