<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PAINE WEBBER GROUP INC.
(Name of Issuer)
COMMON STOCK
$1 PAR VALUE
(Title of Class of Securities)
69562910
(Cusip Number)
GENERAL ELECTRIC COMPANY
GENERAL ELECTRIC CAPITAL SERVICES, INC.
KIDDER, PEABODY GROUP INC.
(Name of Persons Filing Statement)
BENJAMIN W. HEINEMAN, JR.
GENERAL ELECTRIC COMPANY
3135 Easton Turnpike
Fairfield, CT 06431
Tel. No.: 203-373-2494
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
November 5, 1994
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this statement because of Rule 13d-1(b)(3) or (4), check the
following: [ ].
Check the following box if a fee is being paid with
this statement: [X]
<PAGE>
SCHEDULE 13D
CUSIP NO. 69562910 PAGE 2-I of [14] Pages
-------- ------- --------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GENERAL ELECTRIC COMPANY
IRS NO. 14-0689340
____________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
Inapplicable (a) [ ]
(b) [ ]
____________________________________________________________________
3 SEC USE ONLY
____________________________________________________________________
4 SOURCE OF FUNDS
00
____________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [X]
____________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
____________________________________________________________________
7 SOLE VOTING POWER
0
NUMBER OF ____________________________________________
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 21,519,000 (SEE ITEM 5)
OWNED BY ____________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
|
PERSON
WITH ____________________________________________
10 SHARED DISPOSITIVE POWER
21,519,000 (SEE ITEM 5)
____________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 21,519,000 (SEE ITEM 5)
____________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
____________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.2%
____________________________________________________________________
14 TYPE OF REPORTING PERSON
C0
2-I
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SCHEDULE 13D
CUSIP NO. 69562910 PAGE 2-II of [14] Pages
-------- ------- --------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GENERAL ELECTRIC CAPITAL SERVICES, INC.
IRS NO. 06-1109503
____________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
Inapplicable (a) [ ]
(b) [ ]
3 SEC USE ONLY
____________________________________________________________________
4 SOURCE OF FUNDS
00
____________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
____________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
____________________________________________________________________
7 SOLE VOTING POWER
0
NUMBER OF ____________________________________________
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 21,519,000 (SEE ITEM 5)
OWNED BY ___________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
|
PERSON
WITH ___________________________________________
10 SHARED DISPOSITIVE POWER
21,519,000 (SEE ITEM 5)
____________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 21,519,000 (SEE ITEM 5)
____________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
____________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.2%
____________________________________________________________________
14 TYPE OF REPORTING PERSON
C0, HC
2-II
<PAGE>
SCHEDULE 13D
CUSIP NO. 69562910 PAGE 2-III of [14] Pages
-------- ------- --------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KIDDER, PEABODY GROUP INC.
IRS NO. 04-2941506
____________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
Inapplicable (a) [ ]
(b) [ ]
____________________________________________________________________
3 SEC USE ONLY
____________________________________________________________________
4 SOURCE OF FUNDS
00
____________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [x]
____________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
____________________________________________________________________
7 SOLE VOTING POWER
0
NUMBER OF ____________________________________________
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 21,519,000 (SEE ITEM 5)
OWNED BY ____________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
|
PERSON
WITH ____________________________________________
10 SHARED DISPOSITIVE POWER
21,519,000 (SEE ITEM 5)
____________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 21,519,000 (SEE ITEM 5)
____________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
____________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.2%
____________________________________________________________________
14 TYPE OF REPORTING PERSON
C0, HC
2-III
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Item 1. Security and Company
--------------------
The class of equity securities to which this statement relates
is the common stock, $1 par value per share (the "Common Stock"), of Paine
Webber Group Inc., a Delaware corporation (the "Company"). The principal
executive offices of the Company are located at 1285 Avenue of the
Americas, New York, New York 10019.
Item 2. Identity and Background
-----------------------
This statement is filed by:
General Electric Company, a New York
corporation ("GE")
3135 Easton Turnpike
Fairfield, Connecticut 06431
General Electric Capital Services, Inc., a
Delaware corporation ("GECS")
260 Long Ridge Road
Stamford, Connecticut 06927
Kidder, Peabody Group Inc., a Delaware
corporation ("Kidder")
10 Hanover Square
New York, New York 10005
The name, business address, present principal occupation or
employment, and citizenship of each director and executive officer of GE,
GECS and Kidder is set forth on Schedule A hereto.
GE and its consolidated affiliates engage in developing,
manufacturing and marketing a wide variety of products for the generation,
transmission, distribution, control and utilization of electricity. The
products of GE and its consolidated affiliates include, but not are limited
to, lamps; major appliances for the home; industrial automation products
and components; motors; electrical distribution and control equipment;
locomotives; power generation and delivery products; nuclear reactors,
nuclear power support services and fuel assemblies; commercial and military
aircraft jet engines; materials, including engineered plastics, silicones
and cutting materials; and a wide variety of high technology products
including products used in defense and medical diagnostic applications.
GE and its consolidated affiliates also offer a broad variety
of services, including product support services; electrical product supply
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houses; electrical apparatus installation, engineering, repair and
rebuilding services; and computer-related information services. A wholly
owned subsidiary of GE, National Broadcasting Company, Inc., is engaged
principally in furnishing network television services and in operating
television stations and in providing cablevision services. GE also
licenses patents and provides technical know-how related to products
developed by it and its consolidated affiliates but such activities are not
material to GE and such affiliates.
GECS, a wholly owned subsidiary of GE, is the parent
corporation of Kidder. GECS, through its three principal subsidiaries, one
of which is Kidder, engages in a broad spectrum of financial services
including consumer financing, commercial and industrial financing, real
estate financing, asset management and leasing, specialty insurance,
reinsurance, and investment banking and brokerage services.
Kidder, through its own principal subsidiary, Kidder Peabody &
Co. Incorporated, provides a wide variety of financing, insurance,
investment banking and securities brokerage products and services including
specialty insurance, consumer services, mid-market financing, equipment
management, full-service securities brokerage and specialized financing.
Except as set forth below, during the last five years, none of
GE, GECS or Kidder or, to the best of their knowledge, any of the persons
listed on Schedule A hereto has (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
law or finding any violation with respect to such laws.
United States v. General Electric Company d/b/a Management and
--------------------------------------------------------------
Technical Services Co., Gerald A. Leo a/k/a "Bud" and James Badolato. On
- --------------------------------------------------------------------
February 2, 1990, a jury sitting in the United States District Court for
the Eastern District of Pennsylvania found GE "vicariously liable" for the
1983 acts of two contract employees of a subsidiary ("MATSCO") of GE. GE
was found guilty of mail fraud and of violating the False Claims Act. This
action arose from 1983 negotiations by MATSCO of a single contract with the
Army for production of battlefield computer systems. Two MATSCO contract
employees were found to have failed to notify the Army that they had
negotiated lower subcontract prices with vendors than had originally been
projected. Upon discovery of the discrepancy,
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during an internal review, MATSCO promptly refunded $3.69 million to the
Government. The Government did not allege that any director or officer of
GE had any knowledge of any withholding of information from the Army. On
July 26, 1990, pursuant to a joint sentencing memorandum, GE and the
Department of Justice settled the MATSCO civil and criminal cases and
resolved seven other civil matters from the early 1980's which were not the
subject of litigation. Under the settlement, GE paid the Government $13.9
million for contracting errors voluntarily disclosed to the Government by
GE or agreed to by GE as a result of governmental and GE audits. GE also
paid $16.1 million in fines for the MATSCO civil and criminal cases.
United States ex re. Taxpayers Against Fraud and Chester L.
-----------------------------------------------------------
Walsh v. General Electric Company. On November 15, 1990, an action under
- ----------------------------------
the False Claims Act was brought against GE in the United States District
Court for the Southern District of Ohio. This qui tam action, brought by
an organization called Taxpayers Against Fraud and an employee of GE's
Aircraft Engines division ("GEAE"), alleged that GEAE, in connection with
its sales of F110 aircraft engines and support equipment to Israel, made
false statements to the Israeli Ministry of Defense ("MoD"), causing MoD to
submit false claims to the United States Department of Defense under the
Foreign Military Sales Program. Senior GE management became aware of
possible misconduct in GEAE's Israeli F110 program in December 1990. Before
learning of the sealed qui tam suit, GE immediately made a voluntary
disclosure to the Departments of Defense and Justice, promised full
cooperation and restitution, and began an internal investigation. In
August 1991, the federal court action was unsealed, and the Department of
Justice intervened and took over responsibility for the case.
On July 22, 1992, after GE had completed its investigation and
made a complete factual disclosure to the U.S. government as part of
settlement discussions, the United States and GE executed a settlement
agreement and filed a stipulation dismissing the civil action. Without
admitting or denying the allegations in the complaint, GE agreed to pay
$59.5 million in full settlement of the civil fraud claims. Also on July
22, 1992, in connection with the same matter, the United States filed a
four count information charging GE with violations of 18 U.S.C. Section 287
(submitting false claims against the United States), 18 U.S.C. Section 1957
(engaging in monetary transactions in criminally derived property), 15
U.S.C. Subsections 78m(b)(2)(A) and 78ff(a) (inaccurate books and records),
and 18 U.S.C. Section 371 (conspiracy to defraud the United States and to
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commit offenses against the United States). The same day, GE and the United
States entered a plea agreement in which GE agreed to waive indictment,
plead guilty to the information, and pay a fine of $9.5 million. GE was
that day sentenced by the federal court in accordance with the plea
agreement.
In re Kidder, Peabody & Co. Incorporated et al. In November 1989,
----------------------------------------------
Kidder, Peabody & Co. Incorporated, ("KPCI) settled an administrative
proceeding brought by the Commodities Futures Trading Commission ("CFTC")
against KPCI and one of its officers. In connection with the proceeding,
the CFTC alleged that during a two-day period in 1986 KPCI and its officer
violated provisions of the Commodity Exchange Act, regulations thereunder
and exchange rules regarding noncompetitively executed trading activities.
In settlement of the proceeding KPCI and its officer neither admitted nor
denied the CFTC's allegations but agreed to pay fines of $75,000 and
$25,000, respectively, and the officer accepted a 5-day suspension from
soliciting futures customer business.
In the Matter of the Distribution of Securities Issued by Certain
-----------------------------------------------------------------
Government Sponsored Enterprises. On January 16, 1992, KPCI without
- --------------------------------
admitting any of the allegations against it and solely for the purpose of
settling the proceeding, consented to the issuance by the Securities and
Exchange Commission ("SEC") of an order finding that in connection with
KPCI's participation in primary distributions of certain unsecured debt
securities issued by certain government sponsored entities, KPCI violated
the SEC's recordkeeping rules (17a-3 and 17a-4) by not accurately
reflecting transactions in and customer orders for such securities handled
by KPCI. The SEC's Order and findings were substantially similar to Orders
and findings by the SEC and other federal regulators with respect to 97
other financial intermediaries involving the same kind of conduct. The SEC
ordered KPCI to (i) cease and desist from further such violations, (ii) pay
a civil penalty of $100,000 and (iii) develop, implement and maintain
policies and procedures reasonably designed to ensure KPCI's future
compliance with the recordkeeping rules in connection with such activities.
On the same day, the SEC granted KPCI's request that the SEC's Order would
not constitute grounds for denial of KPCI's participation in exempt
offerings under Regulation A or D of the Securities Act of 1933 (the
"Securities Act").
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
Pursuant to an Asset Purchase Agreement dated as of October 17,
1994 among the Company, GE and Kidder (the "Asset Purchase Agreement"),
Kidder will receive (i) 21,500,000 shares of Common Stock, (ii) 1,000,000
shares of 6% convertible preferred stock ("Convertible Preferred Stock") of
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the Company and (iii) 2,500,000 shares of 9% redeemable preferred stock
("Redeemable Preferred Stock") of the Company in consideration for the
assets being acquired by the Company of certain businesses and operations
of Kidder as more fully described under "Item 4 -- Purpose of Transaction".
Item 4. Purpose of Transaction.
----------------------
Pursuant to the Asset Purchase Agreement, the Company has
agreed to acquire assets related to the following businesses and operations
of Kidder: asset management; retail brokerage; mortgages; equity research;
investment banking; international fixed income; listed domestic futures;
matched book; and domestic fixed income (sales force only). The Company has
an option until November 16, 1994 to designate additional businesses and
operations of Kidder to be acquired in addition to the businesses and
operations referred to above. The assets to be acquired include net assets
of $580 million, which may include as part of such $580 million up to $20
million of physical capital assets.
Pursuant to the Asset Purchase Agreement, the Company had a
right of termination if, prior to November 5, 1994, the Company discovered
facts, which existed at the date of the Asset Purchase Agreement, of such
seriousness and significance that, had such facts been known at such time,
a reasonable business person would not have entered into the Asset Purchase
Agreement.
The consideration to Kidder for the assets to be acquired will
be (i) 21,500,000 shares of Common Stock, (ii) 1,000,000 shares of
Convertible Preferred Stock, valued at $100,000,000 and (iii) 2,500,000
shares of Redeemable Preferred Stock, valued at $250,000,000.
The closing of the transaction is expected to occur on or about
January 2, 1995 (or such other date as may be mutually agreed by the
Company, GE and Kidder) (the "Closing"), assuming (i) expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and (ii) the satisfaction of certain
other conditions customary in transactions of this kind.
Kidder will acquire the Common Stock for investment. Kidder
intends to review from time to time the Company's business affairs and
financial position. Based on such evaluation and review, as well as
general economic and industry conditions existing at the time, Kidder may
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consider from time to time various alternative courses of action as
permitted by the Stockholders Agreement to be entered into among the
Company, GE and Kidder (the "Stockholders Agreement). Such actions may
include, in certain limited circumstances permitted by the Stockholders
Agreement and subject to receipt of all necessary regulatory approvals, the
acquisition of additional voting securities of the Company ("Voting
Securities") through open market purchases, privately negotiated
transactions or otherwise. Alternatively, and subject to the terms of the
Stockholders Agreement, such actions may involve the sale of all or a
portion of the Voting Securities in the open market, in privately
negotiated transactions, through a public offering or otherwise. Except as
set forth above and except as contemplated by the Stockholders Agreement,
none of GE, GECS or Kidder or, to the best of their knowledge, any of the
persons listed on Schedule A hereto has a plan or proposal which relates to
or would result in any of the transactions described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Company.
-------------------------------------
(a)(i) Subject to the terms of the Asset Purchase Agreement,
Kidder will acquire and, for the purpose of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), Kidder will
directly beneficially own 21,500,000 shares of Common Stock and (ii) at the
close of business on November 14, 1994, Kidder had acquired on behalf of
third parties and, for purposes of Rule 13d-3 promulgated under the
Exchange Act, beneficially owned 19,000 shares of Common Stock,
collectively, representing approximately 22.2% of the then outstanding
Common Stock.
GECS is the parent corporation of Kidder and, for the purpose
of Rule 13d-3 promulgated under the Exchange Act, GECS will indirectly
beneficially own 21,519,000 shares of Common Stock, representing
approximately 22.2% of the then outstanding Common Stock.
GE is the parent corporation of GECS and, for the purpose of
Rule 13d-3 promulgated under the Exchange Act, GE will indirectly
beneficially own 21,519,000 shares of Common Stock, representing
approximately 22.2% of the then outstanding Common Stock.
Except as set forth in this Item 5(a), none of GE, GECS or
Kidder or, to the best of their knowledge, any of the persons listed in
Schedule A hereto beneficially own any Common Stock.
(b) Subject to the terms of the Stockholders Agreement,
Kidder will have the power to vote and to dispose of 21,500,000 shares of
Common Stock. Kidder has the shared power to vote and dispose of 19,000
shares of Common Stock held on behalf of customers in discretionary
accounts.
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Subject to the terms of the Stockholders Agreement, GECS, as
the parent corporation of Kidder, and GE, as the parent corporation of
GECS, will have the indirect shared power to vote and dispose of 21,500,000
shares of Common Stock. GECS and GE have the indirect shared power to vote
and dispose of 19,000 shares held by Kidder on behalf of customers in
discretionary accounts.
(c) Except as set forth in Schedule B hereto, there were no
purchases or sales of Common Stock effected during the past 60 days by GE,
GECS or Kidder or, to the best of their knowledge, any person listed in
Schedule A hereto.
(d) Inapplicable.
(e) Inapplicable.
Item 6. Contracts, Arrangements, Understandings or
------------------------------------------
Relationships with Respect to Securities
----------------------------------------
of the Company
--------------
In accordance with the terms of the Asset Purchase Agreement,
the Company, GE and Kidder will enter into the Stockholders Agreement at
the time of the Closing. The following summary of certain terms of the
Stockholders Agreement is qualified in its entirety by reference to the
copy of the form of Stockholders Agreement attached hereto (as Exhibit C to
the Agreement attached hereto as Exhibit 99(a)) and incorporated herein by
reference.
Pursuant to the Stockholders Agreement, GE will agree that,
until the earlier of (i) the termination thereof and (ii) three years after
the date on which GE and its affiliates no longer beneficially own any
Voting Securities, and except as otherwise provided therein, GE will not,
and will cause each of its affiliates not to, singly or as a part of a
group (as defined in Section 13(d)(3) of the Exchange Act), directly or
indirectly (i) acquire, offer to acquire, or agree to acquire, by purchase,
gift or otherwise, any Voting Securities, except pursuant to a stock split,
stock dividend, rights offering, recapitalization, reclassification or
similar transaction, (ii) make, or in any way participate in, any
"solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-
1 under the Exchange Act), solicit any consent or communicate with or seek
to advise or influence any person or entity with respect to the voting of
any Voting Securities or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange Act)
with respect to the Company, (iii) form, join or encourage or in any way
participate in the formation of, any "person" within the meaning of Section
13(d)(3) of the Exchange act with respect to any Voting Securities (except
for such an arrangement solely among GE and any of its wholly-owned
subsidiaries), (iv) deposit any Voting Securities into a voting trust or
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subject any such Voting Securities to any arrangement or agreement with
respect to the voting thereof (except for such an arrangement solely among
GE and any of its wholly-owned subsidiaries), (v) initiate, propose or
otherwise solicit stockholders for the approval of one or more stockholder
proposals with respect to the Company as described in Rule 14a-8 under the
Exchange Act, or induce or attempt to induce any other person to initiate
any stockholder proposal, (vi) other than with respect to the GE designee
on the Board of Directors of the Company (the "Board of Directors")
contemplated by the Stockholders Agreement, seek election to or seek to
place a representative on the Board of Directors or, except with the
approval of management of the Company, seek the removal of any member of
the Board of Directors, (vii) except with the approval of the management of
the Company, call or seek to have called any meeting of the stockholders of
the Company, (viii) except through its representative on the Board of
Directors, otherwise act to seek to control, disrupt or influence the
management, business, operations, policies or affairs of the Company,
except with the approval of the management of the Company, (ix) (A)
solicit, seek to effect, negotiate with or provide any information to any
other party with respect to, (B) make any statement or proposal, whether
written or oral, to the Board of Directors or any director or officer of
the Company with respect to, or (C) otherwise make any public announcement
or proposal whatsoever with respect to any form of business combination
transaction involving the Company including, without limitation, a merger,
exchange offer or liquidation of the Company's assets, or any
restructuring, recapitalization or similar transaction with respect to the
Company (except for (x) discussions between officers, employees or agents
of GE or Kidder and the representative on the Board of Directors or (y) in
the case of clause (B) above, the ability of such representative to make
any such statement or proposal or to discuss any such proposal with any
officer, director or advisor to the Company or the Board of Directors in
connection with the performance by such representative of his duty as a
director), (x) disclose or announce any intention, plan or arrangement
inconsistent with the foregoing, or (xi) advise, assist, instigate or
encourage any third party to do any of the foregoing.
Pursuant to the Stockholders Agreement, the Company will cause
one person mutually agreed upon by GE and the Company to be elected to the
Board of Directors and thereafter, during the term of the Stockholders
Agreement, the Company shall cause its nominating committee to recommend to
the Board of Directors that such person or any other person designated by
GE and approved by the nominating committee be included in the slate of
nominees recommended to stockholders for election as directors at each
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annual meeting of stockholders of the Company at which such person's term
expires.
During the term of the Stockholders Agreement, Kidder will vote
or cause to be voted, or consent with respect to, all Voting Securities
beneficially owned by it in the manner recommended by the Board of
Directors, except that at any time when there is a valid order or judgment
of a court of competent jurisdiction or a ruling, pronouncement or
requirement of the New York Stock Exchange, Inc. to the contrary, then
Kidder will, if so required by the Board of Directors, vote or cause to be
voted all such Voting Securities in the same proportion as the votes cast
by or on behalf of the other holders of the Voting Securities.
Notwithstanding the foregoing, Kidder will be entitled to vote freely (i)
with respect to certain matters specified in the Company's Certificates of
Designation of Rights and Preferences for the Convertible Preferred Stock
and for the Redeemable Preferred Stock and (ii) any "Rule 13e-3
transaction" (as defined in Rule 13e-3(a)(3) under the Exchange Act) unless
such transaction has been approved by a majority of the disinterested
directors of the Board of Directors.
The Stockholders Agreement will limit the ability of GE and its
affiliates to transfer their Voting Securities to the following
circumstances: (i) transfers to any subsidiary of GE, if the transferee
agrees to be bound by the Stockholder Agreement and provided that it owns
such Voting Securities only so long as it remains a subsidiary of GE, (ii)
subject to the Company's exercise of a right of first refusal, in the case
of shares of Common Stock, transfers made pursuant to (A) a broad public
distribution or (B) Rule 144 under the Securities Act (iii) subject to the
Company's exercise of a right of first refusal, in the case of shares of
Convertible Preferred Stock, after the fifth anniversary of the date of
issuance thereof, transfers made pursuant to a demand registration, (iv)
transfers made pursuant to a tender offer or exchange offer or acquisition
of control of the Company or similar transaction provided it is unopposed
by the Board of Directors or (v) transfers of any portion of or all its
shares of Redeemable Preferred Stock to any person if (A) written notice is
given to the Company 45 days prior to the transfer and (B) such transferee
agrees to be bound by such notice requirement.
In addition to its right of first refusal the Company will have
a call right to elect to purchase a portion of the shares of Common Stock
held by GE or its affiliates in accordance with the terms set out in the
Stockholders Agreement.
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Subject to certain conditions set forth in the Stockholders
Agreement, GE will be entitled to require the Company to register under the
Securities Act (i) shares of Redeemable Preferred Stock then owned by GE,
(ii) shares of Common Stock issued pursuant to the Asset Purchase Agreement
or issuable upon conversion of the Convertible Preferred Stock, or
otherwise acquired in accordance with the Stockholders Agreement or (iii)
at any time following the fifth anniversary of the Closing, shares of
Convertible Preferred Stock pursuant to not more than five "demand"
registrations, provided that any such registration must include (A)
Redeemable Preferred Stock with an aggregate liquidation preference of at
least $50 million, (B) Convertible Preferred Stock with an aggregate
liquidation preference of $100 million or (C) at least 5,000,000 shares of
the Common Stock in the case of the first such demand relating to Common
Stock, or 2,500,000 shares of Common Stock in any subsequent demand
relating to Common Stock, subject to adjustment in certain circumstances.
In addition, GE will be entitled to participate in registrations by the
Company of Voting Securities, subject to certain limitations.
Pursuant to the Stockholders Agreement, GE will have the right
in certain limited circumstances to acquire, in the open market or in
private transactions, the number of shares of Common Stock sufficient to
maintain certain accounting and/or tax treatment then existing with respect
to GE's level of beneficial ownership of shares of Common Stock.
On October 17, 1994, the Company, GE and Kidder entered into a
Letter Agreement (the "Letter Agreement") pursuant to which the Company may
request, at any time but only one time, on or prior to 60 days after the
Closing, that Kidder exchange the 2,500,000 shares of Redeemable Preferred
Stock issued to Kidder at the Closing for one of the following: (i) shares
of redeemable preferred stock of the Company with a stated maturity the
same as those previously issued as consideration, callable at any time,
with an annual dividend rate of 9 3/4%; (ii) shares of redeemable preferred
stock of the Company with a stated maturity the same as those previously
issued as consideration, noncallable until the third anniversary of the
Closing and callable at par at any time thereafter, with an annual dividend
rate of 9 1/2%; (iii) shares of redeemable preferred stock of the Company
with a stated maturity the same as those previously issued as
consideration, noncallable until the fifth anniversary of the closing date
and callable at par at any time thereafter, with an annual dividend rate of
9%; or (iv) any combination of the foregoing.
12
<PAGE>
Except for the Stockholders Agreement and Letter Agreement as
described above, to the best of GE's, GECS's and Kidder's knowledge, there
are no contracts, arrangements, understandings or relationships (legal or
otherwise) between the persons enumerated in Item 2, and any other person,
with respect to any securities of the Company, including, but not limited
to, transfer or voting of any of the Voting Securities, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of
proxies.
Item 7. Material to be Filed as Exhibits
--------------------------------
Exhibit 99(a): Asset Purchase Agreement with all exhibits,
including the form of Stockholders Agreement as
Exhibit C thereto
Exhibit 99(b): Letter Agreement dated October 17, 1994
regarding the Convertible Preferred Stock
13
<PAGE>
SIGNATURES
----------
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Date: November 14, 1994
-----------------
GENERAL ELECTRIC COMPANY
By: Benjamin W. Heineman, Jr.
-------------------------------
Senior Vice President - General
Counsel and Secretary
GENERAL ELECTRIC CAPITAL
SERVICES, INC.
By: Jeffrey S. Werner
-------------------------------
Senior Vice President, Corporate
Treasury and Global Funding Operation
KIDDER, PEABODY GROUP INC.
By: John M. Liftin
-------------------------------
Senior Vice President,
General Counsel and Secretary
<PAGE>
Schedule A
DIRECTORS AND EXECUTIVE OFFICERS OF GENERAL ELECTRIC COMPANY
The name, business address, title, present principal occupation
or employment of each of the directors and executive officers of GE are set
forth below. If no business address is given, the director's or officer's
business address is GE's address. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to GE. Unless
otherwise indicated below, all of the persons listed below are citizens of
the United States of America.
Present Principal
Occupation Including
Name and Name and Address/1/
Business Address of Employer
---------------- ---------------------
Directors
- ---------
John F. Welch, Jr. Chairman and Chief Executive
Officer
H. Brewster Atwater, Jr. Chairman of the Board, Chief
General Mills, Inc. Executive Officer and
1 General Mills Blvd. Director, General Mills, Inc.
Minneapolis, MN 55426
D. Wayne Calloway Chairman of the Board, Chief
Pepsico, Inc. Executive Officer and
700 Anderson Hill Road Director, PepsiCo, Inc.
Purchase, NY 10577
Silas S. Cathcart Director and retired Chairman
125 South Wacker Dr. of the Board, Illinois Tool
Suite 3000 Works, Inc.
Chicago, IL 60606
Lawrence E. Fouraker Former Dean, Harvard Business
School, Cambridge, Mass.
Paolo Fresco Vice Chairman and Executive
GE International Officer; Citizen of Italy
35 Shortlands, Hammersmith
London W6 8BX
England
_______________________
/1/ Same address as director's or officer's business address except
where indicated.
A-1
<PAGE>
Present Principal
Occupation Including
Name and Name and Address
Business Address of Employer
---------------- ---------------------
Claudio X. Gonzalez Chairman of the Board and
Kimberly-Clark de Mexico Chief Executive Officer,
S.A. de C.V. Kimberly-Clark de Mexico S.A.
Jose Luis Lagrange 103, de C.V. and Director of
Tercero Piso Kimberly-Clark Corporation;
Colonia Los Morales Citizen of Mexico
Mexico, D.F. 11510
Mexico
Henry H. Henley, Jr. Retired Chairman of the Board,
Chief Executive Officer and
former Director, Cluett,
Peabody & Co., Inc.
David C. Jones Retired U.S. Air Force General
and former Chairman of the
Joint Chiefs of Staff,
Washington, D.C.
Robert E. Mercer Retired Chairman of the Board
1653 Merriman Road and former Director, The
Suite 220 Goodyear Tire & Rubber Company
Akron, OH 44313
Gertrude G. Michelson Senior Advisor,
R.H. Macy Company, Inc. R.H. Macy Company, Inc.
151 West 34th Street
New York, NY 10001
Roger S. Penske Chairman of the Board and
Penske Corporation President, Penske Corporation
13400 Outer Drive, West
Detroit, MI 48239
Barbara Scott Preiskel Former Senior Vice President,
36 West 44th Street Motion Picture Associations
Suite 1100 of America
New York, NY 10036
Frank H.T. Rhodes President, Cornell University,
Cornell University Ithaca, N.Y.
300 Day Hall
Ithaca, NY 14853
A-2
<PAGE>
Present Principal
Occupation Including
Name and Name and Address/1/
Business Address of Employer
---------------- ---------------------
Andrew C. Sigler Chairman of the Board, Chief
Champion International Executive Officer and
Corporation Director, Champion
One Champion Plaza International Corporation
Stamford, CT 06921
Douglas A. Warner III President and Director
J.P. Morgan & Co., Inc. J.P. Morgan & Co., Inc. and
and Morgan Guaranty Trust Company
Morgan Guaranty Trust of New York
Company of New York
60 Wall Street
New York, NY 10260
Executive Officers (Who Are Not Directors)
- ------------------------------------------
James R. Bunt Vice President and Treasurer
William J. Conaty Senior Vice President, Human
Resources
Dennis D. Dammerman Senior Vice President, Finance
Frank P. Doyle Executive Vice President
Lewis S. Edelheit Senior Vice President, Corporate
Research and Development
Dale F. Frey Chairman and President, GE Corporate
Investments
David C. Genever-Watling Senior Vice President, GE Industrial
and Power Systems
Benjamin W. Heineman, Jr. Senior Vice President, General
Counsel and Secretary
W. James McNerney, Jr. Senior Vice President, GE South Asia
Area
Eugene F. Murphy Senior Vice President, GE Aircraft
Engines
Robert L. Nardelli Vice President, GE Transportation
Systems
A-3
<PAGE>
Present Principal
Occupation Including
Name and Name and Address
Business Address of Employer
---------------- ---------------------
Robert W. Nelson Vice President, Corporate Financial
Planning and Analysis
John D. Opie Senior Vice President, GE Lighting
Gary M. Reiner Vice President, Corporate Business
Development
Gary L. Rogers Senior Vice President, GE Plastics
James W. Rogers Vice President, GE Motors
Brian H. Rowe Chairman, GE Aircraft Engines
Hellene S. Runtagh Vice President and Chief Information
Officer, GE Information Services
J. Richard Stonesifer Senior Vice President, GE Appliances
John M. Trani Senior Vice President, GE Medical
Systems
Lloyd G. Trotter Vice President, GE Electrical
Distribution and Control
A-4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
OF
GENERAL ELECTRIC CAPITAL SERVICES, INC.
The name, business address, title, present principal occupation
or employment of each of the directors and executive officers of GECS are
set forth below. If no business address is given, the director's or
officer's business address is GECS's address. Unless otherwise indicated,
each occupation set forth opposite an individual's name refers to GECS.
Unless otherwise indicated below, all of the persons listed below are
citizens of the United States of America.
Present Principal
Occupation Including
Name and Name and Address /2/
Business Address of Employer
----------------- ----------------------
Directors
- ---------
Gary C. Wendt Chairman, President and Chief
Executive Officer
John F. Welch, Jr. Chairman and Chief
General Electric Company Executive Officer, GE
3135 Easton Turnpike
Fairfield, CT 06431
Kaj Ahlmann President, Employers Reinsurance;
Executive Vice President
Nigel D. T. Andrews Executive Vice President
James R. Bunt Vice President and Treasurer, GE
Dennis D. Dammerman Senior Vice President,
General Electric Company Finance, GE
3135 Easton Turnpike
Fairfield, CT 06431
Paolo Fresco Vice President and
GE International Executive Officer, GE;
35 Shortlands, Hammersmith Citizen of Italy
London W6 8 BX England
Dale F. Frey Chairman and President,
GE Corporate Investments
____________________
/2/ Same address as director's or officer's business address except
where indicated.
A-5
<PAGE>
Present Principal
Occupation Including
Name and Name and Address
Business Address of Employer
---------------- ----------------------
Benjamin W. Heineman, Jr. Senior Vice President,
General Electric Company General Counsel and
3135 Easton Turnpike Secretary, GE
Fairfield, CT 06431
Michael D. Lockhart Former Officer, GE
2901 East Lake Road Aircraft Engines
Erie, PA 16531
Hugh J. Murphy Officer, GE Power Systems
Denis J. Nayden Executive Vice President
Michael A. Neal Executive Vice President
John M. Samuels Senior Counsel, Taxes, GE
General Electric Company
3135 Easton Turnpike
Fairfield, CT 06431
Edward D. Stewart Executive Vice President
Executive Officers (Who Are Not Directors)
- ------------------------------------------
Joan Amble Vice President and Controller
Granville H. Bowie Senior Vice President, Human
Resources
Richard D'Avino Vice President and Senior Counsel,
Taxes
Burton J. Kloster, Jr. Senior Vice President, General
Counsel and Secretary
James A. Parke Senior Vice President, Finance
Jeffrey S. Werner Senior Vice President, Corporate
Treasury and Global Funding
Operation
A-6
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
OF
KIDDER, PEABODY GROUP INC.
The name, business address, title, present principal occupation
or employment of each of the directors and executive officers of Kidder are
set forth below. If no business address is given, the director's or
officer's business address is Kidder's address. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers
to Kidder. Unless otherwise indicated below, all of the persons listed
below are citizens of the United States of America.
Present Principal
Occupation Including
Name and Name and Address /3/
Business Address of Employer
---------------- ----------------------
Directors
Dennis D. Dammerman Chairman and Chief
General Electric Company Executive Officer; Senior
3135 Easton Turnpike Vice President, Finance,
Fairfield, CT 06431 GE
Burton J. Kloster, Jr. Senior Vice President,
General Electric Capital General Counsel and
Services, Inc. Secretary, GECS
260 Long Ridge Road
Stamford, CT 06927
Denis J. Nayden President and Chief
General Electric Capital Operating Officer;
Services, Inc. Executive Vice President,
260 Long Ridge Road GECS
Stamford, CT 06927
_______________________
/3/ Same address as director's or officer's business address
except where indicated.
A-7
<PAGE>
Present Principal
Occupation Including
Name and Name and Address
Business Address of Employer
---------------- ----------------------
James A. Parke Senior Vice President,
General Electric Capital Finance, GECS
Services, Inc.
260 Long Ridge Road
Stamford, CT 06927
Gary C. Wendt Chairman, President and
General Electric Capital Chief Executive Officer,
Services, Inc. GECS
260 Long Ridge Road
Stamford, CT 06927
Executive Officers (Who Are Not Directors)
Carol S. Anderson Senior Vice President
Steven P. Baum Senior Vice President
George V. Grune, Jr. Senior Vice President
Theodore J. Johnson Senior Vice President
John M. Liftin Senior Vice President, General
Counsel and Secretary
David M. McAuliffe Senior Vice President
C. Edward Midgley Senior Vice President
Richard W. O'Donnell Senior Vice President, Chief
Financial and Administrative Officer
Thomas F. Ryan, Jr. Senior Vice President
Mark B. Sutton Senior Vice President
Georges Ugeux Senior Vice President
William S. Watt Senior Vice President
A-8
<PAGE>
Schedule B
----------
During the 60 days prior to November 15, 1994, Kidder, Peabody &
Co. Incorporated, the wholly-owned broker-dealer subsidiary of Kidder
("KPCI"), purchased and sold shares of Common Stock pursuant to
proprietary trading strategies. The Common Stock is one of the
component securities of seven different baskets of securities. During
such 60-day period, KPCI made purchases aggregating 85,950 and sales
aggregating 86,512 of shares of Common Stock pursuant to such
proprietary trading strategies at prices ranging from $13.625 to $15.875
per share. The aggregate number of shares of Common Stock held by such
baskets as of the close of business on November 14, 1994, is -81,612
(short position).
During the 60 days prior to November 15, 1994, KPCI, on behalf of
customers with discretionary accounts, made purchases aggregating 46,100
and sales aggregating 27,000 shares at prices ranging from $14.375 to
$15.50 per share. KPCI also made the following additional purchases and
sales of shares of Common Stock during such period: (i) on September
20, 1994, purchase of 15,000 shares at $14.875 per share and sale of
15,000 shares at $14.875 per share; and (ii) on October 4, 1994,
purchase of 10,000 shares at $14.125 per share and sale of 10,000 shares
at $14.00 per share.
<PAGE>
Exhibit 99(a)
ASSET PURCHASE AGREEMENT, dated as of
October 17, 1994, among PAINE WEBBER GROUP INC., a
Delaware corporation (the "Purchaser"), GENERAL
ELECTRIC COMPANY, a New York corporation (the
"Parent"), and KIDDER, PEABODY GROUP INC., a Delaware
corporation (the "Seller").
WHEREAS the Purchaser desires to purchase certain assets
from the Seller and certain of its subsidiaries, and the Seller desires
to sell, and to cause such subsidiaries to sell, such assets to the
Purchaser, in each case upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS the parties recognize the importance to the Acquired
Businesses (as defined below) of their respective key employees.
NOW, THEREFORE, in consideration of the respective covenants
and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Accounts Receivable" shall mean all accounts and notes
receivable of each member of the Seller Group, including credit balances
and security and commodity balances, outstanding on the Closing Date and
arising out of the conduct of any Acquired Business, other than any
Excluded Asset.
"Acquired Assets" shall mean (a) the Acquired Liquid Assets
and (b) the Acquired Operating Assets.
"Acquired Businesses" shall mean, subject to the
Restructuring Agreement, the business activities and operations of the
Seller Group generally described by the following names, other than any
Excluded Business:
<PAGE>
2
(a) Asset Management;
(b) Mortgages, including Single Family Whole Loan Trading,
Commercial/Multi-Family Whole Loan Trading, Mortgage Finance, Real
Estate Finance (including REIT underwriting and sales and real
estate advisory), Research and Contract Finance;
(c) Equity Research;
(d) Investment Banking, including High Yield and Emerging
Markets;
(e) International Fixed Income; provided, however, that
(i) the Seller has advised the Purchaser that the International
Fixed Income business is currently conducted principally through
the Seller Group's London office and is also conducted through
certain other foreign offices, (ii) the operations and business
defined in this clause (e) shall include the related sales force,
wherever located, and (iii) without limiting clause (ii) above,
except to the extent otherwise specified pursuant to clause (j)
below, the operations and business defined in this clause (e)
shall include only the London office;
(f) Listed Domestic Futures, including sales and marketing
of futures and futures option contracts traded on United States
futures exchanges and related support functions;
(g) Matched Book, consisting of (i) matched repurchase and
reverse repurchase and borrowing transactions collateralized by
U.S. government and agency Securities, mortgaged-backed Securities
or whole loans (conducted in New York) and (ii) such transactions
collateralized by foreign government Securities and Eurobond
Securities (conducted in London);
(h) Investment Services (retail brokerage);
(i) Fixed Income (sales force only); and
(j) any other business activities and operations of the
Seller Group (or any portion thereof) specified by the Purchaser
pursuant to Section 9.01.
<PAGE>
3
"Acquired Liquid Assets" shall mean (i) the cash reflected
on the Closing Balance Sheet, (ii) subject to Section 2.09, all
Securities held as of the Closing Date by any member of the Seller Group
in connection with the conduct of any Acquired Business, other than any
Excluded Asset, (iii) the cash and U.S. Government Securities delivered
to the Purchaser pursuant to Section 3.03(b) and (iv) subject to
Section 2.07(b), the Other Liquid Assets.
"Acquired Operating Assets" shall mean (a) all the assets,
rights, properties, claims, contracts, goodwill and business of every
kind and description, whether tangible or intangible, real, personal or
mixed, owned directly or indirectly by any member of the Seller Group
and used primarily in the conduct of any Acquired Business, including
Assigned Contracts, including customer account agreements, Exchange
Memberships, Intellectual Property, Leased Real Property, Licenses and
Permits and Owned Real Property, other than any Equipment and Machinery,
(b) the Equipment and Machinery, (c) if mutually agreed between the
Purchaser and the Seller, the stock of any member of the Seller Group,
other than the Seller, any foreign member, or any member that directly
or indirectly owns stock in a foreign member, that the Purchaser
identifies to the Seller in writing prior to the Closing, (d) the Books
and Records and (e) any hedges and derivatives included within the
Acquired Assets pursuant to Section 9.05, other than, in each case, any
Excluded Asset, any Security and any Other Liquid Asset.
"Advisers Act" shall mean the Investment Advisers Act of
1940.
"Affiliate" shall mean, with respect to a specified person,
a person that directly or indirectly, through one or more
intermediaries, controls, or is controlled by or is under common control
with, the person specified and when used with respect to the Parent or
the Seller, shall include the members of the Seller Group.
"aggregate market value", when used in Section 2.08, has the
meaning specified in Section 2.08(b)(i).
"Applicable Law" shall mean all applicable provisions of all
(a) constitutions, treaties, statutes, laws (including the common law),
rules, regulations, ordinances, codes or orders of any Governmental
Authority, and (b) orders, decisions, injunctions, judgments, awards
<PAGE>
4
and decrees of or agreements with any Governmental Authority.
"Assigned Contracts" has the meaning set forth in
Section 2.07(c).
"Assumed Liabilities" has the meaning set forth in Section
2.05.
"Assumption Agreement" shall mean the assumption agreement
dated as of the Closing Date by the Purchaser in favor of the members of
the Seller Group, reasonably satisfactory in form and substance to the
parties, pursuant to which the Purchaser shall assume the Assumed
Liabilities in accordance with this Agreement.
"Balance Sheet" has the meaning set forth in Section 5.05.
"Balance Sheet Principles" shall mean (a) including no
assets other than Acquired Assets, (b) containing separate line items
for cash, Securities (other than U.S. Government Securities), U.S.
Government Securities, Physical Capital and Other Liquid Assets,
(c) valuing all Securities and Exchange Seats at fair market value as of
the date of the applicable balance sheet, (d) including no Excluded
Liabilities specified in clauses (ii) through (xii) of Section 2.06 and
(e) otherwise in accordance with generally accepted accounting
principles, on a basis consistent with the Seller's past practice.
"Benefit Plans" has the meaning set forth in Section 5.11.
"Books and Records" shall mean all books of account,
records, files and invoices used primarily in the Acquired Businesses,
including all customer files, customer account records, production data,
equipment maintenance data, employee files relating to Continuing
Employees, accounting records, inventory records, sales and sales
promotional data, advertising materials, customer lists, cost and
pricing information, supplier lists, business plans, reference catalogs,
Tax records and Returns and any other similar records and data, other
than any Excluded Asset.
<PAGE>
5
"Business Day" shall mean any day other than a Saturday,
Sunday or other legal holiday in New York City or a day on which the
NYSE does not conduct regular trading.
"CFTC" shall mean the Commodity Futures Trading Commission.
"Closing" has the meaning set forth in Section 4.01.
"Closing Balance Sheet" has the meaning set forth in
Section 3.04.
"Closing Balance Sheet Report" has the meaning set forth in
Section 3.04.
"Closing Date" has the meaning set forth in Section 4.01.
"Closing Securities Listing" has the meaning set forth in
Section 2.09.
"Code" shall mean the Internal Revenue Code of 1986.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean the Purchaser's Common Stock, par
value $1 per share.
"Common Stock Consideration" shall mean 21,500,000 shares of
Common Stock.
"Commonly Controlled Entity" has the meaning set forth in
Section 5.11.
"Confidentiality Agreement" shall mean the two letter
agreements between the Purchaser and the Seller relating to
confidentiality.
"Continuing Employee" shall mean any employee of the Seller
Group (including an employee who is absent due to illness, injury,
military service or other authorized absence, but not including an
employee who is retired or who is disabled within the meaning of any
applicable long-term disability plan) who accepts an offer of employment
from the Purchaser that takes effect at the Closing (or, in the case
<PAGE>
6
of an absent employee, following his or her return to service).
"Contract" shall mean any contract, agreement or other
instrument or arrangement, excluding any Security and any such item
relating to any off-balance sheet hedge or derivative.
"Conversion Plan" has the meaning specified in the
Restructuring Agreement.
"Convertible Preferred Stock" shall mean 1,000,000 shares of
6% Convertible Preferred Stock of the Purchaser having the terms set
forth in Exhibit A.
"Conveyancing Documents" has the meaning set forth in
Section 2.02.
"Covered Taxes" has the meaning set forth in Section 5.06.
"Deferred Purchase Price" has the meaning set forth in
Section 3.05.
"Delayed Asset" has the meaning set forth in Section 2.04.
"Delayed Liability" has the meaning set forth in
Section 2.04.
"DRD" has the meaning set forth in Section 3.05.
"Equipment and Machinery" shall mean all the equipment,
machinery, furniture, fixtures and improvements, supplies and vehicles
owned or leased by any member of the Seller Group and used exclusively
in the operation of any Acquired Business.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974.
"Exchange Membership" shall mean each membership in any
securities or commodities exchange held by or on behalf of any member of
the Seller Group primarily in connection with its conduct of any
Acquired Business and any agreements relating thereto, other than
(i) any Excluded Asset and (ii) any such item that confers a particular
status on the applicable member of the Seller Group if the
<PAGE>
7
Purchaser or any relevant subsidiary of the Purchaser possesses such
status.
"Exchange Seat" shall mean each seat on any securities or
commodities exchange held by or on behalf of any member of the Seller
Group primarily in connection with its conduct of any Acquired Business,
other than any Excluded Asset.
"Excluded Assets" shall mean all right, title and interest
of the members of the Seller Group in (a) any Securities known as
collateralized mortgage obligations, (b) any assets (other than
Securities, Physical Capital, Contracts and Other Liquid Assets) and any
Exchange Seats described in any notice of assets to be excluded
delivered by the Purchaser to the Seller from time to time prior to the
Closing (provided that any asset identified to the Purchaser pursuant to
Section 7.03(b) may only be excluded pursuant to this clause (b) in a
notice delivered by the Purchaser to the Seller within 30 days of
delivery to the Purchaser of such writing), (c) the Securities inventory
of any Excluded Business, (d) any Securities excluded pursuant to
Section 2.08, (e) each other asset of any member of the Seller Group not
used primarily (or in the case of Equipment and Machinery, exclusively)
in the conduct of any Acquired Business, (f) the "GE" and "General
Electric Company" marks and names and any derivatives thereof, (g) the
Excluded Documents, (h) any Books and Records that the Seller is
required to retain under Applicable Law (including applicable Tax law
and regulations), (i) any rights attributable to any Excluded Asset or
Excluded Business (including any Contract forming part of the Excluded
Assets or the performance of which is an Excluded Liability), (j) any
off-balance sheet hedges and derivatives and related assets, other than
those included within the Acquired Assets pursuant to Section 9.05,
(k) any right to refunds of Excluded Taxes, (l) any Contract not
assigned in accordance with Section 2.07(c) and (m) any asset returned
to the Seller pursuant to Section 2.07(a) or 2.07(b).
"Excluded Businesses" shall mean the business activities and
operations of the Seller Group (or any portion thereof) neither listed
in clauses (a) through (i) of the definition of "Acquired Business" nor
specified by the Purchaser pursuant to Section 9.01.
"Excluded Documents" shall mean any Books and Records or
other material created in connection with or in
<PAGE>
8
anticipation of any suit, action, proceeding, arbitration, mediation,
inquiry or investigation, whether or not created or maintained by
counsel, and whether or not subject to the attorney-client privilege,
the work product immunity, or any other applicable privilege.
"Excluded Liabilities" has the meaning set forth in
Section 2.06.
"Excluded Taxes" shall mean (i) all Taxes imposed upon the
Seller or any present or former Affiliate of the Seller or any other
person that is or ever has been affiliated with any Included Subsidiary
(in each case other than any Included Subsidiary or any present or
former Affiliate of the Purchaser) for any taxable period, (ii) all
Taxes related to the Excluded Assets or the Excluded Businesses for any
taxable period, (iii) all Taxes relating to or arising under any Tax
sharing agreement, Tax indemnity obligation or similar agreement,
arrangement or practice in effect with respect to the Seller, any
Included Subsidiary or any present or former Affiliate of the Seller or
of any Included Subsidiary during the Pre-Closing Tax Period, and
(iv) all Taxes related to the Acquired Assets accruing, under the
principles of Sections 11.01 and 11.04, during the Pre-Closing Tax
Period; provided, however that Excluded Taxes shall in no event include
the Assumed Liabilities for Taxes described in Sections 2.05(d) and
2.05(e).
"fair market value" of an individual Security or any
individual Exchange Seat, as of any date, shall mean the net price to
the Seller of such Security or Exchange Seat that would be realized in
an arm's length sale transaction on such date between a willing buyer
and a willing seller, neither under any compulsion to buy or sell, as
the case may be.
"Financial Statements" has the meaning set forth in
Section 5.05.
"Funds" shall mean the registered investment companies for
which any member of the Seller Group acts as investment adviser or, in
the case of open-end funds, principal underwriter.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
<PAGE>
9
"Governmental Authority" shall mean any government, or any
commission, authority, board, agency, division, subdivision or any court
or tribunal, of the government of the United States or of any state,
territory, city, municipality, county or town thereof or of the District
of Columbia, or of any foreign jurisdiction, including the employees or
agents thereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Included Subsidiary" shall mean any subsidiary of the
Seller the stock of which forms part of the Acquired Assets.
"Independent Accounting Firm" has the meaning set forth in
Section 3.04(a).
"Intellectual Property" shall mean (a) patents (including
domestic and foreign patents and applications), trademarks and service
marks (including registrations and applications therefor), trade names,
brands, private labels, copyrights (including registrations and
applications therefor), know-how, proprietary processes (whether or not
patentable), trade secrets and computer software (including all
applications, operating systems, and interface software, in object and
source code form); (b) tapes, disks and other electronic or print media
embodying or containing any software; (c) enhancements, improvements,
modifications and derivative versions of software; (d) all documentation
related to the software and any modifications thereof, including all
commentary relating to source codes, user manuals, programmers' manuals,
diagrams, flow charts, and maintenance records); and (e) all licenses
and rights with respect to the foregoing; in each case that any member
of the Seller Group owns or possesses the right to use and that is used
primarily in the conduct of any Acquired Business, including all the
right, title and interest of each member of the Seller Group in the
names "Kidder" and "Kidder Peabody", and all extensions, contractions
and abbreviations thereof and derivations therefrom, other than any
Excluded Asset.
"Interim Balance Sheet" has the meaning set forth in
Section 3.03.
"Interim Net Book Value Statement" has the meaning set forth
in Section 3.03.
<PAGE>
10
"LM Expert" has the meaning set forth in Section 2.08(c).
"Leased Real Property" has the meaning set forth in
Section 5.07.
"Licenses and Permits" shall mean the governmental permits,
franchises, authorizations, licenses and other rights granted to any
member of the Seller Group by any Governmental Authority and applicable
to or used primarily in the conduct of any Acquired Business and all
certificates of convenience or necessity, immunities, privileges,
easements, consents, grants, ordinances and other rights of any
character used primarily in the conduct of, or required or necessary for
the lawful ownership or operation of, any Acquired Business, other than
(i) any Excluded Asset and (ii) any such item that confers a particular
status on the applicable member of the Seller Group if the Purchaser or
any relevant subsidiary of the Purchaser possesses such status.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or other) or conditional sale agreement.
"Liquid and Marketable", when used with respect to any
Security, shall mean (a) capable of being converted within a reasonable
period of time into cash without significant loss of value, (b) able to
be sold in a secondary market that has the ability to absorb a
reasonable amount of buying and selling activity (in light of the size
of such Security) without excessive price volatility and (c) for which
there exists a ready secondary market characterized by multiple bona
fide bids and offers, reasonable trading volume (in light of the size of
such Security) and prompt and orderly settlement of transactions in
securities.
"Loss" has the meaning set forth in Section 12.01.
"Material Adverse Effect" shall mean a material adverse
effect on the business, assets, properties, condition (financial or
otherwise), operations, results of operations or prospects of the
Acquired Businesses taken as a whole.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
<PAGE>
11
"Net Book Value of Tangible Liquid Assets" shall mean the
excess of (a) the sum of (i) the Acquired Liquid Assets and (ii) up to a
maximum of $20 million in net book value of Physical Capital, in each
case as reflected on the Closing Balance Sheet, as finally determined
pursuant to Section 3.04(a), over (b) the Assumed Liabilities, as
reflected on the Closing Balance Sheet, as finally determined pursuant
to Section 3.04(a).
"1940 Act" shall mean the Investment Company Act of 1940.
"1934 Act" shall mean the Securities Exchange Act of 1934.
"1933 Act" shall mean the Securities Act of 1933.
"NYSE" shall mean the New York Stock Exchange.
"Opening Securities Listing" has the meaning set forth in
Section 2.09.
"Owned Real Property" has the meaning set forth in Section
5.07.
"Other Liquid Assets" shall mean (a) all Accounts Receivable
(other than those receivable from the Parent or any of its Affiliates
(including any Included Subsidiary) and other than any employee
forgivable loan) that the Seller reasonably believes will be paid in
full within 90 days of the Closing Date, (b) all other intangible assets
(other than Accounts Receivable and Securities) owned directly or
indirectly by any member of the Seller Group and used primarily in the
conduct of any Acquired Business and that represents the right to
receive cash on deposit or other cash or Securities and that the Seller
reasonably believes will be reduced to cash in accordance with its terms
within 90 days of the Closing Date (other than, in the case of this
clause (b), any such item that will need to be replaced by the Purchaser
following its reduction to cash) and (c) any Exchange Seat, to the
extent transferrable and reflected on the Closing Balance Sheet (in
accordance with the Balance Sheet Principles) as having value.
"person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Authority.
<PAGE>
12
"Physical Capital" shall mean (a) the equipment, machinery,
furniture and fixtures owned by any member of the Seller Group used
exclusively in and necessary in the operation of any Acquired Business
and (b) the cash proceeds of any insurance claim attributable to loss of
or damage to any item described in clause (a) above, to the extent such
proceeds are remitted to the Purchaser pursuant to Section 7.03, but not
in excess of what would have been the net book value of such item on the
Closing Balance Sheet in the absence of such loss or damage.
"Post-Closing Tax Period" shall mean all taxable periods
beginning on or after the Closing Date and the portion beginning on the
Closing Date of any taxable period that includes (but does not begin on)
such day.
"Pre-Closing Tax Period" shall mean all taxable periods
ending before the Closing Date and the portion ending on the day before
the Closing Date of any taxable period that includes (but does not end
on) such day.
"Property Taxes" has the meaning set forth in
Section 11.01(a).
"Purchase Price" has the meaning set forth in Section 3.01.
"Purchaser" has the meaning set forth in the Recitals
hereto.
"Purchaser Indemnitees" shall mean the Purchaser and its
subsidiaries (including the Included Subsidiaries) and their respective
officers, directors, employees, agents and advisors.
"Redeemable Preferred Stock" shall mean 2,500,000 shares of
9% Redeemable Preferred Stock of the Purchaser having the terms set
forth in Exhibit B.
"Required Consent" shall mean the consent of any person
necessary for the sale, conveyance, transfer or assignment of any
Acquired Asset or the assumption of any Assumed Liability.
"Restructuring Agreement" shall mean the Restructuring
Agreement dated as of the date hereof, among the Purchaser, the Parent
and the Seller.
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13
"Restructuring Payment" has the meaning set forth in
Section 12.05(b).
"Retail Brokerage Business" shall mean a full service retail
brokerage business such as the retail brokerage businesses being
conducted by each of the Seller and the Purchaser on the date of this
Agreement.
"Retail Brokerage Conversion Agreement" shall mean such
agreement or agreements, which may include a conversion agreement and a
clearing agreement, dated as of the Closing Date between the Seller and
the Purchaser, in form and substance reasonably satisfactory to the
Purchaser and the Seller, covering the transfer of assets and businesses
related to the retail brokerage operations of the Seller Group, as
contemplated by the Restructuring Agreement and this Agreement.
"Return" or "Returns" shall mean all returns, declarations,
reports, estimates, information returns and statements with respect to
Taxes, including any related or supporting information with respect to
any of the foregoing, filed or required to be filed with any Taxing
Authority.
"SEC Documents" has the meaning set forth in Section 6.08.
"Securities" shall mean any stock, note, bond, debenture,
collateral-trust certificate or transferrable share and any put, call,
straddle, option on or warrant or purchase right with respect to any of
the foregoing or with respect to any group or index of the foregoing
(including any interest therein or based upon the value thereof),
including whole loans, mortgage loans and participations therein.
"Seller Group" shall mean the Seller and its subsidiaries.
Any reference to a "member of the Seller Group" shall be a reference to
the Seller or any of its subsidiaries.
"Seller Indemnitees" shall mean the Parent and the members
of the Seller Group (other than any Included Subsidiary) and their
respective officers, directors, employees, agents and advisors.
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14
"Stockholders Agreement" shall mean a stockholders agreement
dated as of the Closing Date among the Parent, the Seller and the
Purchaser, in the form of Exhibit C.
"Straddle Period" has the meaning set forth in Section
11.01.
"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation, partnership, association
or other business entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of
the ordinary voting power are, at the time any determination is being
made, owned, controlled or held, or (b) that is, at the time any
determination is being made, otherwise controlled, by the parent or one
or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.
"Tax" or "Taxes" shall mean all Federal, state, local,
foreign and other governmental taxes, assessments, duties, fees, levies
or similar charges of any kind, including all sales, payroll, employment
and other withholding taxes, and including all obligations under any tax
sharing agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement or practice, and including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Allocation Agreement" has the meaning set forth in
Section 11.02.
"Tax Claim" has the meaning set forth in Section 12.04.
"Tax Rate" has the meaning set forth in 3.05.
"Taxing Authority" shall mean any governmental or quasi-
governmental body exercising any Taxing authority or Tax regulatory
authority.
"Third Party Claim" has the meaning set forth in
Section 12.03.
"Transaction Documents" shall mean this Agreement, the
Confidentiality Agreement, the Conveyancing Documents, the Assumption
Agreement, the Restructuring Agreement, the Stockholders Agreement, the
Tax Allocation Agreement and the
<PAGE>
15
Retail Brokerage Conversion Agreement and any other ancillary agreements
among the parties executed in connection with the transactions
contemplated hereby.
"Transfer Taxes" shall mean all transfer, documentary,
sales, use, registration, value-added and other similar Taxes (including
all applicable real estate transfer Taxes and real property transfer
gains Taxes) and related amounts (including any penalties, interest and
additions to Tax) incurred in connection with this Agreement and the
other Transaction Documents and the transactions contemplated hereby and
thereby, including any transfer of assets to the Seller pursuant to
Section 2.07 or 3.04(d).
"U.S. Government Securities" shall mean direct obligations
of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full
faith and credit of the United States of America), excluding interest-
only or principal-only stripped securities.
"value", when used in Section 2.08, has the meaning set
forth in Section 2.08(b)(i).
SECTION 1.02. Terms Generally. The definitions in
Section 1.01 shall apply equally to both the singular and plural forms
of the terms defined. "Include", "includes" and "including" shall be
deemed to be followed by "without limitation" whether or not they are in
fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing, lithography or
other means of reproducing words in a visible form. Any agreement or
instrument or any law, rule or regulation of any Governmental Authority
defined or referred to in Section 1.01 means such agreement or
instrument or such law, rule or regulation as from time to time amended,
modified or supplemented in accordance with the terms thereof, including
(in the case of agreements or instruments) by waiver or consent and (in
the case of such law, rule or regulation) by succession of any
comparable successor law, rule or regulation and includes (in the case
of agreements or instruments) references to all attachments thereto and
instruments incorporated therein. References to a person are also to
its permitted successors and assigns. Any term defined below by
reference to any agreement or instrument or any law, rule or regulation
of any Governmental Authority has such meaning whether or not such
agreement, instrument
<PAGE>
16
or law, rule or regulation is in effect. "Agreement", "hereof",
"herein", "hereunder" and comparable terms refer to this Agreement
(including all exhibits and schedules hereto) and not to any particular
article, section, clause or other subdivision hereof or attachment
hereto. References to any gender include, unless the context otherwise
requires, references to all genders, and references to the singular
include, unless the context otherwise requires, references to the plural
and vice versa. References in this Agreement to "Article", "Section",
"Clause" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section, clause or
subdivision of or attachment to this Agreement.
ARTICLE II
Purchase of Assets and Assumption of Liabilities
SECTION 2.01. Purchase and Sale. Upon the terms and
subject to the conditions herein set forth, the Seller shall sell,
convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to the Purchaser (or its designee),
and the Purchaser (or its designee) shall purchase and accept from the
Seller and the other members of the Seller Group, on the Closing Date,
all right, title and interest of the Seller and the other members of the
Seller Group in and to the Acquired Assets, wherever located.
SECTION 2.02. Transfer of Assets. The sale, conveyance,
transfer, assignment and delivery by the members of the Seller Group of
the Acquired Assets to the Purchaser shall be effected on the Closing
Date by deeds, bills of sale, endorsements, stock powers, assignments
and other instruments of transfer and conveyance satisfactory in form
and substance to counsel for the Purchaser (the "Conveyancing
Documents").
SECTION 2.03. Subsequent Documentation. The Seller shall
(and shall cause the other members of the Seller Group to), at any time
and from time to time after the Closing Date, upon the request of the
Purchaser and at the expense of the Seller (but excluding fees of the
Purchaser's counsel), do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all such further deeds,
assignments, transfers and other
<PAGE>
17
instruments of transfer and conveyance as may be required for the better
assigning, transferring, granting, conveying and confirming to the
Purchaser or its successors and assigns, or for aiding and assisting in
collecting and reducing to possession, any of or all the Acquired Assets
(any such document, upon its execution and delivery, becoming a
Conveyancing Document).
SECTION 2.04. Asset Transfers Requiring Consent. (a) The
parties recognize that the transfer of certain Acquired Assets to the
Purchaser as contemplated hereby cannot be effected without Required
Consents. To the extent that any Required Consent with respect to any
Acquired Asset has not been obtained on or prior to the Closing Date,
such Acquired Asset (a "Delayed Asset") shall not be transferred as an
Acquired Asset hereunder, and any related liability that would, but for
the absence of such Required Consent, constitute an Assumed Liability (a
"Delayed Liability") shall not be assumed by the Purchaser as an Assumed
Liability hereunder, unless and until such Required Consent has been
obtained. Notwithstanding the foregoing, if any Required Consent is not
obtained, the Seller shall, at the request of the Purchaser and at the
expense of the Seller, implement any lawful arrangement designed to
provide to the Purchaser the benefits under or of the applicable
Acquired Asset; provided, however, that the Purchaser assumes and agrees
to pay and perform all liabilities relating to such Acquired Asset that
would otherwise constitute Assumed Liabilities.
(b) At such time and on each occasion after the Closing
Date that a Required Consent shall be obtained with respect to any
Delayed Asset, such Delayed Asset shall forthwith be transferred and
assigned to the Purchaser hereunder, and all related Deferred
Liabilities shall be simultaneously assumed by the Purchaser hereunder,
whereupon (i) such Delayed Asset shall constitute an Acquired Asset for
all purposes hereunder and (ii) such Deferred Liabilities shall
constitute Assumed Liabilities for all purposes hereunder.
(c) In the event that the shareholders of a Fund do not
approve the transfer of the appropriate Contracts to the Purchaser and
the Seller Group subsequently sells such Contracts, they shall forthwith
remit the proceeds of such sales to the Purchaser.
<PAGE>
18
(d) Should a Delayed Asset be transferred or a Delayed
Liability be assumed pursuant to this Section after the Closing Date
(i) but prior to the final determination of the Closing Balance Sheet,
such Delayed Asset or Delayed Liability shall be deemed transferred or
assumed, as the case may be, at the Closing, or (ii) after the final
determination of the Closing Balance Sheet, an appropriate cash payment
shall be made by the Purchaser or the Seller, as applicable, calculated
as if such Delayed Asset or Delayed Liability had been transferred or
assumed, as the case may be, at the Closing and been included in the
Closing Balance Sheet.
(e) The parties recognize that the transfer of certain
Exchange Memberships and Licenses and Permits may not be permitted under
Applicable Law. With respect to any such Exchange Membership or License
and Permit, (i) the Seller shall at its expense cooperate with the
Purchaser in applying for a replacement therefor, (ii) the Seller shall
at its expense use reasonable efforts to convey, to the extent permitted
under Applicable Law, the benefits thereof to the Purchaser pending the
grant to the Purchaser of a replacement therefor and (iii) if the
absence thereof would have a material adverse effect on the ability of
the Purchaser to conduct any Acquired Business then, notwithstanding any
other provision of this Agreement, the Purchaser shall not be required
to purchase the Acquired Assets or assume the Assumed Liabilities
relating to such Acquired Business until a replacement therefor shall
have been granted.
(f) The parties recognize that certain Exchange
Memberships, Exchange Seats and Licenses and Permits (other than those
covered by Section 2.04(e)) that would otherwise be Acquired Assets are
necessary to the conduct by a member of the Seller Group of an Excluded
Business. The Purchaser and the Seller shall cooperate to provide such
benefits as are necessary to both parties in respect of any such
Exchange Membership, Exchange Seat or License and Permit.
SECTION 2.05. Assumption of Certain Liabilities. Upon the
terms and subject to the conditions set forth in the Transaction
Documents, from and after the Closing Date, the Purchaser shall assume
and agree to pay, perform and discharge when due the following
liabilities and obligations to the extent arising out of the Acquired
Businesses, other than any Excluded Liabilities (the "Assumed
Liabilities"):
<PAGE>
19
(a) liabilities outstanding on the Closing Date of any
member of the Seller Group that at the Closing Date finance
Securities forming part of the Acquired Liquid Assets, but only to
the extent such liabilities are reflected on the Closing Balance
Sheet, as finally determined pursuant to Section 3.04(a);
(b) (i) liabilities to the extent directly related to the
Acquired Assets and (ii) liabilities for amounts owed to any
Continuing Employee, pursuant to any Benefit Plan or otherwise, or
any customer of any Acquired Business, but, in each case, only to
the extent and in the amount reflected on the Closing Balance
Sheet, as finally determined pursuant to Section 3.04(a);
(c) liabilities and obligations under Assigned Contracts and
off-balance sheet hedges and derivatives included within the
Acquired Assets pursuant to Section 9.05, but, in each case, only
to the extent the due date for payment or performance thereof is
after the Closing Date;
(d) all Taxes related to the Acquired Assets accruing under
the principles of Sections 11.01 and 11.04 during the Post-Closing
Tax Period;
(e) any Transfer Taxes borne by the Purchaser pursuant to
Section 11.06; or
(f) any liability or obligation expressly allocated to the
Purchaser pursuant to the Restructuring Agreement.
Notwithstanding anything in this Agreement to the contrary,
any liability for Taxes described in Section 2.05(d) or 2.05(e) shall
not be an Excluded Liability.
SECTION 2.06. Excluded Liabilities. Notwithstanding clauses
(a) through (c) and clause (f) of Section 2.05, the Purchaser shall not
assume or become liable to pay, perform or discharge any of the
following liabilities or obligations, whether known or unknown,
<PAGE>
20
absolute, accrued, contingent or otherwise (collectively, the "Excluded
Liabilities"):
(i) any liability or obligation of any member of the Seller
Group not specifically described in clauses (a) through (f) of
Section 2.05;
(ii) any Excluded Taxes;
(iii) any liability or obligation that is attributable to
any Excluded Asset or Excluded Business;
(iv) any liability or obligation relating to the Acquired
Assets or Acquired Businesses arising out of any event or
condition occurring or existing prior to the Closing (except any
liability or obligation specifically described in clauses (a)
through (f) of Section 2.05);
(v) any liability or obligation of any member of the Seller
Group arising out of (A) any suit, action, proceeding,
arbitration, mediation, inquiry or investigation pending or
threatened as of, or arising out of any event or condition
occurring or existing prior to, the Closing or (B) any actual or
alleged breach of Applicable Law prior to the Closing;
(vi) any liability or obligation (A) of the Parent or any
member of the Seller Group to any present or former employee of
the Parent or any member of the Seller Group or (B) with respect
to any Benefit Plan, except, in any case, for any liability
expressly assumed by the Purchaser pursuant to Section 2.05(b);
(vii) any liability or obligation of any member of the
Seller Group under any Assigned Contract or off-balance sheet
hedge or derivative included in the Acquired Assets pursuant to
Section 9.05, in each case to the extent (A) attributable to any
actual or alleged breach of or non-performance thereunder prior to
the Closing Date or (B) accruing with respect to any period prior
to the Closing Date;
(viii) any liability or obligation of any member of the
Seller Group to the Parent or any other member of the Seller Group
or any of their respective Affiliates (other than to an Included
Subsidiary);
<PAGE>
21
(ix) any liability or obligation of any member of the Seller
Group not incurred in the ordinary course of business consistent
with past practices;
(x) any liability or obligation pursuant to an Assigned
Contract incurred in connection with obtaining any applicable
Required Consent;
(xi) any liability or obligation of any member of the Seller
Group described in any notice of liabilities to be excluded
delivered by the Purchaser to the Seller from time to time prior
to the Closing (provided that any liability or obligation pursuant
to any Contract may only be excluded pursuant to this clause (xi)
if such Contract is not an Assigned Contract);
(xii) any Transfer Taxes borne by the Seller pursuant to
Section 11.06; and
(xiii) any liability or obligation expressly allocated to
the Parent or the Seller pursuant to the Restructuring Agreement.
SECTION 2.07. Return of Selected Assets. (a) With respect
to any Acquired Asset other than Securities, Other Liquid Assets,
Physical Capital and Contracts, the Purchaser may, within 90 days after
the Closing Date, elect by notice in writing to the Seller to return
such Acquired Asset to the Seller. Upon giving of such notice and the
execution by the Purchaser of any appropriate instrument of transfer,
such Acquired Asset shall thereafter be an Excluded Asset for all
purposes under the Transaction Documents, including for the purpose of
determining the Assumed Liabilities.
(b) With respect to any Other Liquid Asset, the Purchaser
may at any time after 90 days after the Closing Date and prior to the
delivery of the Closing Balance Sheet elect by notice in writing to the
Seller to return to the Seller such Other Liquid Asset not paid in full
or otherwise reduced to cash at the time of such notice. Upon giving of
such notice and the execution by the Purchaser of any appropriate
instrument of transfer, such Other Liquid Asset (or, to the extent such
Other Liquid Asset has been paid in part or not reduced to cash, such
remaining unpaid or other portion thereof) shall be deemed to have been
an Excluded Asset as of the Closing Date.
<PAGE>
22
(c) The Purchaser shall have the right to review Contracts
to which any member of the Seller Group is a party and arising out of or
used primarily by such Seller Group member in the conduct of any
Acquired Business and to determine whether or not to assume any of such
Contracts. Any Contracts that are expressly assumed in writing by the
Purchaser or that are not described in a notice of Contracts to be
excluded delivered by the Purchaser to the Seller within 30 days after
identification of such Contract to the Purchaser pursuant to
Section 7.03(b) (together, "Assigned Contracts") shall be assigned to
and assumed by the Purchaser. Any Contracts that are not Assigned
Contracts shall be Excluded Assets.
SECTION 2.08 Exclusion of Selected Securities. (a) As
soon as practicable after the date of this Agreement, but in no event
later than October 19, 1994, the Seller shall deliver to the Purchaser
true and complete, detailed securities inventory position information
(the "Opening Securities Listing") as of the close of business on
October 14, 1994, for each of the businesses of the Seller Group
specified in the definition of "Acquired Businesses". The Opening
Securities Listing shall contain detailed descriptive information of the
type available in the Seller Group's management information systems,
including holdings, dates of acquisition, carrying cost and market value
and other descriptive information necessary for the Purchaser to make
its determinations under this Section.
(b) On or before November 5, 1994 (such date to be extended
to the extent the Opening Securities Listing is not delivered to the
Purchaser by October 19, 1994), the Purchaser may notify the Seller of:
(i) any Security on the Opening Securities Listing that the
Purchaser does not wish to acquire, whereupon such Security shall
become an Excluded Asset; provided, however, that the Purchaser
may not exclude pursuant to this clause Securities having a value
(determined by reference to market value, as specified in the
Opening Securities Listing) ("value") in the aggregate in excess
of 10% of the aggregate market value (as specified in the Opening
Securities Listing) of the Securities on the Opening Securities
Listing (the "aggregate market value"); and
(ii) any Security or class of Securities on the Opening
Securities Listing that the Purchaser
<PAGE>
23
reasonably believes in good faith not to be Liquid and Marketable,
taking into account all relevant matters, including the aging of
such Security (considered in light of the relevant business), the
size of the holdings of the Seller Group of such Security or
class, existing forward sales commitments with respect to such
Security or class, recent sales by the Seller Group of identical
Securities, the ability of the Seller Group to enter into
repurchase transactions with respect to such Security or
Securities of such class and each market in which such Security or
Securities of such class can be sold (including the pricing
characteristics of such market, the narrowness of the bid/ask
spread in such market, historical and recent trading volumes, the
depth, breadth and resiliency of such market, the number of
buyers, sellers and market-makers participating in such market on
a regular basis, the transparency of pricing in such market, the
age and history of such market, the existence of any formal,
regulated market or exchange, the amount of capital committed to
such market and current conditions prevailing in such market).
(c) With respect to any Security or class identified by the
Purchaser pursuant to Section 2.08(b)(ii), the Purchaser and the Seller
shall discuss whether such Security or the Securities of such class is
or is not Liquid and Marketable. If, within 10 days of the delivery by
the Purchaser of its notice pursuant to Section 2.08(b), the Purchaser
and the Seller are unable to agree on whether any Security or the
Securities of any class identified by the Purchaser pursuant to
Section 2.08(b)(ii) is or is not Liquid and Marketable, the parties
shall request that Goldman, Sachs & Co., or such other person or persons
with expertise in trading Securities and acceptable to the Purchaser and
the Seller (the "LM Expert"), determine whether such Security or the
Securities of such class are in its judgment "liquid and marketable"
and, to the extent that the LM Expert determines that such Security or
the Securities of such class are in its judgment not "liquid and
marketable", such Security or all the Securities of such class, as the
case may be, shall become Excluded Assets; provided, however, that, if,
but for this proviso, the LM Expert would have been requested to make
determinations with respect to Securities with a value in excess of 20%
of the aggregate market value, then (i) the Purchaser shall select
Securities as to which the Purchaser and the Seller cannot agree with a
value equal to 50% of such excess, whereupon
<PAGE>
24
such Securities shall become Excluded Assets, (ii) following such
selection by the Purchaser, the Seller shall select Securities as to
which the Purchaser and the Seller cannot agree with a value equal to
50% of such excess, whereupon such Securities shall become Excluded
Assets, and (iii) the balance of such Securities shall be the subject of
determination by the LM Expert. If any Security or the Securities of
any class identified by the Purchaser pursuant to Section 2.08(b)(ii)
are determined pursuant to this Section 2.08(c) not to be Liquid and
Marketable, such Security or the Securities of such class, as the case
may be, shall become Excluded Assets.
(d) If the Purchaser shall specify pursuant to Section 9.01
that it wishes to acquire any additional business of the Seller Group,
the procedures set forth above in this Section shall be repeated with
respect to the Securities inventory of such additional business except
that the October 14, 1994, date shall be the most recent practicable
date prior to the selection by the Purchaser of such additional business
pursuant to Section 9.01, and the November 5 date shall be 15 days
thereafter (but in no event later than December 3, 1994).
SECTION 2.09. Return of Securities. (a) Within three
Business Days after the Closing, the Seller shall deliver to the
Purchaser true and complete, detailed securities inventory position
information (the "Closing Securities Listing") as of the close of
business on the Closing Date for each of the Acquired Businesses. The
Closing Securities Listing shall conform as to content and format to the
Opening Securities Listing.
(b) Within 15 days after the delivery to the Purchaser of
the Closing Securities Listing, the Purchaser may elect by notice in
writing to the Seller to transfer to the Seller any Securities on the
Closing Securities Listing forming part of a class of Securities to the
extent the aggregate carrying cost (as specified in the Closing
Securities Listing) for all Securities of such class on the Closing
Securities Listing exceeds the last target inventory level for such
class established pursuant to Section 7.01(d).
(c) With respect to any Security that was acquired by the
Seller Group after October 14, 1994, the Purchaser may, within 15 days
after the delivery to the Purchaser of the Closing Securities Listing,
notify the Seller if the
<PAGE>
25
Purchaser reasonably believes in good faith that such Security is not
Liquid and Marketable, taking into account all relevant matters,
including those specified in Section 2.08(b)(ii). With respect to any
Security so identified by the Purchaser, the Purchaser and the Seller
shall discuss whether such Security is or is not Liquid and Marketable.
If, within 10 days of the delivery by the Purchaser of such notice, the
Purchaser and the Seller are unable to agree on whether such Security is
or is not liquid and Marketable, the parties shall request that the LM
Expert determine whether such Security is in its judgment "liquid and
marketable" and, to the extent that the LM Expert determines that such
Security is in its judgment not "liquid and marketable", the Purchaser
shall transfer such Security to the Seller; provided, however, that, if,
but for this proviso, the LM Expert would have been requested to make
determinations pursuant to this Section with respect to Securities with
a value (determined by reference to market value, as specified in the
Closing Securities Listing) in the aggregate market value in excess of
20% of the aggregate carrying cost (as specified in the Closing
Securities Listing) of all Securities on the Closing Securities Listing
acquired after October 14, 1994, then (A) the Purchaser shall select
Securities as to which the Purchaser and the Seller cannot agree with a
value (determined by reference to market value, as specified in the
Closing Securities Listing) equal to 50% of such excess, whereupon the
Purchaser shall transfer such Security to the Seller, (ii) the Seller
shall select Securities as to which the Purchaser and the Seller cannot
agree with a value (determined by reference to market value, as
specified in the Closing Securities Listing) equal to 50% of such
excess, whereupon the Purchaser shall transfer such Securities to the
Seller, and (iii) the balance of such Securities shall be the subject of
determination by the LM Expert. If any Security identified by the
Purchaser is determined pursuant to this Section 2.09(c) not to be
Liquid and Marketable, the Purchaser shall transfer such Security to the
Seller.
(d) If the Purchaser shall have specified pursuant to
Section 9.01 that it shall acquire any additional business of the Seller
Group, the references to October 14, 1994, in Section 2.09(c) shall,
with respect to the Securities inventory of such additional business, be
deemed a reference to the date of the opening securities listing for
such additional business pursuant to Section 2.08(d).
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(e) In the event of the transfer of any Security to the
Seller pursuant to this Section, upon the execution by the Purchaser of
any appropriate instrument of transfer, such Security shall be deemed to
have been an Excluded Asset as of the Closing Date for all purposes
under the Transaction Documents, including for the purposes of
determining the Assumed Liabilities.
SECTION 2.10. The LM Expert. The parties shall jointly
instruct the LM Agent to make all its determinations under Sections 2.08
and 2.09 as promptly as practicable and in any event within time periods
consistent with the other time periods set forth in those Sections. The
Purchaser and the Seller shall jointly engage the LM Expert, share
equally the fees and expenses of the LM Expert arising out of its
services as LM Expert and jointly indemnify the LM Expert against
liability arising out of its services as LM Expert.
ARTICLE III
Purchase Price; Closing; Additional Assets
SECTION 3.01. Purchase Price. (a) The purchase price for
the Acquired Assets (the "Purchase Price") shall consist of the
following:
(i) the Common Stock Consideration;
(ii) the Convertible Preferred Stock;
(iii) the Redeemable Preferred Stock;
(iv) the assumption by the Purchaser of the Assumed
Liabilities; and
(v) the Deferred Purchase Price.
(b) The Purchase Price shall be payable and deliverable in
accordance with Sections 3.02, 3.03, 3.04 and 3.05 and shall be subject
to adjustment as provided in Section 3.04.
SECTION 3.02. Closing. (a) At the Closing, upon the terms
and subject to the conditions set forth in the Transaction Documents,
the Purchaser shall:
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(i) issue the Common Stock Consideration, the Convertible
Preferred Stock and the Redeemable Preferred Stock to the members
of the Seller Group who are transferring the Acquired Assets to
the Purchaser (which members shall be identified in writing to the
Purchaser at least ten Business Days prior to the Closing) and
deliver or cause to be delivered to the applicable members
certificates, registered in the appropriate names), therefor; and
(ii) deliver to the Seller the Assumption Agreement, duly
executed by the Purchaser.
(b) At the Closing, upon the terms and subject to the
conditions set forth in the Transaction Documents, the Seller shall
transfer to the Purchaser (or its designee) the Acquired Assets by
delivering the Conveyancing Documents, duly executed by the applicable
members of the Seller Group.
(c) At the Closing, upon the terms and subject to the
conditions set forth in the Transaction Documents:
(i) the Purchaser and the Seller shall execute and deliver
the Retail Brokerage Conversion Agreement (including an agreement
for clearing services); and
(ii) the Purchaser, the Parent and the Seller shall execute
and deliver the Stockholder Agreement.
SECTION 3.03. Additional Acquired Liquid Assets To Be
Transferred. (a) On the date three Business Days before the Closing
Date, the Seller shall deliver to the Purchaser (i) an estimated balance
sheet as of the Closing Date (the "Interim Balance Sheet") prepared in
accordance with the Balance Sheet Principles, (ii) a schedule based on
the Interim Balance Sheet detailing the calculation of the estimated Net
Book Value of Tangible Liquid Assets to be delivered on the Closing Date
(the "Interim Net Book Value Statement") and (iii) a listing of the
Securities held as of the most recent practicable date by any member of
the Seller Group in connection with the conduct of any Acquired
Business, other than any Excluded Asset. For the purposes of the
Interim Balance Sheet, Securities shall be valued at their fair market
value as of the close of business on the most recent practicable date
(but in no event earlier than the fifth Business Day prior to the
Closing Date).
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(b) To the extent, if any, the estimated Net Book Value of
Tangible Liquid Assets as reflected on the Interim Net Book Value
Statement is less than $580,000,000, the Parent shall deliver to the
Purchaser on the Closing Date, at the Parent's option, cash or U.S.
Government Securities with a fair market value equal to the excess of
(i) $580,000,000 over (ii) the estimated Net Book Value of Tangible
Liquid Assets as reflected on the Interim Net Book Value Statement.
SECTION 3.04. Post-Closing Delivery. (a) Within 120 days
after the Closing Date, the Purchaser shall deliver to the Seller (i) a
balance sheet as of the Closing Date (the "Closing Balance Sheet"),
prepared in accordance with the Balance Sheet Principles, (ii) a
schedule based on the Closing Balance Sheet detailing the calculation of
the Net Book Value of Tangible Liquid Assets delivered on the Closing
Date (including any cash or U.S. Government Securities delivered
pursuant to Section 3.03(b)) (the "Final Net Book Value Statement") and
(iii) a schedule based on the Final Net Book Value Statement setting
forth the amount, if any, owed by the Purchaser or the Seller, as the
case may be, to the other, together with a statement from Ernst & Young
confirming that they have reviewed the Balance Sheet Principles and
agree with the Closing Balance Sheet. The Closing Balance Sheet and the
Final Net Book Value Statement shall be examined by the Seller, who
shall, not later than 30 days after receipt of the Closing Balance
Sheet, render a report thereon (the "Closing Balance Sheet Report").
The Closing Balance Sheet Report shall list those items, if any, as to
which the Seller asserts the Closing Balance Sheet did not comply with
the Balance Sheet Principles and those items, if any, as to which the
Seller does not agree in the Final Net Book Value Statement and the
Purchaser's proposed adjustment for such items and shall be accompanied
by a statement from KMPG Peat Marwick confirming that they have reviewed
the Balance Sheet Principles, the Closing Balance Sheet and the Final
Net Book Value Statement and agree with the Closing Balance Sheet
Report. If the Seller fails to deliver to the Purchaser the Closing
Balance Sheet Report within 30 days following delivery of the Closing
Balance Sheet, the Seller shall be deemed to have accepted the Closing
Balance Sheet and the Final Net Book Value Statement for all purposes,
including for the purpose of determining the additional cash or U.S.
Government Securities to be delivered pursuant to Section 3.04(b). If
the Purchaser does not give the Seller notice within 30 days following
receipt of the Closing Balance Sheet Report, the
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Purchaser shall be deemed to have accepted the Closing Balance Sheet and
the Final Net Book Value Statement as adjusted by the Seller for all
purposes, including for the purpose of determining the additional cash
or U.S. Government Securities to be delivered pursuant to
Section 3.04(b). If the Purchaser gives the Seller notice of objections
to the Closing Balance Sheet Report, and if the Purchaser and the Seller
are unable, within 15 days after receipt by the Seller of the notice by
the Purchaser of objections, to resolve the disputed objections, such
disputed objections shall be referred to Price Waterhouse (the
"Independent Accounting Firm"); provided, however, that any disputes
with respect to the fair market value of any Securities shall be
resolved pursuant to Section 3.04(c) and not by the Independent
Accounting Firm. The Independent Accounting Firm shall, within 60 days
following its selection, deliver to the Seller and the Purchaser a
written report determining whether the matters that are the subject of
the disputed objections complied with the Balance Sheet Principles or
were appropriately reflected in the Final Net Book Value Statement and,
if not, the adjustments that would be required to cure such items. Such
determination shall be conclusive and binding upon the parties hereto
for all purposes, including for the purpose of any Purchase Price
adjustment under Section 3.04(b), and the Closing Balance Sheet and the
Final Net Book Value Statement shall be so adjusted. The fees and
disbursements of the Independent Accounting Firm acting under this
Section shall be shared equally by the Purchaser and the Seller. The
parties shall cooperate with one another and with each other's
representatives in order to resolve any and all matters in dispute as
quickly as practicable.
(b) Within two Business Days following the final
determination, pursuant to Section 3.04(a), of the Closing Balance Sheet
and the Final Net Book Value Statement (including the calculations of
fair market value contemplated by Section 3.04(c)), and based upon such
final determination, and taking into account any payment pursuant to
Section 3.03(b), (i) to the extent the Net Book Value of Tangible Liquid
Assets as reflected on the Final Net Book Value Statement is less than
$580,000,000, the Parent shall deliver to the Purchaser, at the Parent's
option, additional cash or U.S. Government Securities with a fair market
value (determined as of the date of delivery) equal to the excess of
(A) $580,000,000 over (B) the Net Book Value of Tangible Liquid Assets
as reflected on the Final Net Book Value Statement and (ii) to the
extent, if any, the Net Book Value
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30
of Tangible Liquid Assets as reflected on the Final Net Book Value
Statement is greater than $580,000,000, the Purchaser shall deliver to
the Seller assets with a fair market value (determined as of the date of
delivery) equal to the excess of (A) the net worth as reflected on the
Closing Balance Sheet over (B) $580,000,000. Any payment made pursuant
to this Section 3.04(b) shall include interest on such excess at an
annual rate equal to the 30-day LIBOR rate plus 0.25% from the Closing
Date to the date of actual delivery. Any payment by the Purchaser
pursuant to this Section 3.04(b) shall be, at the Purchaser's option, in
cash or U.S. Government Securities except to the extent the amount due
exceeds the total amount of cash and U.S. Government Securities
delivered by the Seller or the Parent to the Purchaser at the Closing,
in which case the Purchaser, at its option, may elect to pay in
Securities (other than U.S. Government Securities) forming part of the
Acquired Liquid Assets having a fair market value (determined as of the
date of delivery) equal to the amount of such excess.
(c) For the purposes of the Closing Balance Sheet, the
Final Net Book Value Statement and the payments pursuant to
Section 3.04(b), (i) any Securities (other than any U.S. Government
Securities) shall be valued at fair market value and, if the Purchaser
and the Seller are unable to agree on fair market value within 60 days
of the Closing Date, the fair market value of such Securities shall be
determined by Goldman, Sachs & Co. or such other person or persons with
expertise in valuing Securities and acceptable to the Purchaser and the
Seller and (ii) U.S. Government Securities shall be valued at fair
market value.
SECTION 3.05. Deferred Purchase Price. In consideration
for the transfer of all the right, title and interest of each member of
the Seller Group in the names "Kidder" and "Kidder Peabody", the
Purchaser shall pay to the Seller additional amounts (the "Deferred
Purchase Price"), payable on each March 15, June 15, September 15 and
December 15, equal to (a) the difference between (i) one and (ii) the
product of (A) the Tax Rate and (B) the difference between one and the
DRD, multiplied by (b) the weighted average number of shares of
Redeemable Preferred Stock outstanding during the preceding quarter
multiplied by (c) $0.1875 divided by (d) the difference between one and
the Tax Rate; provided, however, that if there is a final determination
(including the execution of a Form 870-AD or successor form) to the
effect that any payments of the Deferred Purchase Price are to be
treated as dividends with
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respect to which the Seller or an Affiliate of the Seller is entitled to
the dividends received deduction under Section 243 of the Code for
Federal income Tax purposes, then the amounts of such payments required
under this Section shall be equal to the product of clause (b) above
multiplied by clause (c) above, and any excess amounts paid by the
Purchaser prior to such final determination shall be repaid by the
Seller to the Purchaser, together with interest at the rate provided
under Section 6621(a)(1) of the Code as in effect from time to time.
For the purposes of this Section, the "Tax Rate" means the maximum
Federal and state income tax rate (expressed as a decimal) applicable to
corporations for the taxable period in which the applicable payment is
paid, and the "DRD" is the percentage (expressed as a decimal) specified
in Sections 243(a) and 243(c) of the Code that applies to dividends paid
during such taxable period on the shares of Redeemable Preferred Stock
held by the Seller during such taxable period.
ARTICLE IV
Closing; Risk of Loss
SECTION 4.01. Closing. Subject to the satisfaction or
waiver by the appropriate party of all the conditions set forth in this
Agreement, the closing hereunder (the "Closing") shall take place at the
offices of Cravath, Swaine & Moore at 825 Eighth Avenue, New York, New
York 10019 at 10:00 a.m. on the second Business Day following the
satisfaction or waiver of the last of the conditions set forth in
Sections 13.02, 13.04, 14.02 and 14.04 shall have been satisfied, or
waived by the appropriate party, or at such other place and time as may
be mutually agreed to by the parties hereto, but in no event shall the
Closing take place earlier than January 2, 1995 (the date the Closing
occurs being referred to herein as the "Closing Date").
SECTION 4.02. Risk of Loss. Until the Closing, any loss of
or damage to the Acquired Assets from fire, casualty or any other
occurrence shall be the responsibility of the Parent and the Seller.
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ARTICLE V
Representations and Warranties of the Parent and the Seller
The Parent and the Seller hereby represent and warrant,
jointly and severally, to the Purchaser, as of the date hereof and as of
the Closing Date, as follows:
SECTION 5.01. Corporate Organization. Each of the Parent
and each member of the Seller Group is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction
of incorporation, and has all requisite corporate power and authority to
own its properties and assets (including the Acquired Assets) and to
conduct its businesses (including the Acquired Businesses) as now
conducted. Prior to the Closing, the Seller will have delivered to the
Purchaser true and complete copies of the certificate of incorporation
and by-laws, or other constitutive documents, of the Parent and each
member of the Seller Group.
SECTION 5.02. Qualification To Do Business. The Parent and
each member of the Seller Group is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in
which the character of the properties owned or leased by it or the
nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
SECTION 5.03. Authorization and Validity of Transaction
Documents. Each of the Parent and each member of the Seller Group has
full corporate power and authority to execute and deliver the
Transaction Documents to which it is, or is specified to be, a party and
to carry out its obligations thereunder. As of the Closing Date, the
execution and delivery of the Transaction Documents to which the Parent
or any member of the Seller Group is, or is specified to be, a party and
the performance of its obligations thereunder will have been duly
authorized by all necessary corporate action by its Board of Directors
and stockholders, and no other corporate proceedings on its part are
necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by each of the Parent and
the Seller and constitutes its valid and binding obligation, enforceable
against it in accordance with its terms. On the Closing Date, each
other Transaction Document to which the Parent or
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33
any member of the Seller Group is, or is specified to be, a party will
have been duly executed and delivered by it and will constitute its
valid and binding obligation, enforceable against it in accordance with
its terms.
SECTION 5.04. No Conflict or Violation; Consents. The
execution, delivery and performance by the Parent and the members of the
Seller Group of this Agreement and the other Transaction Documents
(i) do not and will not violate or conflict with any provision of the
certificate of incorporation or by-laws (or equivalent documents) of the
Parent or any member of the Seller Group and (ii) do not and will not
conflict with, or result in any violation of or default (with or without
notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the
creation of any Lien upon any of the properties or assets of the Parent
or any member of the Seller Group under, any provision of (A) assuming
receipt of all Required Consents, and except as previously disclosed in
writing to the Purchaser, any contract, agreement or other instrument to
which the Parent or any member of the Seller Group is a party or by
which it is bound or to which any of its properties or assets is subject
or (B) any Applicable Law applicable to the Parent or any member of the
Seller Group or their respective properties or assets, other than, in
the case of clauses (A) and (B) above, any such items that, individually
or in the aggregate, would not have a Material Adverse Effect. The
execution, delivery and performance by the Parent and each member of the
Seller Group of the Transaction Documents to which it is, or is
specified to be, a party and the consummation by it of the transactions
contemplated thereby do not require the consent or approval of, or
filing with, any Governmental Authority except (I) as required pursuant
to the HSR Act; (II) approvals and authorizations of the NYSE and other
self-regulatory organizations in the securities and commodities field;
(III) as may be required under the 1986 Supplement to the Banking Act of
1948 of New Jersey; (IV) compliance with and filings under the 1934 Act,
the 1940 Act, the Advisers Act and applicable state securities laws; and
(V) such consents, approvals and filings, as to which the failure to
obtain or make would not, individually or in the aggregate, materially
impair the ability of the Parent and the Seller to perform their
obligations under the Transaction Documents.
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SECTION 5.05. Financial Statements. Set forth in
Schedule 5.05 are (i) the audited consolidated balance sheet of the
Seller Group as of December 31, 1993, and the consolidated audited
statements of profit and loss and cash flows of the Seller Group for the
year then ended, together with the notes to such financial statements
and the report of the independent auditors thereon (the financial
statements described above, together with the notes to such financial
statements, collectively, the "Financial Statements", and the audited
consolidated balance sheet of the Seller Group as of December 31, 1993,
the "Balance Sheet"), and (ii) the unaudited consolidated balance sheet
of the Seller Group as of September 29, 1994, and the unaudited
consolidated income statement of the Seller Group for the nine months
then ended. Except as otherwise previously disclosed to the Purchaser
in writing, (A) the Financial Statements have been prepared in
conformity with GAAP (except as indicated in the notes thereto) and
fairly present the consolidated financial condition and consolidated
results of operations of the Seller Group as of the date thereof and for
the period then ended and (B) the unaudited financial statements have
been prepared from the books and records of the Seller Group in
accordance with GAAP (except for the absence of notes) and present
fairly the consolidated financial condition as of the date thereof and
the consolidated results of operations of the Seller Group as of the
date thereof and for the periods than ended.
SECTION 5.06. Tax Matters. Except as set forth in
Schedule 5.06 (which need not be provided with respect to any Included
Subsidiary prior to the agreement of the parties to the acquisition of
such Included Subsidiary):
(a) Each Included Subsidiary has timely filed or caused to
be filed, within the time and in the manner prescribed by law, with the
appropriate Taxing Authorities, all material separate Returns required
to be filed by or on behalf of it and each such Return was complete and
correct in all material respects at the time of filing.
(b) All material Taxes required to be shown on a separate
return (i) of each Included Subsidiary or (ii) which are or could become
after the Closing Date charged as a material encumbrance or Lien upon
any Acquired Asset, any Acquired Business or the assets or properties of
any Included Subsidiary (except for statutory Liens for Taxes not yet
due and Taxes for which an Included Subsidiary could become liable under
Treasury Regulation Section 1.1502-6 or
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35
any similar principle of state, local or foreign Tax law) (collectively,
"Covered Taxes") have been duly and timely paid.
(c) No material Liens for Taxes exist with respect to any
assets or properties of any Included Subsidiary, except for statutory
Liens for Taxes not yet due.
(d) No material separate Returns with respect to Covered
Taxes are under audit or examination by any Taxing Authority, and no
written or unwritten notice of such an audit or examination has been
received by the Seller or any Affiliate of the Seller (including any
member of the Seller Group). Each material deficiency resulting from
any audit or examination relating to Covered Taxes by any Taxing
Authority has been paid, except for deficiencies being contested in good
faith. No material issues were raised in writing by the relevant Taxing
Authority during any audit or examination relating to Covered Taxes, and
no issues which could reasonably be expected to have a Material Adverse
Effect during a Post-Closing Tax Period were raised in writing by any
Taxing Authority during any audit or examination relating to other Taxes
attributable to the Acquired Assets or the Acquired Businesses.
(e) Schedule 5.06 lists each state, county, local,
municipal or foreign jurisdiction in which any Included Subsidiary
files, has ever filed, is required to file or has been required to file
a material Return or is or has been liable for any material Tax on a
"nexus" basis.
(f) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection
of any material amount of Covered Taxes and no power of attorney with
respect to any material amount of Covered Taxes has been executed or
filed with any Taxing Authority.
(g) Schedule 5.06 lists each non-federal consolidated,
combined, unitary or affiliated group for purposes of filing Returns or
paying Taxes of which any Included Subsidiary is or has been a member,
the jurisdiction in which such consolidated, combined, unitary or
affiliated group has filed or has been required to file a Return that
includes any Included Subsidiary or the income, assets or activities of
any Included Subsidiary, and the
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parent corporation and/or other person that is or was responsible for
filing such Returns.
(h) Each Included Subsidiary is a member of the
consolidated group, within the meaning of Treas. Reg. Section 1.1502-
1(h), of which the Parent is the common parent and which includes the
Seller.
(i) For any Post-Closing Tax Period, no Included Subsidiary
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 Tax sharing agreements with the Seller or any of
its other Affiliates or with any Taxing Authority).
(j) No Included Subsidiary shall be required to include in
a Post-Closing Tax Period taxable income attributable to income that
accrued in a Pre-Closing Tax Period but was not recognized in any Pre-
Closing Tax Period as a result of the installment method of accounting,
the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of
the Code or comparable provisions of state, local or foreign Tax law.
SECTION 5.07. Real Property. The Seller or another member
of the Seller Group has (i) good and insurable fee title to all material
real property owned in fee simple and included in the Acquired Assets
("Owned Real Property") and (ii) good and valid title to the leasehold
estates in all material real property leased and included in the
Acquired Assets ("Leased Real Property"), in each case free and clear of
all Liens, leases, assignments, subleases, easements, covenants, rights-
of-way and other similar restrictions of any nature whatsoever, except
(A) leases, subleases and similar agreements entered into in the
ordinary course of business, (B) zoning, building and other similar
restrictions and (C) unrecorded easements, covenants, rights-of-way and
other similar restrictions, none of which items, individually or in the
aggregate, materially impairs the continued use and operation of the
property to which they relate as heretofore used and operated by the
Seller Group in the conduct of the Acquired Businesses.
SECTION 5.08. Intellectual Property. All the registered
trademarks and service marks, registered copyrights and patents, and all
applications for any of the
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foregoing, included in the Intellectual Property and required in order
to conduct the Acquired Business as currently conducted are owned by or
validly licensed to the Seller or another member of the Seller Group.
The Seller or another member of the Seller Group owns or has the right
to use all material Intellectual Property required in order to conduct
the Acquired Business as heretofore conducted. The Seller or another
member of the Seller Group has the full right to use the names "Kidder"
and "Kidder Peabody" in each jurisdiction in which the Seller Group
currently carries on business and has not authorized any person in any
jurisdiction, either within or outside the United States, to use any
such name.
SECTION 5.09. Litigation. Except as previously disclosed
to the Purchaser in writing, there are no claims, actions, suits,
proceedings, arbitrations, mediations, labor disputes or investigations
or inquiries pending or, to the best knowledge of the Seller,
threatened, before any arbitration or other tribunal, or any federal or
state court or regulatory or self-regulatory organization brought by or
against the Seller or any other member of the Seller Group or any Funds
that could reasonably be expected to have a Material Adverse Effect.
SECTION 5.10. Contracts. (a) As of the Closing Date,
(i) each material Assigned Contract will be a valid and binding
obligation of the parties thereto and in full force and effect, and
(assuming receipt of any Required Consent) will continue in full force
and effect following the transactions contemplated by this Agreement, in
each case without any material breach of any terms or conditions thereof
or the forfeiture or impairment of any rights thereunder, (ii) the
applicable member of the Seller Group will have performed all material
obligations required to be performed by it prior to the Closing Date
under each Assigned Contract and will not be (with or without the lapse
of time or the giving of notice, or both) in breach or default in any
material respect thereunder and (iii) to the best knowledge of the
Seller, each other party to each Assigned Contract will have performed
all material obligations required to be performed by it to date under
the Assigned Contracts, and will not be (with or without the lapse of
time or the giving of notice, or both) in breach or default in any
material respect thereunder.
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(b) None of the members of the Seller Group is a party to
or bound by any Contract that could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.11. Benefit Plans. With respect to each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA),
stock option, stock purchase, deferred compensation plan or arrangement,
and other employee fringe benefit plan or arrangement maintained,
contributed to or required to be maintained or contributed to by the
Parent or any member of the Seller Group or any other person or entity
that, together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each, a "Commonly
Controlled Entity") for the benefit of any present or former officers,
employees, directors or independent contractors of the Seller Group or
any Commonly Controlled Entity (all the foregoing being herein called
"Benefit Plans"), there are no liabilities or obligations associated
with such Benefit Plan that could constitute a liability or obligation
of the Purchaser following the Closing Date, except to the extent and in
the amount reflected on the Closing Balance Sheet or as otherwise
provided for in the Restructuring Agreement.
SECTION 5.12. Investment Purpose. The Seller is acquiring
the Common Stock Consideration, the Convertible Preferred Stock and the
Redeemable Preferred Stock for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof and not with a view to acquiring control of the
Purchaser.
SECTION 5.13. Title to Acquired Assets. The Seller or
another member of the Seller Group has good title to all the Acquired
Assets free and clear of all Liens, except for (i) Liens that,
individually or in the aggregate, do not materially detract from, or
impair the value or interfere with the use of, any of the Acquired
Assets, (ii) Assumed Liabilities and (iii) Excluded Liabilities. At the
Closing, the Purchaser shall acquire the Acquired Assets free and clear
of all Liens, except as described in clauses (i) and (ii) above. This
Section does not relate to Owned Real Property, Leased Real Property or
Intellectual Property.
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39
SECTION 5.14. Assets Necessary to Business. The Acquired
Assets, together with the Purchaser's rights under the Transaction
Documents, constitute all the assets, properties, rights and goodwill
necessary to carry on the Acquired Businesses substantially as
heretofore conducted and no part of the Acquired Businesses is conducted
by or through any corporation or entity other than the members of the
Seller Group; provided, however, that this Section shall be deemed not
be have been breached if the reason that it would have been breached,
but for this proviso, is the exclusion of assets by the Purchaser
pursuant to clause (b), (d), (j) or (m) of the definition of "Excluded
Assets" or the failure of the Purchaser to assume any Contract following
its identification to the Purchaser pursuant to Section 7.03(b).
SECTION 5.15. Absence of Certain Changes or Events. Except
as previously disclosed to the Purchaser in writing, since September 29,
1994, the members of the Seller Group have conducted their respective
businesses only in the ordinary course, and there has not been any sale,
transfer or other disposition by any member of the Seller Group of, or
any imposition of any Lien on, any material asset or group of assets, in
each case other than inventory sold for fair value, or Liens to secure
financing created, in the ordinary course of business.
SECTION 5.16. Brokers or Finders. Except for Goldman,
Sachs & Co., the fees and expenses of whom will be paid by the Parent,
no agent, broker, investment banker or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by
this Agreement based on arrangements made by or on behalf of the Parent
or any of its Affiliates.
SECTION 5.17. No Restraints. Neither Parent nor Seller is
aware of any event or circumstance which is reasonably likely to result
in an order of the Commission, any authority of any state or territory
of the United States, or of the District of Columbia, primarily
responsible for the regulation or registration of persons engaged in the
securities business, the NYSE, the NASD or any court prohibiting or
limiting the ability of the Purchaser to hire at least 75% of the retail
brokers employed by the Seller Group on the date hereof.
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40
SECTION 5.18 Securities. As of the Closing Date,
except to the extent otherwise expressly agreed in writing by the
Purchaser prior to Closing, all Securities forming part of the Acquired
Assets will be Securities that the Seller believes in good faith are
Liquid and Marketable; provided, however, that this representation and
warranty will not be deemed to have been breached by delivery of
Securities at Closing that are determined to be Liquid and Marketable in
accordance with the procedures set forth in Section 2.09.
ARTICLE VI
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Parent
and the Seller, as of the date hereof and as of the Closing Date, as
follows:
SECTION 6.01. Corporate Organization. The Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power
and authority to own its properties and assets and to conduct its
businesses as now conducted. Prior to the Closing, the Purchaser has
delivered to Seller true and complete copies of the certificate of
incorporation and by-laws of the Purchaser.
SECTION 6.02. Qualification To Do Business. The Purchaser
is duly qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted by it
makes such qualification necessary.
SECTION 6.03. Authorization and Validity of Transaction
Documents. The Purchaser has full corporate power and authority to
execute and deliver the Transaction Documents to which it is, or is
specified to be, a party and to carry out its obligations thereunder.
As of the Closing Date, the execution and delivery of the Transaction
Documents to which the Purchaser is, or is specified to be, a party and
the performance of its obligations thereunder will have been duly
authorized by all necessary corporate action by the Board of Directors
of the Purchaser, and no other corporate proceedings on the part of the
Purchaser
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41
will be necessary to authorize such execution, delivery and performance
(other than (i) filing the Certificates of Designation for the
Convertible Preferred Stock and the Redeemable Preferred Stock with the
Secretary of State of the State of Delaware and (ii) the approval of the
shareholders of the Purchaser to the issuance of Common Stock upon
conversion or redemption of the Convertible Preferred Stock). This
Agreement has been, and on the Closing Date the other Transaction
Documents to which the Purchaser is, or is specified to be, a party will
have been, duly executed and delivered by the Purchaser and will
constitute its valid and binding obligation, enforceable against it in
accordance with their terms.
SECTION 6.04. No Conflict or Violation; Consents. The
execution, delivery and performance by the Purchaser of this Agreement
and the other Transaction Documents (i) do not and will not violate or
conflict with any provision of the Certificate of Incorporation or
By-laws of the Purchaser and (ii) do not and will not conflict with, or
result in any violation of or default (with or without notice or lapse
of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of
any Lien upon any of the properties or assets of the Purchaser under
(A) any contract, agreement or other instrument to which the Purchaser
is a party or by which it is bound or to which any of its properties or
assets is subject or (B) violate any provision of Applicable Law
applicable to the Purchaser or its properties or assets, other than, in
the case of clauses (A) and (B) above, any such items that, individually
or in the aggregate, would not have a material adverse effect on the
business, assets, properties, condition (financial or otherwise),
operations, results of operations or prospects of the Purchaser. The
execution, delivery and performance by the Purchaser of the Transaction
Documents to which it is, or is specified to be, a party and the
consummation by it of the transactions contemplated thereby do not
require the consent or approval of, or filing with, any Governmental
Authority except (I) as may be required to transfer any Licenses and
Permits; (II) as required pursuant to the HSR Act; (III) approvals and
authorizations of the NYSE and other self-regulatory organizations in
the securities and commodities field; (IV) as may be required under the
1986 Supplement to the Banking Act of 1948 of New Jersey; (V) filing the
Certificates of Designation for the
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42
Convertible Preferred Stock and the Redeemable Preferred Stock with the
Secretary of State of the State of Delaware; (VI) compliance with and
filings under the 1933 Act, the 1934 Act, the 1940 Act, the Advisers Act
and applicable state securities laws; (VII) filings required by any
exercise of registration rights pursuant to the Stockholder Agreement;
and (VIII) such consents, approvals and filings, as to which the failure
to obtain or make would not, individually or in the aggregate, have a
material adverse effect on the ability of the Purchaser to consummate
the transactions contemplated thereby.
SECTION 6.05. Capital Stock and Related Matters. As of the
date hereof, (a) the authorized capital stock of the Purchaser consists
of 20,000,000 shares of series preferred stock, par value $20 per share,
and 200,000,000 shares of Common Stock, (b) the outstanding capital
stock of the Purchaser consists of 75,569,937 shares of Common Stock,
all of which shares are duly authorized, validly issued and outstanding,
fully paid and nonassessable and have not been issued in violation of,
and are not subject to, any preemptive or subscription rights and
(c) there are not any outstanding warrants, options, rights, "phantom"
stock rights, agreements, convertible or exchangeable securities or
other commitments (i) pursuant to which the Purchaser is or may become
obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of the Purchaser or (ii) that give any
person the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the holders of shares of capital stock of the
Purchaser, other than as set forth in the SEC Documents and other than
the purchase rights held by Yasuda Mutual Life Insurance Company. There
are not any outstanding bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which stockholders of the
Purchaser generally may vote.
SECTION 6.06. Common Stock Consideration; Convertible
Preferred Stock; Redeemable Preferred Stock. When issued, the Common
Stock Consideration, the Convertible Preferred Stock and the Redeemable
Preferred Stock will have been duly authorized, will be validly issued
and outstanding, fully paid and nonassessable and will not have been
issued in violation of, and will not be subject to, any preemptive or
subscription rights, and the issuance of the Common Stock upon
conversion or redemption of the Convertible Preferred Stock will have
been duly authorized (subject to shareholder approval). When issued,
the
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Convertible Preferred Stock and the Redeemable Preferred Stock will rank
prior in right of payment to each other series or class of capital stock
of Purchaser then outstanding.
SECTION 6.07. Brokers or Finders. Other than Gleacher &
Co. Inc., The Blackstone Group and J.P. Morgan & Co. Incorporated, the
fees and expenses of whom will be paid by the Purchaser, no agent,
broker, investment banker or other firm or person is or will be entitled
to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this
Agreement based on arrangements made by or on behalf of the Purchaser or
any of its Affiliates.
SECTION 6.08. 1934 Act Filings. The Purchaser has filed,
as and when required, all required reports, schedules, forms, statements
and other documents with the Commission since December 31, 1993 (the
"SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1933 Act
or the 1934 Act, as the case may be, and the rules and regulations of
the Commission promulgated thereunder applicable to such SEC Documents,
and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except
to the extent that information contained in any SEC Document has been
revised or superseded by a later filed SEC Document, none of the SEC
Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
the Purchaser included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the Commission) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Purchaser and
its consolidated results of operations and cash flows for the periods
then ended
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44
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
ARTICLE VII
Covenants of the Parent and the Seller
The Parent and the Seller, jointly and severally, covenant
as follows:
SECTION 7.01. Actions and Conduct of Acquired Businesses
Before the Closing Date. (a) Neither the Parent nor the Seller shall
take, nor shall either of them permit any other member of the Seller
Group to take, any action that would, or could reasonably be expected
to, cause the Parent or any member of the Seller Group to be in material
breach of any representations, warranties, covenants or agreements
contained in any Transaction Document. The Parent and the Seller shall
use all reasonable efforts to perform and satisfy all conditions to
Closing to be performed or satisfied by either of them under this
Agreement as soon as possible.
(b) Except as otherwise required or expressly permitted by
this Agreement or the Restructuring Agreement or otherwise permitted by
the prior written consent of the Purchaser, the Seller shall conduct,
and shall cause the other members of the Seller Group to conduct, the
Acquired Businesses in, and the Seller shall not take any action and
shall cause the other members of the Seller Group not to take any action
relating to the Acquired Businesses (other than relating solely to any
Excluded Asset) except in, the ordinary course consistent with past
practice. Prior to the Closing, the Seller shall confer with the
Purchaser, through designated liaison employees, on a regular basis and
report on significant operational matters, corporate actions and
business transactions relating to the Seller Group and consult with the
Purchaser, through such employees, concerning transitional planning for
operation of the Acquired Businesses after the Closing.
(c) The Parent and the Seller shall use all reasonable
efforts to preserve for Purchaser intact the present business
organization of the Acquired Businesses, keep available the services of
the present officers and employees and preserve the relationships of the
Acquired Businesses with employees, business suppliers, creditors,
<PAGE>
45
customers, and others transacting business with the Acquired Businesses.
Without limiting the generality of the foregoing, except as otherwise
required or expressly permitted by this Agreement or the Restructuring
Agreement or otherwise permitted by the prior written consent of the
Purchaser, prior to the Closing the Seller shall not, and shall cause
the other members of the Seller Group not to: (i) (A) change the
commission payout schedule for its registered representatives; (B) enter
into any new or amended Benefit Plan without the prior consent of the
Purchaser, which shall not be unreasonably withheld; (C) forgive any
promissory note made by any registered representative except pursuant to
the terms of loans existing on the date of this Agreement; or
(D) establish, adopt, enter into or amend any collective bargaining
agreement; or (ii) until the expiration of the 30 day period referred to
in Section 9.01, with respect to any business, and from such expiration
to the Closing, with respect to any Acquired Business (other than
relating solely to any Excluded Asset), (A) change its accounting
methods, principles or practices in any material respect; (B) revalue
any of the assets included in the Acquired Assets, including writing off
any Accounts Receivable other than in the ordinary course of business,
except in accordance with the Restructuring Agreement; (C) except as
required by Applicable Law, change any tax accounting method, principle
or practice, which change would materially adversely affect any Included
Subsidiary and which change would not materially benefit the Seller or
any Affiliate of the Seller; or (D) sell or transfer any material amount
of assets, other than inventory sold in the ordinary course of business
consistent with past practices.
(d) Until the Closing, the Purchaser may periodically
establish (in consultation with appropriate employees of the Seller
Group) target levels, by classes of Securities, for the Securities
inventory portfolios of the Acquired Businesses (other than any class
that contains only Excluded Assets); provided, however, that the last
such target shall not be established any later than 30 days prior to the
scheduled Closing Date from time to time. The Seller shall use all
commercially reasonable efforts to reduce the Seller Group's inventory
portfolios of each class of Securities by the Closing Date to (or, at
the option of the Seller, below) the targeted levels for such class of
Securities. The Seller shall provide to the Purchaser weekly reports
stating the then current inventory levels, by class of Securities, for
the Acquired Businesses and
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46
describing in reasonable detail the programs in place to reduce such
inventory levels to the then applicable target level. The Seller shall
(i) use its best efforts to cause the traders employed in the Acquired
Businesses not to acquire any Securities that are not Liquid and
Marketable (other than any Securities that constitute Excluded Assets)
and (ii) establish such internal monitoring procedures as shall be
necessary to ensure that the Securities that form part of the Acquired
Assets at the Closing are Liquid and Marketable.
SECTION 7.02. Consents and Approvals. Each of the Parent
and the Seller shall use all reasonable efforts to obtain (and to
cooperate with the Purchaser in obtaining) all necessary consents,
waivers, authorizations and approvals of all Governmental Authorities
and of all other persons required to be obtained by the Parent or the
Seller in connection with the execution, delivery and performance by it
of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby.
SECTION 7.03. Access to Properties and Records. (a) Each of
the Parent and the Seller shall afford to the Purchaser, and to the
accountants, counsel and representatives of the Purchaser, reasonable
access throughout the period prior to the Closing Date to all
properties, assets, books and records, and employees of the Seller Group
and the management of the Parent with responsibility for the Seller
Group and the independent accountants for the Seller Group, and shall
authorize access by the Purchaser's independent auditors to the working
papers of the Seller's independent auditors to the extent they relate to
the Seller Group (but only, in the case of access after the expiration
of the 30-day period referred to in Section 9.01, to the extent related
to the Acquired Business). Without limiting the generality of the
foregoing, the Parent and the Seller shall provide the Purchaser and its
accountants, counsel and representatives access to the books and records
of the Seller Group relating to litigation, real property, compliance
with laws, Contracts, environmental matters, employee compensation and
benefits and intellectual property.
(b) From time to time prior to the Closing, the Parent or
the Seller shall provide to the Purchaser lists of subsidiaries,
investments, equity interests, litigation, real property, Contracts,
environmental violations, Benefit
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47
Plans and intellectual property rights and such other asset and
liability listings as the Purchaser shall reasonably request, to the
extent such lists are available or can be prepared without undue burden,
or copies of relevant documents in lieu of such lists. All such lists,
and any disclosure by delivery of documents in lieu of lists, shall be
coordinated through designated employees of the Purchaser and the Seller
and shall be pursuant to mutually agreed procedures such that such
designated employees have clear records of the lists, and documents in
lieu of lists, delivered pursuant to this Section 7.03(b) clearly
identifying the material disclosed.
(c) Following the Closing, the Seller shall permit the
Purchaser reasonable access during normal business hours to, and grant
to the Seller the right to make copies of, all documents, contracts,
books, records and data constituting part of the Excluded Assets but
relating to the Acquired Businesses. The Seller shall maintain the
confidentiality of all such contracts, books, records, data and other
documents, except as otherwise required by Applicable Law.
(d) Nothing in this Section shall authorize or permit
access to any Excluded Documents that are subject to the attorney-client
privilege, the work product immunity or any other applicable privilege.
SECTION 7.04. Further Assurances. (a) At any time and
from time to time after the Closing Date, the Seller shall forthwith
execute and deliver, or cause to be executed and delivered, such further
instruments and take such further actions as the Purchaser or its
counsel may reasonably request to effectuate the purposes of this
Agreement, including executing and delivering appropriate instruments of
transfer (which shall also constitute "Conveyancing Documents") for the
transfer of any Acquired Asset not transferred to the Purchaser at the
Closing.
(b) If any Contract in effect on the Closing Date to which
any member of the Seller Group is a party and arising out of or used
primarily by such Seller Group member in the conduct of any Acquired
Business shall not have been identified pursuant to Section 7.03(b) to
the Purchaser prior to the Closing, the Purchaser may, within 90 days
after the Closing Date (or, if later, 90 days after the discovery by the
Purchaser of such Contract), elect by notice in writing to the Seller to
assign and assume such
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48
Assigned Contract. Upon giving of such notice and the execution by the
Purchaser of any appropriate instrument of transfer, such Contract shall
thereafter be an Assigned Contract for all purposes under the
Transaction Documents, including for the purposes of determining the
Assumed Liabilities.
SECTION 7.05. Reasonable Efforts. Each of the Parent and
the Seller shall use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable consistent with Applicable Law to consummate the
transactions contemplated hereby in accordance with the terms hereof.
SECTION 7.06. 1940 Act; Advisers Act. (a) With respect to
each Fund for which any member of the Seller Group acts as investment
adviser or distributor, the Seller (i) shall cause to be convened a
meeting of the board of trustees/directors of such Fund to consider a
new investment advisory contract or distribution contract, as
applicable, (ii) shall recommend to the board of trustees/directors of
each Fund, including in each case a majority of trustees/directors who
are not parties to the investment advisory contracts of such Fund or
"interested persons" (as such term is defined in the 1940 Act) of any
such party (the "Non-Interested Directors") (as such term is defined in
the 1940 Act) that they approve a new investment advisory contract or
distribution contract, as applicable, with an Affiliate of the Purchaser
acting as investment adviser or distributor, as applicable, of such
Fund, and (iii) assuming that such approval by the board and a majority
of the Non-Interested Directors is granted, shall use reasonable efforts
to cause such Fund to solicit its shareholders as promptly as
practicable with regard to the approval of such new investment advisory
contract or distribution contract, as applicable, to be effective on or
as promptly as reasonably practicable after the Closing, in each case
pursuant to and consistent with all requirements of the 1940 Act
applicable thereto; provided, however, that such contracts are identical
in all material respects to the existing contracts other than the
identity of the adviser or distributor, as applicable, and the term of
the contract. The Seller shall use reasonable efforts to ensure, prior
to or as soon as reasonably practicable after the Closing Date, the
satisfaction of the conditions set forth in Section 15(f) of the 1940
Act with respect to each Fund.
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(b) As promptly as practicable, the Seller shall cause the
noninvestment company advisory clients of the Asset Management business
of the Seller Group to be informed of the transactions contemplated by
this Agreement and shall give such clients an opportunity to terminate
their advisory contracts. The Seller may satisfy this obligation
insofar as it relates to noninvestment company advisory clients by
providing them with the notice contemplated by the first sentence of
this Section 7.06(b) and obtaining such clients' consent in the form of
actual or implied consent by way of the continued receipt of advisory
services after receiving at least 60 days' notice of the transactions
contemplated hereby.
SECTION 7.07. Information To Be Furnished. (a) The Seller
shall furnish the Purchaser all information required for inclusion in
any application or filing made by the Purchaser in connection with the
transactions contemplated by the Transaction Documents.
(b) Upon request, the Seller shall provide to the Purchaser
prior to the Closing (i) complete and correct copies of all Returns
filed by or on behalf of any Included Subsidiary (limited in the case of
consolidated, combined or unitary Returns to the portions relating to
the Included Subsidiary), for taxable periods ending after December 31,
1988, and for all other taxable periods for which the statute of
limitations has not yet run, (ii) complete and correct copies of any
portions of all ruling requests, private letter rulings, revenue agent
reports, information document requests and responses thereto, notices of
proposed deficiencies, deficiency notices, applications for changes in
method of accounting, protests, petitions, closing agreements,
settlement agreements, and any similar Tax documents submitted or
received with respect to such taxable periods which relate to any
Included Subsidiary and (iii) information relating to the Tax position
of each Included Subsidiary for any taxable period for which a Return
with respect to such Tax has not been filed and (iv) information
relating to any Tax Lien on the Acquired Assets or the Acquired
Businesses.
SECTION 7.08. No Other Bids. From the date hereof through
the end of the 30-day period set forth in Section 9.01, neither the
Parent nor the Seller shall, nor shall it authorize or permit any other
member of the Seller Group or any officer, director or employee of or
any investment banker, attorney, accountant or other
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50
representative retained by any of the foregoing to, solicit or encourage
(including by way of furnishing information), or take any other action
to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any takeover
proposal, or agree to endorse any takeover proposal relating to any
member of the Seller Group. After the 30-day period set forth in
Section 9.01 has expired, the restriction contained in the foregoing
sentence shall apply only to takeover proposals relating to the Acquired
Businesses. The Seller shall promptly advise the Purchaser orally and
in writing of any such inquiries or proposals. Without limiting the
foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentences by any representative of the Parent,
any member of the Seller Group or any other Affiliate of the Parent,
whether or not such person is purporting to act on behalf of the Parent,
any member of the Seller Group or any other Affiliate of the Parent or
otherwise, shall be deemed to be a breach of this Section by the Seller.
As used in this Section, "takeover proposal" shall mean any proposal for
a merger or other business combination involving any member of the
Seller Group or any proposal to acquire in any manner any equity
securities or any significant amount of assets of any member of the
Seller Group, other than in the ordinary course of business and other
than the transactions contemplated by this Agreement.
SECTION 7.09. Advice of Changes. The Seller shall promptly
advise the Purchaser orally and in writing of any change or event
having, or which, insofar as can reasonably be foreseen, would have, a
Material Adverse Effect.
SECTION 7.10 Collection of Receivables. From and after the
Closing Date and until such time as they may become Excluded Assets
pursuant to Section 2.07(b), the Purchaser shall have the right and
authority to collect for its own account all Accounts Receivable that
are included in the Acquired Assets and to endorse with the name of any
member of the Seller Group any checks or drafts received with respect to
any Accounts Receivable, and the Seller shall deliver to the Purchaser
any cash or other property received directly or indirectly by it or any
of its Affiliates with respect to such Accounts Receivable, including
any amounts payable as interest.
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SECTION 7.11. Change of Name. Within two years after the
Closing Date, each member of the Seller Group, to the extent required,
shall file with the applicable Governmental Authorities an amendment to
its certificate of incorporation to delete from its name the words
"Kidder" and "Kidder Peabody", or any derivative thereof and shall do or
cause to be done all other acts, including the payment of any fees
required in connection therewith, to cause such amendment to become
effective. For two years following the Closing Date, each member of the
Seller Group shall have a non-transferable royalty-free license right to
use the names "Kidder" and "Kidder Peabody", or any derivative thereof,
but only to the extent reasonably necessary to effect the disposition,
dissolution or winding down of the Excluded Businesses.
SECTION 7.12. Certain Fund Directors. At the Purchaser's
request after the transfer of management of any Fund to the Purchaser,
the Seller shall request that directors of such Fund who are employees
of the Seller resign as directors of such Fund.
SECTION 7.13. Insurance Proceeds. If prior to the Closing
Date any Acquired Business shall suffer any loss that is covered by
insurance carried by the Seller or any of its Affiliates, the Seller
shall, or shall cause such Affiliate to, make a claim under its
insurance policy for recovery in respect of such loss and to pursue such
claim actively. If the Seller or such Affiliate, as the case may be,
receives insurance proceeds in respect of such loss, the Seller shall,
or cause such Affiliate to, remit promptly such proceeds to the
Purchaser.
SECTION 7.14. Agreement Not to Compete. Each of the Parent
and the Seller understand that the Purchaser shall be entitled to
protect and preserve the going concern value of the business related to
the Acquired Businesses to the extent permitted by law and that the
Purchaser would not have entered into this Agreement absent the
provisions of this Section and, therefore, agrees that it will not, and
will not permit any of its Affiliates to, (i) prior to the fifth
anniversary of the Closing Date, directly or indirectly, acquire more
than 50% of the outstanding voting securities of any person the
principal business of which is the Retail Brokerage Business, provided
that (1) if the Parent, the Seller or any Affiliate (the "Acquiring
Person") acquires 100% of the outstanding voting securities of a person
(the "Acquired Person") engaged in the Retail
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52
Brokerage Business not as its principal business, the Acquiring Person
shall offer, or cause the Acquired Person to offer, to sell to the
Purchaser the Retail Brokerage Business of the Acquired Person for an
amount in cash equal to that portion of the purchase price paid by the
Acquiring Person that is attributable to the Retail Brokerage Business
of the Acquired Person, and (2) if such acquisition is of more than 50%
but less than 100% of the outstanding voting securities of the Acquired
Person, the Acquiring Person's obligation shall be to use reasonable
efforts consistent with its fiduciary duties to cause the Acquired
Person to make such an offer; (ii) prior to the fifth anniversary of the
Closing Date, directly or indirectly induce any employee of the
Purchaser or any of its subsidiaries to leave such employ, or to accept
any other position or employment or assist any other person in hiring
such employee; and (iii) at any time communicate or divulge any material
secret or confidential information, knowledge or data used primarily in
any Acquired Business (except to the extent required by Applicable Law).
For purposes of this Section, the phrase "directly or indirectly engage
in" shall include having a direct or indirect ownership interest (other
than ownership of 50% or less of the outstanding voting securities of a
person in any Person which engages primarily in the Retail Brokerage
Business. Nothing in this Section shall prevent any member of the
Financial Services Group from engaging in any business conducted by any
member of the Financial Services Group on the Closing Date (other than
the Retail Brokerage Business conducted by the Seller Group on the
Closing Date). Except as specifically provided in the first sentence of
this Section, nothing in this Section is intended to restrict in any way
the ability of the Financial Services Group to sell or otherwise
distribute Securities, annuities or insurance products, or other
financial instruments, products, or services. In the event that any
member of the Financial Services Group desires to arrange with a third
party engaged in the Retail Brokerage Business to sell or otherwise
distribute material amounts of such financial instruments, products, or
services, such member shall, either in advance thereof or
simultaneously, give the Purchaser a reasonable opportunity to make an
offer to enter into such an arrangement.
SECTION 7.15. Ordinary Conduct. To the extent that the
Seller or an Affiliate of the Seller is in control of an Included
Subsidiary on the Closing Date, the Seller shall cause the business of
such Included Subsidiary to be
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conducted on the Closing Date in the ordinary course and in a manner
substantially consistent with past practice.
ARTICLE VIII
Covenants of the Purchaser
The Purchaser covenants as follows:
SECTION 8.01. Actions Before the Closing Date. The
Purchaser shall not take any action that would, or could reasonably be
expected to, cause it to be in breach of any representations,
warranties, covenants or agreements contained in any Transaction
Document. The Purchaser shall use all reasonable efforts to perform and
satisfy all conditions to Closing to be performed or satisfied by the
Purchaser under this Agreement as soon as possible.
SECTION 8.02. Consents and Approvals. The Purchaser shall
use all reasonable efforts to obtain (and to cooperate with the Parent
and the Seller in obtaining) all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all
other persons required to be obtained by the Purchaser in connection
with the execution, delivery and performance by it of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 8.03. Reasonable Efforts. The Purchaser shall use
all reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable
consistent with Applicable Law to consummate the transactions
contemplated hereby in accordance with the terms hereof; provided,
however, that the Purchaser's obligations under this Section shall not
limit or impair the Purchaser's rights under this Agreement to deliver
notices of assets and liabilities to be excluded.
SECTION 8.04. Access to Records and Information. Following
the Closing, the Purchaser shall permit the Seller reasonable access
during normal business hours to, and grant to the Seller the right to
make copies of, all documents, contracts, books, records and data
constituting part of the Acquired Assets. The Seller shall maintain the
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confidentiality of all such contracts, books, records, data and other
documents, except as otherwise required by Applicable Law.
SECTION 8.05. Certificates of Designation. On or prior to
the Closing Date, the Purchaser shall amend its Certificate of
Incorporation to include as a part thereof Certificates of Designation
for the Convertible Preferred Stock and the Redeemable Preferred Stock
substantially in the form attached hereto as Exhibits A and B.
SECTION 8.06. Purchaser Securities. Prior to the Closing
Date, the Purchaser shall not take any action that would have resulted
in an adjustment to the conversion price of the Convertible Preferred
Stock had the Convertible Preferred Stock been outstanding at the time
of such action.
SECTION 8.07. Return of Excluded Documents. Should the
Purchaser receive any Excluded Documents, the Purchaser shall promptly
return such Excluded Documents to the Seller.
SECTION 8.08. Ordinary Conduct. To the extent that the
Purchaser or an Affiliate of the Purchaser is in control of an Included
Subsidiary on the Closing Date, the Purchaser shall cause the business
of such Included Subsidiary to be conducted on the Closing Date in the
ordinary course and in a manner substantially consistent with past
practice.
SECTION 8.09. Information To Be Furnished. The Purchaser
shall furnish the Seller all information required for inclusion in any
application or filing made by the Seller in connection with the
transactions contemplated by the Transaction Documents.
ARTICLE IX
Additional Agreements of the Parties
SECTION 9.01. Additional Acquired Businesses. The
Purchaser, in its sole discretion, may within 30 days of the date hereof
elect from time to time during such period to acquire as part of the
acquisition pursuant to this Agreement additional businesses of the
Seller Group and, upon such election, such businesses shall constitute
"Acquired Businesses". If and to the extent the Purchaser
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shall make any determination not to acquire any particular additional
business, the Purchaser shall promptly advise the Seller of such
determination. Notwithstanding the foregoing, the representations and
warranties set forth in Article V shall apply to the Acquired Assets
included within such Additional Businesses only from and after 45 days
following the date hereof. In addition, the Seller shall have the
right, by notice to the Purchaser at any time on or before the
expiration of such 45-day period, to amend, modify or supplement any
representation or warranty set forth in Article V with respect to such
additional Acquired Businesses (and the related Acquired Assets). If
the Seller shall amend, modify or supplement in any material respect any
representation or warranty with respect thereto, the parties shall
negotiate in good faith alternative provisions with respect to any such
additional Acquired Assets. If the parties are unable to agree with
respect to such alternative provisions within ten Business Days, such
businesses shall, at the option of the Purchaser (exercised within five
Business Days from the expiration of such ten Business Day period), not
constitute "Acquired Businesses".
SECTION 9.02. Allocation of Purchase Price. (a) The Seller
and the Purchaser agree that the aggregate of the value of the
Redeemable Preferred Stock and the value of the right to receive the
Deferred Purchase Price shall equal the aggregate liquidation preference
of the Redeemable Preferred Stock, the value of the Convertible
Preferred Stock shall equal its liquidation preference, and the value of
the Common Stock Consideration shall equal 21,500,000 multiplied by the
mean of the high and low per-share prices at which the Common Stock
trades on the NYSE on the Closing Date. The Purchaser and the Seller
shall agree prior to the Closing Date on estimated allocations of the
Purchase Price to the extent necessary to permit the making of timely
Transfer Tax filings. In addition, as soon as practicable after the
Closing Date, but in no event later than the date 30 days prior to the
due date of the Form 8594 referred to in Section 9.02(c), the Purchaser
shall provide to the Seller proposed statements (the "Allocation
Statements") allocating the total of the Purchase Price and any other
payments properly treated as additional Purchase Price for Tax purposes
made by the Purchaser pursuant to this Agreement to the different items
of Acquired Assets, including the Acquired Assets held by any Included
Subsidiary, pursuant to the rules of Section 1060 of the Code and the
regulations thereunder. The Seller and the Purchaser shall agree on the
method of applying such rules
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with respect to any assets or liabilities of an Included Subsidiary.
Such allocations shall be based on valuations (i) of any Acquired Liquid
Assets in accordance with their treatment on the Closing Balance Sheet
and pursuant to the method articulated in Section 3.04(c), (ii) of any
Accounts Receivable at their face amount less any reserve attributable
thereto on the Closing Balance Sheet, and (iii) of all other assets at
the value agreed by the Seller and the Purchaser (the "Allocation
Principles"). Within 30 days following delivery to the Seller of the
proposed Allocation Statements, the Seller may propose changes to the
proposed allocations in accordance with the Allocation Principles,
together with a reasonably detailed explanation of the reasons therefor.
Within 15 days following delivery to the Purchaser of such proposed
changes in accordance with the Allocation Principles, the Purchaser
shall deliver to the Seller a statement of objections (if any) to such
proposed changes, in accordance with the Allocation Principles, together
with a reasonably detailed explanation of the reasons therefor. If the
Purchaser and the Seller are unable, within 15 days after receipt by the
Seller of the Purchaser's statement of objections, to resolve the
disputed objections, such disputed objections shall be referred to the
Independent Accounting Firm. The Independent Accounting Firm shall,
within 60 days following its selection, deliver to the Seller and the
Purchaser a written report determining whether the matters that are the
subject of the disputed objections complied with the Allocation
Principles and, if not, the adjustments that would be required to cure
such items. Such determination shall be conclusive and binding upon the
parties hereto for all purposes, and the Allocation Statements shall be
so adjusted. The fees and disbursements of the Independent Accounting
Firm acting under this Section shall be shared equally by the Purchaser
and the Seller. The parties shall cooperate with one another and with
each other's representatives in order to resolve any and all matters in
dispute as quickly as practicable.
(b) The Allocation Statements shall be revised from time to
time to reflect any adjustment to Purchase Price for Tax purposes
required by Section 12.05 or otherwise by Applicable Law.
(c) The Purchaser and the Seller shall file and cause to be
filed all Returns, and execute such other documents as may be required
by any Taxing Authority, in a manner consistent with the Allocation
Statements as revised from time to time. The Purchaser shall prepare
the
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Form 8594 under Section 1060 of the Code relating to the transactions
contemplated by this Agreement based on the Allocation Statements and
deliver such Form to the Seller within 30 calendar days after
finalization of the Allocation Statements as provided above. The
Purchaser and the Seller shall file, or cause the filing of, such Form
with each relevant Taxing Authority, and refrain, and cause their
Affiliates to refrain, from taking any position inconsistent with such
Allocation Statements as revised from time to time with any Taxing
Authority unless otherwise required by Applicable Law.
SECTION 9.03. Bulk Transfer Laws. The Seller and the
Purchaser hereby waive compliance with the provisions of any so-called
"bulk transfer law" of any jurisdiction in connection with the sale of
the Acquired Assets to the Purchaser.
SECTION 9.04. Sales of Physical Capital. To the extent the
Purchaser sells or transfers any Physical Capital forming part of the
Acquired Operating Assets during the 18 month period following the
Closing, the Purchaser shall pay to the Seller in cash an amount equal
to the excess of (i) the sum of (A) the net after-tax proceeds realized
by the Purchaser on such sale or transfer plus (B) the aggregate
amounts, if any, previously realized by the Purchaser upon all prior
sales or transfers of any other such assets plus (C) the net book value
as reflected on the Closing Balance Sheet of all such remaining assets
held by the Purchaser over (ii) $20,000,000. The Purchaser and the
Seller shall agree on the bookkeeping methods to be utilized under this
Section.
SECTION 9.05. Off-Balance Sheet Positions. (a) As promptly
as practicable, and in any event not later than 30 days prior to the
Closing, the parties shall work together to develop or ratify, or both,
a hedging strategy or strategies relating to the different classes of
Securities forming part of the inventories of the Acquired Businesses.
Not later than 15 Business Days prior to the Closing Date, the Seller
shall notify the Purchaser in writing of all off-balance sheet hedges
and derivatives relating to the Acquired Businesses. Within five
Business Days of such notice, the Purchaser shall notify the Seller of
any hedges and derivatives that the Purchaser is willing to accept, in
accordance with the following rules: (i) if such strategy or strategies
are reasonably satisfactory to the Purchaser, any such hedge or
derivative established or
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entered into by the Seller Group in accordance with such strategy or
strategies shall be accepted, (ii) any such hedge or derivative
inconsistent with any agreed strategy or strategies shall be accepted
only if satisfactory to the Purchaser and (iii) any such hedge or
derivative established or entered into in accordance with any strategy
not reasonably satisfactory to the Purchaser shall be accepted only if
satisfactory to the Purchaser. Any such hedge or derivative so
accepted, and any Securities related thereto, shall constitute Acquired
Assets. Any such hedge or derivative not so accepted, and all
Securities related thereto, shall constitute Excluded Assets.
(b) Within three Business Days after the Closing, the
Seller shall notify the Purchaser in writing of all off-balance sheet
hedges and derivatives established or entered into by the Purchaser less
than 15 Business Days prior to the Closing. Within five Business Days
of receipt of notice, the Purchaser shall notify the Seller of any such
hedges or derivatives that the Purchaser is willing to accept in
accordance with the principles set forth in Section 9.05(a).
(c) No other off-balance sheet hedge or derivative of any
member of the Seller Group shall be included in the Acquired Assets
(other than any hedges or derivatives relating to the derivatives
business of the Seller Group, which will be included in the Acquired
Assets only if the Purchaser elects pursuant to Section 9.01 to acquire
such business).
ARTICLE X
Employee Matters
SECTION 10.01. Seller Plans. Except as otherwise provided
in the Restructuring Agreement or as set forth in Section 2.05(b), all
assets and liabilities associated with each Benefit Plan shall be
retained by the Seller.
SECTION 10.02. Cooperation. The parties shall provide each
other with access to such information regarding employees and former
employees of the Seller Group as may be reasonably necessary to
administer their respective benefit and compensation programs.
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ARTICLE XI
Tax Matters
SECTION 11.01. Taxable Periods. (a) In the case of any
taxable period that includes but does not end on the day before the
Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes ("Property
Taxes") for the Pre-Closing Tax Period shall be equal to the
amount of such Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of
days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the
Straddle Period; and
(ii) all Taxes (other than Property Taxes) for the Pre-
Closing Tax Period shall be computed based on an actual closing of
the books as if such taxable period ended as of the close of
business on the Closing Date and, in the case of any Taxes
attributable to the ownership of any equity interest in any
partnership or other "flow through" entity, based on an actual
closing of the books as if the taxable period of such partnership
or other "flow through" entity ended as of the close of business
on the Closing Date.
(b) In the case of any taxable period other than a Straddle
Period, all income, deductions, and other items shall be allocated
between the Pre-Closing Tax Period and the Post-Closing Tax Period based
on an actual closing of the books of Seller and the Included
Subsidiaries on the day before the Closing Date.
(c) In the case of any taxable period, if the Closing Date
occurs on a date other than the first day of a fiscal month of Seller,
all income, deductions, and other items for such month (other than
amounts attributable to transactions not in the ordinary course of
business and other than closing adjustments and other similar
adjustments) will be prorated on a daily basis.
SECTION 11.02. Tax Allocation Agreement. At the Closing,
an agreement (the "Tax Allocation Agreement") in the form of Exhibit D
shall be executed with respect to the Included Subsidiaries.
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SECTION 11.03. Cooperation. The Seller, each of the
Included Subsidiaries and the Purchaser shall reasonably cooperate, and
shall cause their respective Affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and
filing all Returns, including maintaining and making available to each
other all books and records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods
relating to Taxes and in all other Tax matters, and to keep each party
advised as to any issue relating to Taxes which could have a bearing on
such other party's responsibility under this Agreement or the Tax
Allocation Agreement. At the Purchaser's request, the Seller shall
provide the Purchaser with, or cause to be provided to the Purchaser,
copies of Returns in its possession (or in the possession of its
Affiliates), or the relevant portions of such Returns, to the extent
such Returns relate to Covered Taxes. The Purchaser and the Seller
recognize that the Seller and its Affiliates shall need access, from
time to time, after the Closing Date, to certain accounting and Tax
records and information held by, and certain employees of, the Purchaser
and the Included Subsidiaries to the extent such records and information
pertain to, or have information or knowledge of, events occurring on or
prior to the Closing Date; therefore, the Purchaser shall, and shall
cause each of the Included Subsidiaries to, (i) properly retain and
maintain such records for 10 years from the Closing Date (or for such
longer period as the Seller requests in writing) and (ii) allow the
Seller and its agents and representatives (and agents or representatives
of any of its Affiliates), at times and dates reasonably acceptable to
the parties, to inspect, review and make copies of such records, and
have access to such employees, as the Seller may deem necessary or
appropriate from time to time, such activities to be conducted during
normal business hours. At the end of the 10-year period described in
clause (i), the Purchaser shall either (A) transfer such records (or
cause such records to be transferred) to the Seller, or (B) on 90 days'
written notice to the Seller, destroy or otherwise dispose of such
records. If the Seller or an Affiliate of the Seller shall claim a
deduction for any indemnity payment under this Agreement or otherwise
under the Transaction Documents or any Restructuring Payment, and if the
Internal Revenue Service or other Taxing Authority shall provide written
notice to the Seller or any Affiliate of the Seller that such Taxing
Authority may assert that such deduction was improperly claimed (which
written notice shall include an
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Information Document Request or similar written request for information
relating to such deduction), the Seller shall promptly notify the
Purchaser and, notwithstanding Sections 11.07 and 12.05(c), the
Purchaser or any Affiliate of the Purchaser may file a protective refund
claim or take similar action reasonably designed to protect its ability
to claim a deduction therefor in the event that the deduction claimed by
the Seller or its Affiliate is disallowed.
SECTION 11.04. Treatment of Closing Date. The Purchaser
and the Seller shall file, or cause to be filed, all relevant Returns,
including the Returns of any Included Subsidiary, and execute, or cause
to be executed, such other documents as may be required by any Taxing
Authority, on the basis that the purchase and sale contemplated by
Article II shall occur for Tax purposes as of the close of business on
the day before the Closing Date and refrain from taking any position
inconsistent with such basis with any Taxing Authority unless the
relevant Taxing Authority will not accept a Return filed on that basis,
or unless otherwise required under Applicable Law after a final
determination thereof.
SECTION 11.05. FIRPTA. The Seller shall deliver to the
Purchaser at the Closing a duly executed certificate in the form
specified in Treas. Reg. Section 1.1445-2(b)(2)(iii).
SECTION 11.06. Transfer Taxes. The Seller and the
Purchaser shall cooperate in timely making and filing all filings, Tax
Returns, reports and forms as may be required to comply with the
provisions of any Transfer Tax laws. To the extent legally able to do
so, the Purchaser shall deliver to the Seller exemption certificates
satisfactory in form and substance to the Seller with respect to
Transfer Taxes if such delivery would reduce the amount of Transfer
Taxes that would otherwise be so imposed. All Transfer Taxes shall be
borne equally by the Seller and the Purchaser; provided, however, that
the maximum amount of Transfer Taxes so borne by the Purchaser pursuant
to this Agreement and the Tax Allocation Agreement shall be $4,000,000,
with any excess being borne by Seller.
SECTION 11.07. Consistent Tax Reporting. Unless there
has been a final determination (including the execution of a Form 870-AD
or successor form) to the contrary, neither the Purchaser nor any
Affiliate of the Purchaser shall claim any Tax deduction in respect of
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expenses or other obligations incurred with respect to Continuing
Employees, or other items for which the Seller or its Affiliates are
responsible, whether under the Restructuring Agreement or otherwise, for
which a deduction is claimed by the Seller or an Affiliate of the
Seller.
ARTICLE XII
Indemnification
SECTION 12.01. Indemnification by the Seller and the
Parent. The Seller and the Parent shall, jointly and severally,
indemnify and fully defend, save and hold each Purchaser Indemnitee
harmless from any losses, damages, liabilities, claims, costs, expenses,
fines, penalties, amounts paid in settlement and reasonable attorneys'
fees and expenses (collectively, "Losses") suffered by such Purchaser
Indemnitee, as incurred (payable quarterly upon written request), for or
on account of or arising from or in connection with or otherwise with
respect to:
(a) any breach of any representation or warranty of the
Parent or any member of the Seller Group made in any Transaction
Document or in any certificate or other document delivered
pursuant to any Transaction Document;
(b) any failure of the Parent or any member of the Seller
Group duly to perform or observe any of its covenants or
agreements contained in any Transaction Document;
(c) any Excluded Liability;
(d) the termination of any Contract forming part of the
Excluded Assets; and
(e) each Contract forming part of the Excluded Assets that
the Seller is required pursuant to the Restructuring Agreement to
keep in effect to implement the Conversion Plan.
SECTION 12.02. Indemnification by the Purchaser. The
Purchaser shall indemnify and fully defend, save and hold each Seller
Indemnitee harmless from any Loss suffered by such Seller Indemnitee, as
incurred (payable quarterly
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upon written request), for or on account of or arising from or in
connection with or otherwise with respect to:
(a) any breach of any representation or warranty of the
Purchaser made in any Transaction Document or in any certificate
or other document delivered pursuant to any Transaction Document;
(b) any failure of the Purchaser duly to perform or observe
any of the Purchaser's covenants or agreements contained in any
Transaction Document; or
(c) any Assumed Liability.
SECTION 12.03. Procedures for Indemnification. (a) In
order for a party to be entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving a claim
or demand made by any person against the indemnified party (a "Third
Party Claim"), such indemnified party must notify the indemnifying party
of the Third Party Claim reasonably promptly after receipt by such
indemnified party of written notice of the Third Party Claim; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying
party shall have been actually prejudiced as a result of such failure.
Thereafter, the indemnified party shall deliver to the indemnifying
party, reasonably promptly after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party claim,
other than those notices and documents (including court papers)
separately addressed to the indemnifying party; provided, however, that
failure to deliver any such notice or document shall not affect the
indemnification provided hereunder, except to the extent the
indemnifying party shall have been actually prejudiced as a result of
such failure.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the
defense thereof and, if it so chooses at its sole cost and upon written
notice to the indemnified party acknowledging its obligation to
indemnify the indemnified party therefor in accordance with the terms of
this Agreement, to assume the defense thereof with counsel selected by
the indemnifying party; provided, however, that such counsel is
reasonably satisfactory to the indemnified party. Should the
indemnifying party so elect to assume the
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defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for legal expenses subsequently incurred
by the indemnified party in connection with the defense thereof;
provided, however, that (i) if the indemnifying party assumes such
defense, the indemnified party shall have the right to participate in
the defense thereof and to employ counsel, at its own expense, separate
from the counsel employed by the indemnifying party, it being understood
that the indemnifying party shall control such defense and (ii) the
indemnified party shall be entitled to employ separate counsel, at the
expense of the indemnifying party, and to participate in the defense of
such Third Party Claim if in the opinion of counsel to such indemnified
party a conflict or potential conflict exists between such indemnified
party and the indemnifying party that would make such separate
representation advisable (provided that the indemnified party shall only
be
responsible under this clause (ii) for the fees of one counsel for all
indemnified parties). The indemnifying party shall be liable for the
fees and expenses of counsel employed by the indemnified party for any
period during which the indemnifying party has failed to assume the
defense thereof.
(c) If the indemnifying party so elects to assume the
defense of any Third Party Claim, the indemnified parties shall
cooperate with the indemnifying party in the defense thereof. Such
cooperation shall include the retention and (upon the indemnifying
party's reasonable request) the provision to the indemnifying party of
records and information that are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. If the indemnifying party shall have assumed the defense of
a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection
with such Third Party Claim, which releases the indemnified party
completely in connection with such Third Party Claim and which would not
otherwise significantly adversely affect the indemnified party. The
indemnified party shall not admit any liability with respect to, or
settle, compromise or discharge, any Third Party Claim the defense of
which shall have been assumed by the indemnifying party in accordance
with the terms hereof. The indemnified party shall have the right to
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admit any liability with respect to, or settle, compromise or discharge,
any Third Party Claim the defense of which shall not have been assumed
by the indemnifying party.
(d) Notwithstanding the foregoing, the indemnifying party
shall be liable for the reasonable fees and expenses of counsel incurred
by the indemnified party in defending any Third Party Claim if such
Third Party Claim, if successful, is likely to result in a judgment,
decree or order of injunction or other equitable relief or relief for
other than money damages against the indemnified party.
(e) In the event any indemnified party should have a claim
for indemnity against any indemnifying party that does not involve a
Third Party Claim being asserted against or sought to be collected from
such indemnified party, the indemnified party shall deliver notice of
such claim with reasonable promptness to the indemnifying party. The
failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may
have to such indemnified party under this Article, except to the extent
that the indemnifying party shall have been actually prejudiced as a
result of such failure. If the indemnifying party does not notify the
indemnified party within 20 calendar days following its receipt of such
notice that the indemnifying party disputes its liability to the
indemnified party under this Article, such claim specified by the
indemnified party in such notice shall be conclusively deemed a
liability of the indemnifying party under this Article, and the
indemnifying party shall pay the amount of such liability to the
indemnified party on demand or, in the case of any notice in which the
amount of the claim (or any portion thereof) is estimated, on such later
date when the amount of such claim (or such portion thereof) becomes
finally determined. If the indemnifying party has timely disputed its
liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party shall proceed in good faith
to negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
(f) This Section shall not apply to any claim for
indemnification with respect to any Tax Claim.
SECTION 12.04. Tax Claims. (a) (1) The Purchaser shall
promptly notify the Seller in writing of any
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claim or potential claim made by any Taxing Authority that, if
successful, would result in an indemnity payment to any Purchaser
Indemnitee pursuant to Section 12.01 or pursuant to the Tax Allocation
Agreement (a "Tax Claim"); the Purchaser shall notify the Seller in
writing within 30 days of receipt of any communication to the Purchaser
or any Affiliate of the Purchaser from any Taxing Authority, or the
making of any communication to any Taxing Authority by the Purchaser or
any Affiliate of the Purchaser, with respect to any Tax Claim; and the
Purchaser shall notify the Seller in writing at least 15 days prior to
the date it intends to make payment of any Tax claimed pursuant to any
Tax Claim; provided, however, that the failure to give any such notice
under this paragraph (1) shall not affect the indemnification provided
hereunder except to the extent Seller has been actually prejudiced as a
result of such failure.
(2) The Seller shall promptly notify the Purchaser in
writing of any claim or potential claim made by any Taxing Authority
that, if successful, would result in an indemnity payment to any Seller
Indemnitee pursuant to Section 12.02 or pursuant to the Tax Allocation
Agreement (also a "Tax Claim"); the Seller shall notify the Purchaser in
writing within 30 days of receipt of any communication to the Seller or
any Affiliate of the Seller from any Taxing Authority, or the making of
any communication to any Taxing Authority by the Seller of any Affiliate
of the Seller, with respect to any Tax Claim; and the Seller shall
notify the Purchaser in writing at least 15 days prior to the date it
intends to make payment of any Tax claimed pursuant to any Tax Claim;
provided, however, that the failure to give any such notice under this
paragraph (2) shall not affect the indemnification provided hereunder
except to the extent the Purchaser has been actually prejudiced as a
result of such failure.
(b) (1) With respect to any Tax Claim described in
Section 12.04(a)(1), the Seller shall control all proceedings and may
make all decisions taken in connection with such Tax Claim (including
selection of counsel) and, without limiting the foregoing, may in its
sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with
respect thereto, and may, in its sole discretion, either pay the Tax
claimed and sue for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner; provided,
however,
<PAGE>
67
that the Seller shall first consult in good faith with the Purchaser
with respect to the conduct of the defense of a Tax Claim.
(2) With respect to any Tax Claim described in
Section 12.04(a)(2), the Purchaser shall control all proceedings and may
make all decisions taken in connection with such Tax Claim (including
selection of counsel) and, without limiting the foregoing, may in its
sole discretion pursue or forego any or all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with
respect thereto, and may, in its sole discretion, either pay the Tax
claimed and sue for a refund where Applicable Law permits such refund
suits or contest the Tax Claim in any permissible manner; provided,
however, that the Purchaser shall first consult in good faith with the
Seller with respect to the conduct of the defense of a Tax Claim.
(c) The Seller and the Purchaser shall jointly control and
participate in all proceedings taken in connection with any Tax Claim
relating to Taxes for a Straddle Period. Neither the Seller nor the
Purchaser shall settle any such Tax Claim without the prior written
consent of the other.
(d) The Purchaser, each Included Subsidiary and each of
their respective Affiliates on the one hand, and the Seller and its
respective Affiliates on the other, shall cooperate in contesting any
Tax Claim, which cooperation shall include the retention and, upon
request, the provision to the requesting person of records and
information which are reasonably relevant to such Tax Claim, and in
making employees available on a mutually convenient basis to provide
additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim.
SECTION 12.05. Losses Net of Insurance, etc. (a) The
amount of any Loss for which indemnification is provided under this
Article or otherwise under the Transaction Documents shall be net of any
amounts recovered by the indemnified party under insurance policies with
respect to such Loss and shall be (i) increased to take account of any
net Tax cost incurred by the indemnified party hereunder (grossed up for
such increase) and (ii) reduced to take account of any net Tax benefit
realized by the indemnified party arising from the incurrence or
<PAGE>
68
payment of any such Loss. In computing the amount of any such Tax cost
or Tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any indemnity payment
hereunder or the incurrence or payment of any indemnified Loss. Any
indemnification payment hereunder shall initially be made without regard
to this Section and shall be increased or reduced to reflect any such
net Tax cost (including gross-up) or net Tax benefit only after the
indemnified party has actually realized such cost or benefit. For
purposes of this Agreement, an indemnified party shall be deemed to have
"actually realized" a net Tax cost or a net Tax benefit to the extent
that, and at such time as, the amount of Taxes payable by such
indemnified party is increased above or reduced below, as the case may
be, the amount of Taxes that such indemnified party would be required to
pay but for the receipt of the indemnity payment and the incurrence or
payment of such Loss. The amount of any increase or reduction hereunder
shall be adjusted to reflect any final determination (including the
execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes and payments between the Seller
and the Purchaser to reflect such adjustment shall be made if necessary.
Any indemnity payment under this Agreement or otherwise under the
Transaction Documents and any Restructuring Payment (other than a
Restructuring Payment for which a deduction is claimed by Seller) shall
be treated as an adjustment to the Purchase Price for Tax purposes,
unless a final determination (which shall include the execution of a
Form 870-AD or successor form) with respect to the indemnified party or
any of its Affiliates causes any such payment not to be treated as an
adjustment to the Purchase Price for United States Federal income Tax
purposes.
(b) The amount of any payment by Seller or any Affiliate of
Seller pursuant to the Restructuring Agreement or in connection with the
Restructuring (as defined in the Restructuring Agreement) (a
"Restructuring Payment") made to Purchaser or to an Affiliate of
Purchaser shall be (i) increased to take account of any net Tax cost
incurred by the payee (grossed up to reflect such increase) and (ii)
reduced to take account of any net Tax benefit realized by the payee
arising from the incurrence or payment of any amount in respect of which
the Restructuring Payment is made.
<PAGE>
69
(c) If a Restructuring Payment is made to an employee of
Purchaser or of an Affiliate of Purchaser (or otherwise to any person
other than Purchaser or an Affiliate of Purchaser), then Purchaser shall
pay to Seller the amount of any net Tax benefit realized by the
Purchaser or any Affiliate of the Purchaser by reason of such
Restructuring Payment (grossed up to reflect such payment).
(d) In determining the amount and timing of any payment due
under paragraph (b) or (c), the principles of paragraph (a) shall apply.
SECTION 12.06. Survival of Representations and
Warranties. The representations and warranties in the Transaction
Documents and in any certificate or other document delivered pursuant
hereto shall survive the Closing.
ARTICLE XIII
Conditions Precedent to Performance
by the Parent and the Seller
The obligations of the Parent and the Seller to consummate
the transactions contemplated by this Agreement are subject to the
fulfillment, on or before the Closing Date, of the following conditions,
any one or more of which may be waived by the Seller in its sole
discretion:
SECTION 13.01. Performance of the Obligations of the
Purchaser. The Purchaser shall have performed in all material respects
all material obligations required under the Transaction Documents to be
performed by it on or before the Closing Date, and the Seller shall have
received a certificate dated the Closing Date and signed by the
President or any Vice President of the Purchaser to the foregoing
effect.
SECTION 13.02. HSR Act. The waiting period under the HSR
Act shall have expired or been terminated.
SECTION 13.03. No Violation of Orders. No preliminary or
permanent injunction or other order issued by any Governmental Authority
nor any statute, rule or regulation, promulgated or enacted by any
Governmental Authority that prevents the consummation of the
transactions contemplated hereby shall be in effect.
<PAGE>
70
SECTION 13.04. Governmental Approvals. Any consents and
approvals of the Commission, the NYSE, the Federal Reserve Bank of New
York, the NASD and the CFTC to consummate the transactions contemplated
hereby shall have been obtained, except where the failure to obtain any
such consent or approval would not materially impair the ability of the
Parent or the Seller to perform their obligations under the Transaction
Documents.
SECTION 13.05. Other Approvals. The Transaction Documents
and the transactions contemplated thereby shall have been approved by
the Board of Directors of the Parent.
ARTICLE XIV
Conditions Precedent to the Performance by the Purchaser
The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement are subject to the
fulfillment, on or before the Closing Date, of the following conditions,
any one or more of which may be waived by the Purchaser in its sole
discretion:
SECTION 14.01. Performance of the Obligations. The Parent
and each member of the Seller Group shall have performed in all material
respects all material obligations required under the Transaction
Documents to be performed by it on or before the Closing Date, and the
Purchaser shall have received a certificate dated the Closing Date and
signed by the President and any Vice President of the Parent and by the
chief executive officer and the chief financial officer of the Seller to
the foregoing effect.
SECTION 14.02. HSR Act. The waiting period under the HSR
Act shall have expired or been terminated.
SECTION 14.03. No Violation of Orders. No preliminary or
permanent injunction or other order issued by any Governmental Authority
nor any statute, rule or regulation, promulgated or enacted by any
Governmental Authority that prevents the consummation of the
transactions contemplated hereby, shall be in effect.
SECTION 14.04. Governmental Approvals. Any consents and
approvals of the Commission, the NYSE, the Federal Reserve Bank of New
York, the NASD and the CFTC required to consummate the transactions
contemplated hereby
<PAGE>
71
shall have been obtained, except where the failure to obtain any such
consent or approval would not materially impair the ability of the
Purchaser to conduct any material portion of the Acquired Businesses.
SECTION 14.05. Absence of Restraint. No event shall have
occurred nor shall any circumstance exist which is reasonably likely to
result in an order of the Commission, any authority of any state or
territory of the United States, or of the District of Columbia,
primarily responsible for the regulation or registration of persons
engaged in the securities business, the NYSE, the NASD or any court
prohibits the Purchaser hiring, or limits the ability of the Purchaser
to hire, at least 75% of the retail brokers employed by the Seller on
the date hereof.
SECTION 14.06. Other Approvals. The Transaction Documents
and the transactions contemplated thereby shall have been approved by
the Board of Directors of the Purchaser.
ARTICLE XV
Termination
SECTION 15.01. Conditions of Termination. Notwithstanding
anything to the contrary contained herein, this Agreement may be
terminated at any time before the Closing:
(a) by mutual consent of the Seller and the Purchaser;
(b) by either the Purchaser or the Seller if the Closing
shall not have occurred by February 28, 1995; provided, however,
that (i) if the Closing shall not have occurred by such date due
to the failure to satisfy the condition described in
Sections 13.03 and 14.03 because of an injunction or order,
neither the Purchaser nor the Seller may terminate this Agreement
unless the applicable injunction or order preventing the
satisfaction of such condition is final and nonappealable and
(ii) this Agreement may not be terminated pursuant to this clause
(b) by any party if such party or one of its Affiliates is in
material breach of its obligations under any Transaction Document;
<PAGE>
72
(c) by either the Purchaser or the Seller if the other, or
any Affiliate of the other, is in material breach of its
obligations under any Transaction Document;
(d) by the Purchaser if prior to November 5, 1995, the
Purchaser discovers facts, which existed at the date of this
Agreement, of such seriousness and significance that, had such
facts been known at such date, a reasonable businessperson would
not have entered into this Agreement;
(e) by the Seller if the Purchaser has not obtained the
approval of its Board of Directors of the Transaction Documents
and the transactions contemplated thereby on or before October 21,
1994; and
(f) by the Purchaser if the Parent has not obtained the
approval of its Board of Directors of the Transaction Documents
and the transactions contemplated thereby on or before October 21,
1994.
SECTION 15.02. Effect of Termination. In the event of
termination pursuant to Section 15.01, this Agreement shall become null
and void and have no effect, with no liability on the part of the
Parent, the Seller or the Purchaser, or their directors, officers,
agents or stockholders, with respect to this Agreement, except for
(i) the liability of a party for expenses pursuant to Section 16.03; and
(ii) liability for breach of this Agreement.
ARTICLE XVI
Miscellaneous
SECTION 16.01. Successors and Assigns. Except as otherwise
provided in this Agreement and except for an assignment by the Purchaser
to one of its Affiliates, no party hereto shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of
the other party hereto, and any such attempted assignment without such
prior written consent shall be void and of no force and effect;
provided, however, that no such assignment shall reduce or otherwise
vitiate any of the obligations of any other party hereunder. This
Agreement shall inure to
<PAGE>
73
the benefit of and shall be binding upon the successors and permitted
assigns of the parties hereto.
SECTION 16.02. Governing Law; Jurisdiction. (a) This
Agreement shall be construed, performed and enforced in accordance with,
and governed by, the laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
(b) Each party irrevocably submits to the exclusive
jurisdiction of (i) the Supreme Court of the State of New York, New York
County, and (ii) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby. Each party agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the
Southern District of New York or if such suit, action or other
proceeding may not be brought in such court for reasons of subject
matter jurisdiction, in the Supreme Court of the State of New York, New
York County. Each party irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in
(A) the Supreme Court of the State of New York, New York County, or
(B) the United Sates District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 16.03. Expenses. Except as otherwise provided in
this Agreement, each of the parties hereto shall pay its own expenses in
connection with this Agreement and the transactions contemplated hereby,
including any legal and accounting fees, whether or not the transactions
contemplated hereby are consummated.
SECTION 16.04. Severability. In the event that any part of
this Agreement is declared by any court or other judicial or
administrative body to be null, void or unenforceable, said provision
shall survive to the extent it is not so declared, and all of the other
provisions of this Agreement shall remain in full force and effect and
the parties shall negotiate in good faith to replace the part hereof
declared null, void or unenforceable with an
<PAGE>
74
alternative provision that preserves for the parties the benefits of
this Agreement.
SECTION 16.05. Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing and shall
be deemed to have been duly given: (i) on the date of service if served
personally on the party to whom notice is to be given; (ii) on the day
of transmission if sent via facsimile transmission to the facsimile
number given below, and telephonic confirmation of receipt is obtained
promptly after completion of transmission; (iii) on the Business Day
after delivery to Federal Express or a similar overnight courier or the
Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom
notice is to be given, by first class mail, registered or certified,
postage prepaid and properly addressed to the party, as follows:
If to the Seller:
Kidder, Peabody Group, Inc.
10 Hanover Square
New York, New York 10005
Attn: John M. Liftin
Telecopy: (212) 510-4920
Copies to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Alan L. Beller
Telecopy: (212) 225-3999
and to the Parent
<PAGE>
75
If to the Parent:
General Electric Company
3135 Easton Turnpike
Fairfield, Connecticut 06431
Attn: Senior Counsel for Transactions
Telecopy: (203) 373-3008
Copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Dennis S. Hersch
Telecopy: (212) 450-4800
If to the Purchaser:
Paine Webber Group Inc.
1285 Avenue of the Americas
New York, New York 10019
Attn: General Counsel
Telecopy: (212) 713-2114
Copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attn: David G. Ormsby
Telecopy: (212) 474-3700
Any party may change its address for the purpose of this
Section by giving the other party written notice of its new address in
the manner set forth above.
SECTION 16.06. Amendments; Waivers. This Agreement may be
amended or modified, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written
instrument executed by the parties hereto or, in the case of a waiver,
by the party
<PAGE>
76
waiving compliance. Any waiver by any party of any condition, or of the
breach of any provision, term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall not be
deemed to be nor construed as a further or continuing waiver of any such
condition, or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
SECTION 16.07. Public Announcements. Until the earlier of
the Closing and the termination of this Agreement, no party shall make
any press release or public announcement concerning the transactions
contemplated by this Agreement without prior consent of the other
parties hereto.
SECTION 16.08. Entire Agreement. The Transaction Documents
contain the entire understanding between the parties hereto with respect
to the transactions contemplated hereby and thereby and supersede and
replace all prior agreements and understandings, oral or written, with
regard to such transactions.
SECTION 16.09. Parties in Interest. Nothing in this
Agreement is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parent, the
Seller and the Purchaser and their respective successors and permitted
assigns. Nothing in this Agreement is intended to relieve or discharge
the obligations or liability of any third persons to the Seller or the
Purchaser. Except as set forth in Article XII with respect to Seller
Indemnitees and Purchaser Indemnitees, no provision of this Agreement
shall give any third persons any right of subrogation or action over or
against the Seller or the Purchaser.
SECTION 16.10. Headings. The table of contents and section
and paragraph headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.
SECTION 16.11. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute the same instrument.
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77
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
PAINE WEBBER GROUP INC.,
by
_________________________
Name:
Title:
GENERAL ELECTRIC COMPANY,
by Dennis D. Dammerman
--------------------------
Senior Vice President - Finance
KIDDER, PEABODY GROUP INC.,
by Dennis D. Dammerman
--------------------------
Chairman and CEO
<PAGE>
Exhibit A
CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN
THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO,
OF THE
6% CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED STOCK, SERIES [ ]
($100 Stated Value)
PAINE WEBBER GROUP INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, __________, [title], of Paine Webber Group
Inc., a Delaware corporation (hereinafter called the "Corporation"),
pursuant to the provisions of Sections 103 and 151 of the General
Corporation Law of the State of Delaware, does hereby make this
Certificate of Designations and does hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of
the Corporation by the Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the Board of Directors duly
adopted the following resolution:
RESOLVED, that, pursuant to Article __ of the Certificate of
Incorporation (which authorizes __________ shares of preferred stock,
$20 par value ("Preferred Stock"), [of which __________ shares of a
series of __________ Preferred Stock are currently issued and
outstanding),] the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and
restrictions, of a series of Preferred Stock (in addition to the powers,
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Certificate of Incorporation which are
applicable to such series of Preferred Stock).
<PAGE>
2
RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the following
provisions:
(1) Number and Designation. 1,000,000 shares of the
Preferred Stock of the Corporation shall be designated as 6% Cumulative
Convertible Redeemable Preferred Stock, Series __ (the "Series __
Convertible Preferred Stock").
(2) Rank. The shares of Series __ Convertible Preferred
Stock shall rank prior to the shares of the Corporation's common stock,
$1 par value (the "Common Stock"), and any other class of stock of the
Corporation ranking junior to the Series __ Convertible Preferred Stock
(whether with respect to dividends or upon liquidation, dissolution,
winding up or otherwise). All equity securities of the Corporation to
which the Series __ Convertible Preferred Stock ranks prior (whether
with respect to dividends or upon liquidation, dissolution, winding up
or otherwise), including the Common Stock, are collectively referred to
herein as the "Junior Securities." All equity securities of the
Corporation with which the Series __ Convertible Preferred Stock ranks
on a parity (whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise), including the Corporation's 9%
Cumulative Redeemable Preferred Stock, Series __, are collectively
referred to herein as the "Parity Securities." The respective
definitions of Junior Securities and Parity Securities shall also
include any rights or options exercisable for or convertible into any of
the Junior Securities and Parity Securities, as the case may be.
(3) Dividends. (a) The holders of shares of Series __
Convertible Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available
for the payment of dividends, cash dividends at the annual rate of $6
per share. Such dividends shall be payable in arrears in equal amounts
quarterly on March 15, June 15, September 15 and December 15 of each
year (unless such day is not a Business Day, in which event on the next
succeeding Business Day) (each of such dates being a "Dividend Payment
Date" and each such quarterly period being a "Dividend Period")
commencing on the Dividend Payment Date which next follows the issuance
of such shares of Series __ Convertible Preferred Stock. Such dividends
(i) shall be cumulative from the date of issue, whether or not declared
and whether or not in any Dividend Period or Periods there shall be
funds of the Corporation legally available for the payment of such
dividends and (ii) shall compound quarterly, to the extent they are
unpaid, at
<PAGE>
3
the rate of 6% per annum computed on the basis of a 360-day year and
twelve 30-day months. Each such dividend shall be payable to the
holders of record of shares of the Series __ Convertible Preferred
Stock, as they appear on the stock records of the Corporation at the
close of business on such record dates, not more than 60 days, or less
than 10 days, preceding the payment dates thereof, as shall be fixed by
the Board of Directors or a duly authorized committee thereof. Accrued
and unpaid dividends for any past Dividend Periods may be declared and
paid at any time, without reference to any Dividend Payment Date, to
holders of record on such date, not more than 45 days preceding the
payment date thereof, as may be fixed by the Board of Directors. As
used herein, the term "Business Day" shall mean any day other than a
Saturday, Sunday, a day on which the New York Stock Exchange does not
conduct regular trading or a day on which is or is declared a national
or New York State holiday.
(b) The amount of dividends payable for each full Dividend
Period for the Series __ Convertible Preferred Stock shall be computed
by dividing the annual dividend rate by four. The amount of dividends
payable for the initial Dividend Period, or any other period shorter or
longer than a full Dividend Period, on the Series __ Convertible
Preferred Stock shall be computed on the basis of twelve 30-day months
and a 360-day year. Holders of shares of Series __ Convertible
Preferred Stock shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of cumulative dividends, as herein
provided, on the Series __ Convertible Preferred Stock.
(c) So long as any shares of the Series __ Convertible
Preferred Stock are outstanding, no dividends, except as described in
the next succeeding sentence, shall be declared or paid or set apart for
payment on Parity Securities, for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment on the Series __ Convertible Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of the dividend
on such class or series of parity stock. When dividends are not paid in
full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series __
Convertible Preferred Stock and all dividends declared upon any other
Parity Security shall be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the Series __
Convertible Preferred Stock and accumulated and unpaid on such Parity
Security.
<PAGE>
4
(d) So long as any shares of the Series __ Convertible
Preferred Stock are outstanding, no dividends (other than dividends or
distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) shall be
declared or paid or set apart for payment or other distribution declared
or made upon Junior Securities, nor shall any Junior Securities be
redeemed, purchased or otherwise acquired (all such dividends,
distributions, redemptions or purchases being hereinafter referred to as
a "Junior Securities Distribution") for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Corporation, directly or indirectly
(except by conversion into or exchange for Junior Securities), unless in
each case (i) the full cumulative dividends on all outstanding shares of
the Series __ Convertible Preferred Stock and any other Parity
Securities shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Series __ Convertible Preferred
Stock and all past dividend periods with respect to such Parity
Securities and (ii) sufficient funds shall have been paid or set apart
for the payment of the dividend for the current Dividend Period with
respect to the Series __ Convertible Preferred Stock and the current
dividend period with respect to such Parity Securities.
(4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the
assets of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Junior Securities, the holders of the
shares of Series __ Convertible Preferred Stock shall be entitled to
receive $100 per share of Series __ Convertible Preferred Stock plus an
amount equal to all dividends (whether or not earned or declared)
accrued and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation, or proceeds thereof, distributable among
the holders of the shares of Series __ Convertible Preferred Stock shall
be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any Parity Securities, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares of
Series __ Convertible Preferred Stock and any such other Parity
Securities ratably in accordance with the respective amounts that would
be payable on such shares of Series __ Convertible Preferred Stock and
any such other stock if all amounts payable thereon were paid in full.
For the purposes
<PAGE>
5
of this paragraph (4), a sale or transfer of all or substantially all of
the Corporation's assets, shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation,
but a consolidation or merger of the Corporation with one or more
corporations shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of
the Series __ Convertible Preferred Stock, as provided in this paragraph
(4), any other series or class or classes of Junior Securities shall,
subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the Series __ Convertible Preferred
Stock shall not be entitled to share therein.
(5) Redemption. (a) To the extent the Corporation shall
have funds legally available for such payment, at any time or from time
to time prior to the fifth anniversary of the date of issuance of the
shares of Series __ Convertible Preferred Stock, the Corporation may
redeem at its option, in whole or in part, shares of Series __
Convertible Preferred Stock at a redemption price per share in cash
equal to the greater of (i) $140 and (ii) the average of (A) $140 and
(B) the Current Market Price Per Common Share (as defined in paragraph
(7)(g)(vi)) as of the date of notice of redemption multiplied by the
number obtained by dividing 100 by the Conversion Price (as defined in
paragraph 7(a)) then in effect, in each case, together with any accrued
and unpaid dividends thereon to the redemption date.
(b) To the extent the Corporation shall have funds legally
available for such payment, at any time or from time to time on or after
the fifth anniversary of the date of issuance of the shares of Series __
Convertible Preferred Stock, the Corporation may redeem at its option,
in whole or in part, shares of Series __ Convertible Preferred Stock at
a redemption price in cash (subject to subparagraph (d) below) equal to
the sum of (i) the redemption price per share indicated below and (ii)
any accrued and unpaid dividends to the redemption date. The amount of
the redemption price per share, if redeemed during the 12-month period
commencing on the [month and day of issuance of the Series __
Convertible Preferred Stock] of the years indicated below, is:
<PAGE>
6
Year /1/ Amount
2000 $105
2001 $104
2002 $103
2003 $102
2004 $101
2005 and thereafter $100
_______________________
/1/ Assumes Preferred Stock issued in 1995.
(c) To the extent the Corporation shall have funds legally
available for such payment, on [TWENTY YEAR DATE], if any shares of the
Series __ Convertible Preferred Stock shall be outstanding, the
Corporation shall redeem all outstanding shares of the Series __
Convertible Preferred Stock, at a redemption price of $100 per share in
cash (subject to paragraph (d) below) together with accrued and unpaid
dividends thereon to such date.
(d) In lieu of a cash payment of the redemption price per
share due upon any redemption of shares of Series __ Convertible
Preferred Stock pursuant to paragraph 5(b) or (c), the Corporation may
issue shares of Common Stock to the holders of record of such shares of
Series __ Convertible Preferred Stock in full payment of such amount, by
giving written notice (in the manner described in paragraph (6)) to such
holders. If such notice is so given, the Corporation shall issue and
deliver or cause to be delivered to each such holder of shares of Series
__ Convertible Preferred Stock being redeemed out of its authorized but
unissued Common Stock or Common Stock held in treasury that number of
shares of Common Stock determined by dividing the aggregate redemption
price payable in respect of all such shares of Series __ Convertible
Preferred Stock owned by such holder being redeemed by the Current
Market Price Per Common Share as of the redemption date. The
Corporation shall, in lieu of issuing any fractional shares of Common
Stock to any such holder, pay to such holder cash in an amount equal to
such fractional interest multiplied by the Current Market Price Per
Common Share as of the redemption date.
(e) Immediately prior to authorizing or making any
redemption pursuant to this paragraph (5), the Corporation, by
resolution of its Board of Directors, shall, to the extent of any funds
legally available therefor, declare a dividend on the Series __
Convertible Preferred Stock payable on the redemption date in an amount
equal to any accrued and unpaid dividends on the Series __ Convertible
Preferred Stock as of such redemption date.
<PAGE>
7
(f) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series __ Convertible
Preferred Stock pursuant to paragraph (5)(c) (the "Mandatory Redemption
Obligation"), the Mandatory Redemption Obligation shall be discharged as
soon as the Corporation is able to discharge such Mandatory Redemption
Obligation. If and so long as any Mandatory Redemption Obligation with
respect to the Series __ Convertible Preferred Stock shall not be fully
discharged, the Corporation shall not (i) directly or indirectly,
redeem, purchase, or otherwise acquire any Parity Security or discharge
any mandatory or optional redemption, sinking fund or other similar
obligation in respect of any Parity Securities (except in connection
with a redemption, sinking fund or other similar obligation to be
satisfied pro rata with the Series __ Convertible Preferred Stock) or
(ii) in accordance with paragraph (3)(d), declare or make any Junior
Securities Distribution, or, directly or indirectly, discharge any
mandatory or optional redemption, sinking fund or other similar
obligation in respect of the Junior Securities.
(g) Shares of Series __ Convertible Preferred Stock which
have been issued and reacquired in any manner, including shares
purchased or redeemed, shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) have the status of
authorized and unissued shares of the class of Preferred Stock
undesignated as to series and may be redesignated and reissued as part
of any series of the Preferred Stock; provided that no such issued and
reacquired shares of Series __ Convertible Preferred Stock shall be
reissued or sold as Series __ Convertible Preferred Stock.
(6) Procedure for Redemption. (a) In the event that fewer
than all the outstanding shares of Series __ Convertible Preferred Stock
are to be redeemed, the number of shares to be redeemed shall be
determined by the Board of Directors and the shares to be redeemed shall
be selected pro rata (with any fractional shares being rounded to the
nearest whole share) as nearly as practicable or by lot, or by such
other method as the Board of Directors may determine to be equitable.
(b) In the event the Corporation shall redeem shares of
Series __ Convertible Preferred Stock, notice of such redemption shall
be given by first class mail, postage prepaid, mailed not less than 30
days nor more than 60 days prior to the redemption date, to each holder
of record of the shares to be redeemed at such holder's address as the
same appears on the stock register of the Corporation;
<PAGE>
8
provided that neither the failure to give such notice nor any defect
therein shall affect the validity of the giving of notice for the
redemption of any share of Series __ Convertible Preferred Stock to be
redeemed except as to the holder to whom the Corporation has failed to
give said notice or except as to the holder whose notice was defective.
Each such notice shall state: (i) the redemption date; (ii) the number
of shares of Series __ Convertible Preferred Stock to be redeemed and,
if fewer than all the shares held by such holder are to be redeemed, the
number of shares to be redeemed from such holder; (iii) the redemption
price; (iv) the place or places where certificates for such shares are
to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such
redemption date and (vi) whether the redemption price will be paid in
cash or shares of Common Stock.
(c) Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption), dividends on the shares of Series __ Convertible
Preferred Stock so called for redemption shall cease to accrue, and all
rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price) shall
cease. Upon surrender in accordance with said notice of the
certificates for the shares so redeemed (properly endorsed or assigned
for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price aforesaid. In case fewer than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
(d) All shares of Common Stock delivered pursuant to this
paragraph (6) will upon delivery be duly and validly issued and fully
paid and nonassessable, free of all liens and charges and not subject to
any preemptive rights, and free from all documentary, stamp, transfer or
other similar taxes. If the shares of Common Stock to be delivered
pursuant to this paragraph (6) are to be issued in the name of a person
other than the registered holder of the shares of Series __ Convertible
Preferred Stock being redeemed, such registered holder shall pay all
transfer or other similar taxes with respect thereto.
(7) Conversion. (a)(i) Subject to the provisions of this
paragraph (7), the holders of the shares
<PAGE>
9
of Series __ Convertible Preferred Stock shall have the right, at any
time and from time to time, at such holder's option, to convert any or
all outstanding shares (and fractional shares) of Series __ Convertible
Preferred Stock, in whole or in part, into that number of fully paid and
non-assessable shares of Common Stock (calculated as to each conversion
to the nearest 1/10,000th of a share) obtained by dividing 100 by the
Conversion Price (as defined below), and by surrender of such shares so
to be converted, such surrender to be made in the manner provided in
this paragraph (7). The term "Conversion Price" shall mean $18.13 per
share, as adjusted in accordance with the provisions of paragraph 7(g).
(ii) Notwithstanding any other provision hereof, the right
to convert shares of Series __ Convertible Preferred Stock called for
redemption pursuant to paragraph (5) shall terminate (A) if the date of
redemption is prior to the fifth anniversary of the date of issuance of
the shares of Series __ Convertible Preferred Stock, at the close of
business on the day immediately preceding the date on which the
Corporation gives a notice of redemption with respect to such shares in
accordance with paragraph (6) and (B) if the date of redemption is on or
after the fifth anniversary of such date of issuance, at the close of
business on the day immediately preceding the redemption date, in each
case, unless the Corporation shall default in making payment of the
amount payable upon such redemption.
(b)(i) In order to exercise the conversion privilege, the
holder of the shares of Series __ Convertible Preferred Stock to be
converted shall surrender the certificate representing such shares at
the office of the Corporation, or at the office of the conversion agent
for the Series __ Convertible Preferred Stock appointed for such purpose
by the Corporation, with a written notice of election to convert
completed and signed, specifying the number of shares to be converted.
Such notice shall be substantially in the following form:
"NOTICE OF ELECTION TO CONVERT
The undersigned, being a holder of the 6% Cumulative
Convertible Redeemable Preferred Stock, Series [ ]
("Preferred Stock"), of [Paine Webber Group Inc. (the
"Corporation"), irrevocably exercises the right to convert
________ outstanding shares of Preferred Stock on
_________, 19__, into shares of Common Stock of
<PAGE>
10
the Corporation in accordance with the terms of the
Preferred Stock, and directs that the shares issuable and
deliverable upon the conversion, together with any check in
payment for fractional shares, be issued and delivered in
the denominations indicated below to the registered holder
hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated:
Fill in for registration of
shares of Common Stock
if to be issued otherwise
than to the registered holder:
______________________________
Name
______________________________
Address
______________________________ ______________________
(Please print name (Signature)
and address,
including postal
code number)
Denominations: _______________________
Unless the shares issuable on conversion are to be issued in the same
name as the name in which such shares of Series __ Convertible Preferred
Stock are registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the holder or the holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series __ Convertible Preferred
Stock as aforesaid, the Corporation shall issue and shall deliver to
such holder, or on the holder's written order to the holder's
transferee, a
<PAGE>
11
certificate or certificates for the whole number of shares of Common
Stock issuable upon the conversion of such shares in accordance with the
provisions of this paragraph (7) and any fractional interest in respect
of a share of Common Stock arising upon such conversion shall be settled
as provided in paragraph (7)(f).
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series __ Convertible Preferred Stock shall
have been surrendered and such notice received by the Corporation as
aforesaid, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder of record of the
shares of Common Stock represented thereby at such time on such date.
All shares of Common Stock delivered upon conversion of the Series __
Convertible Preferred Stock will upon delivery be duly and validly
issued and fully paid and non-assessable, free of all liens and charges
and not subject to any preemptive rights. Upon the surrender of
certificates representing shares of Series __ Convertible Preferred
Stock, such shares shall no longer be deemed to be outstanding and all
rights of a holder with respect to such shares surrendered for
conversion shall immediately terminate except the right to receive the
Common Stock and other amounts payable pursuant to this paragraph (7).
(c)(i) Subject to paragraph (7)(a)(ii), upon delivery to
the Corporation by a holder of shares of Series __ Convertible Preferred
Stock of a notice of election to convert, the right of the Corporation
to redeem such shares of Series __ Convertible Preferred Stock shall
terminate.
(ii) Subject to paragraph (7)(a)(ii), from the date of
delivery by a holder of shares of Series __ Convertible Preferred Stock
of such notice of election to convert, in lieu of dividends on such
Series __ Convertible Preferred Stock pursuant to paragraph (3), such
Series __ Convertible Preferred Stock shall participate equally and
ratably with the holders of shares of Common Stock in all dividends paid
on the Common Stock as if such shares of Series __ Convertible Preferred
Stock had been converted to shares of Common Stock at the time of such
delivery.
(iii) If, after receipt by a holder of shares of Series __
Convertible Preferred Stock of a notice of redemption pursuant to
paragraph (5) with a redemption date for such shares on or after the
fifth anniversary of the issuance of the Series ___ Convertible
Preferred Stock, such
<PAGE>
12
holder delivers to the Corporation a notice of election to convert, such
Series __ Convertible Preferred Stock shall cease to accrue dividends
pursuant to paragraph (3) but such shares shall continue to be entitled
to receive all accrued dividends which such holder is entitled to
receive pursuant to paragraph (3) through the date of delivery of such
notice of election to convert (including pro rata dividends for the
period from the last Dividend Payment Date to the date of delivery of
the notice of election to convert) in preference to and in priority over
any dividends on the Common Stock. Such accrued dividends shall be
payable to such holder when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
as provided in paragraph (3) above.
(iv) Except as provided above and in paragraph (7)(g), the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series __ Convertible Preferred Stock, whether or
not in arrears, on conversion of such shares or for dividends in cash on
the shares of Common Stock issued upon such conversion.
(d)(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversions of the Series __ Convertible
Preferred Stock. For purposes of this paragraph (d)(i), the number of
shares of Common Stock which shall be deliverable upon the conversion of
all outstanding shares of Series __ Convertible Preferred Stock shall be
computed as if at the time of computation all such outstanding shares
were held by a single holder.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series
__ Convertible Preferred Stock, the Corporation shall use its best
efforts to comply with all applicable federal and state laws and
regulations which require action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on conversion of the Series __
Convertible Preferred Stock pursuant hereto; provided that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the holder of the Series __
Convertible Preferred Stock to be converted and no such issue or
delivery shall be made unless
<PAGE>
13
and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(f) In connection with the conversion of any shares of
Series __ Convertible Preferred Stock, no fractions of shares of Common
Stock shall be issued, but in lieu thereof the Corporation shall pay a
cash adjustment in respect of such fractional interest in an amount
equal to such fractional interest multiplied by the Current Market Price
Per Common Share on the Business Day on which such shares of Series __
Convertible Preferred Stock are deemed to have been converted. If more
than one share shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate
number of the shares of Series __ Convertible Preferred Stock so
surrendered. All calculations under this paragraph (7) shall be made to
the nearest 1/100 of one cent or to the nearest 1/10,000 of a share, as
the case may be.
(g) The Conversion Price shall be adjusted from time to
time as follows:
(i) In case the Corporation shall at any time after the
date of issue of the Series __ Convertible Preferred Stock (I) declare a
dividend or make a distribution on Common Stock payable in Common Stock,
(II) subdivide or split the outstanding Common Stock into a greater
number of shares, (III) combine or reclassify the outstanding Common
Stock into a smaller number of shares, (IV) issue any shares of its
capital stock in a reclassification of Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Corporation is the continuing corporation), or (V) consolidate with,
or merge with or into, any other Person (unless the Corporation shall be
the surviving corporation in such merger and the holders of Common Stock
of the Corporation are not entitled to receive any consideration in
connection therewith), the Conversion Price in effect at the time of the
record date for such dividend or distribution or of the effective date
of such subdivision, split, combination, consolidation, merger or
reclassification shall be proportionately adjusted so that the
conversion of the Series __ Convertible Preferred Stock after such time
shall entitle the holder to receive the aggregate number of shares of
Common Stock or other securities of the Corporation (or shares of any
security into which such shares of Common Stock have been combined,
consolidated, merged or reclassified pursuant to clause
<PAGE>
14
(III), (IV) or (V) above) which, if this Series __ Convertible Preferred
Stock had been converted immediately prior to such time, such holder
would have owned upon such conversion and been entitled to receive by
virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification, assuming such holder of
Common Stock of the Corporation (x) is not a Person with which the
Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such recapitalization, sale or
transfer was made, as the case may be ("constituent person"), or an
affiliate of a constituent person and (y) failed to exercise any rights
of election as to the kind or amount of securities, cash and other
property receivable upon such reclassification, change, consolidation,
merger, recapitalization, sale or transfer (provided, that if the kind
or amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale
or transfer is not the same for each share of Common Stock of the
Corporation held immediately prior to such reclassification, change,
consolidation, merger, recapitalization, sale or transfer by other than
a constituent person or an affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing
share"), then for the purpose of this paragraph (g) (i) the kind and
amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale
or transfer by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing
shares). Such adjustment shall be made successively whenever any event
listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (other than Excluded Stock (as defined below)) without
consideration or for a consideration per share less than the then
Current Market Price Per Common Share, the Conversion Price to be in
effect after such issuance or sale shall be determined by multiplying
the Conversion Price in effect immediately prior to such issuance or
sale by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately prior to such issuance or sale
plus the number of shares which the aggregate offering price of the
total number of shares so issued or sold would purchase at such Current
Market Price Per Common Share, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after giving
effect to such issuance or sale. In case any portion of the
consideration to be received by the Corporation shall be in a form other
than
<PAGE>
15
cash, the fair market value of such noncash consideration shall be
utilized in the foregoing computation. Such fair market value shall be
determined by the Board of Directors of the Corporation. Such
adjustment shall be made effective immediately after such issuance or
sale. For purposes of paragraphs (g)(ii), (iii) and (iv), "Excluded
Stock" shall mean any shares of Common Stock, or any shares of stock or
other securities convertible or exercisable into or exchangeable for
shares of Common Stock (such convertible, exercisable or exchangeable
stock or securities being herein called "Convertible Securities") or any
rights to subscribe for or purchase, or options or warrants for the
purchase of shares of the Common Stock or any Convertible Securities
issued, granted or sold (I) as payment of all or any portion of the cost
of acquiring assets or stock or securities of any other corporation or
of assets of or interests in any noncorporate entity or in any other
transaction (other than a distribution without consideration to holders
of the then outstanding shares of Common Stock) in which the
consideration for such shares of the Common Stock, Convertible
Securities or rights or options is other than cash, obligations of the
United States Government or Federal funds; (II) pursuant to any employee
plan or employee contract approved or otherwise authorized by the Board
of Directors of the Corporation, including without limitation, any
employee stock option plan, employee restricted stock plan or other
employee incentive plan or any share purchase plan; (III) pursuant to
any shareholder dividend reinvestment plan; (IV) upon the conversion or
exchange of any Convertible Securities outstanding on [insert Closing
Date] or the Series __ Convertible Preferred Stock, or pursuant to any
other contractual obligation in existence on such date or any
Convertible Securities issued after such date provided that the
"conversion price" for the Common Stock underlying such Convertible
Security is greater than the Current Market Price Per Common Share on
the date such Convertible Security is issued, granted or sold; (V) upon
the conversion or exchange of any Convertible Securities, or the
exercise of any rights or options, in either case, issued, granted or
sold in the circumstances described in any of the foregoing clauses (I)
through (IV) or upon the conversion or exchange of Convertible
Securities acquired upon the exercise of any such rights or options; or
(VI) pursuant to the exercise of any rights or options, or upon
conversion or exchange of any Convertible Securities, if with respect to
such rights, options or Convertible Securities no adjustment to the
Conversion Price was required pursuant to this paragraph (g)(ii).
(iii) In case the Corporation shall fix a record date for the
issue (other than pursuant to an automatic
<PAGE>
16
dividend reinvestment plan of the Corporation or any similar plan or any
customary shareholders rights plan of the Corporation) of rights,
options or warrants (other than Excluded Stock) to the holders of its
Common Stock or other securities entitling such holders to subscribe for
or purchase shares of Common Stock (or securities convertible into
shares of Common Stock) at a price per share of Common Stock (or having
a conversion price per share of Common Stock, if a security convertible
into shares of Common Stock) less than the then Current Market Price Per
Common Share on such record date, the maximum number of shares of Common
Stock issuable upon exercise of such rights, options or warrants (or
conversion of such convertible securities) shall be deemed to have been
issued and outstanding as of such record date, and the Conversion Price
shall be adjusted pursuant to paragraph (g)(ii) hereof as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration equal to the aggregate consideration payable for
such rights, options, warrants or convertible securities and the
aggregate consideration payable by the holders of such rights, options,
warrants or convertible securities prior to their receipt of such shares
of Common Stock. In case any portion of such consideration shall be in
a form other than cash, the fair market value of such noncash
consideration shall be determined as set forth in paragraph (g)(ii)
hereof. Such adjustment shall be made effective on the day immediately
after the record date; and in the event that such rights, options or
warrants are not so issued or expire unexercised or such convertible
securities are redeemed or otherwise retired prior to conversion
thereof, or in the event of a change in the number of shares of Common
Stock to which the holders of such rights, options, warrants or
convertible securities are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this paragraph (g)),
the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such record date had not been fixed, in
the former event, or the Conversion Price which would then be in effect
if such holders had initially been entitled to such changed number of
shares of Common Stock, in the latter event.
(iv) In case the Corporation shall issue rights, options or
warrants (other than Excluded Stock) entitling the holders thereof to
subscribe for or purchase Common Stock (or securities convertible into
shares of Common Stock) or shall issue convertible securities, at a
price per share of Common Stock (or having a conversion price per share
of Common Stock, if a security convertible into shares of Common Stock)
(including, in the case of rights, options or warrants, the price at
which they may be exercised) is
<PAGE>
17
less than the then Current Market Price Per Common Share, the maximum
number of shares of Common Stock issuable upon exercise of such rights,
options or warrants or upon conversion of such convertible securities
shall be deemed to have been issued and outstanding as of the date of
such sale or issuance, and the Conversion Price shall be adjusted
pursuant to paragraph (g)(ii) hereof as though such maximum number of
shares of Common Stock had been so issued for an aggregate consideration
equal to the aggregate consideration paid for such rights, options,
warrants or convertible securities and the aggregate consideration
payable by the holders of such rights, options, warrants or convertible
securities prior to their receipt of such shares of Common Stock. In
case any portion of such consideration shall be in a form other than
cash, the fair market value of such noncash consideration shall be
determined as set forth in paragraph (g)(ii) hereof. Such adjustment
shall be made effective immediately after such rights, options, warrants
or convertible securities are issued; and in the event that such rights,
options or warrants expire unexercised or such convertible securities
are redeemed or otherwise retired prior to conversion thereof, or in the
event of a change in the number of shares of Common Stock to which the
holders of such rights, options, warrants or convertible securities are
entitled (other than pursuant to adjustment provisions therein
comparable to those contained in this paragraph (g)), the Conversion
Price shall again be adjusted to be the Conversion Price which would
then be in effect if such rights, options, warrants or convertible
securities had not been issued, in the former event, or the Conversion
Price which would then be in effect if such holders had initially been
entitled to such changed number of shares of Common Stock, in the latter
event. No adjustment of the Conversion Price shall be made pursuant to
this paragraph (g)(iv) to the extent that the Conversion Price shall
have been adjusted pursuant to paragraph (g)(iii) upon the setting of
any record date relating to such rights, options, warrants or
convertible securities and such adjustment fully reflects the number of
shares of Common Stock to which the holders of such rights, options,
warrants or convertible securities are entitled and the price payable
therefor.
(v) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which
the Corporation is the continuing corporation) of evidences of
indebtedness, assets or other property (other than regular periodic cash
dividends or dividends payable in Common Stock or rights, options or
warrants referred to in, and for which an adjustment is made pursuant
to, paragraph (g)(iii) hereof),
<PAGE>
18
the Conversion Price to be in effect after such record date shall be
determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction, (A) the numerator of which
shall be the Current Market Price Per Common Share on such record date,
less the fair market value (determined as set forth in paragraph (g)(ii)
hereof) of the portion of the assets, other property or evidence of
indebtedness so to be distributed which is applicable to one share of
Common Stock and (B) the denominator of which shall be the Current
Market Price Per Common Share on such record date. Such adjustments
shall be made effective on the day immediately after the record date;
and in the event that such distribution is not so made, the Conversion
Price shall again be adjusted to be the Conversion Price which would
then be in effect if such record date had not been fixed.
(vi) On any date, the "Current Market Price Per Common Share"
shall be deemed to be the average of the Daily Prices (as defined below)
per share of the applicable class of Common Stock for the ten
consecutive trading days immediately prior to such date. "Daily Price"
means (1) if the shares of such class of Common Stock then are listed
and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing
price on such day as reported on the NYSE Composite Transactions Tape;
(2) if the shares of such class of Common Stock then are not listed and
traded on the NYSE, the closing price on such day as reported by the
principal national securities exchange on which the shares are listed
and traded; (3) if the shares of such class of Common Stock then are not
listed and traded on any such securities exchange, the last reported
sale price on such day on the National Market of the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"); or (4) if the shares of such class of Common Stock then are
not traded on the NASDAQ National Market, the average of the highest
reported bid and lowest reported asked price on such day as reported by
NASDAQ. "Trading day" means, with respect to any exchange or market,
each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day
on which securities are not traded on such exchange or in such market.
For purposes of any computation under this paragraph (g), the number of
shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Corporation.
(vii) To the extent that the Conversion Price shall have been
adjusted pursuant to any of paragraph (g)(ii), (iii), (iv) or (v) as a
result of a particular event, no additional adjustment shall be made
pursuant to any other of such paragraphs (g)(ii), (iii), (iv) or (v) as
a result of such event. No adjustment to the Conversion
<PAGE>
19
Price pursuant to paragraphs (g)(ii), (iii), (iv) and (v) above shall be
required unless such adjustment would require an increase or decrease of
at least 1% in the Conversion Price; provided that any adjustments which
by reason of this paragraph (g)(vii) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this paragraph (g) shall be made to the nearest
four decimal points.
(viii) In the event that, at any time as a result of the
provisions of this paragraph (g), the holder of this Series __
Convertible Preferred Stock upon subsequent conversion shall become
entitled to receive any shares of capital stock of the Corporation other
than Common Stock, the number of such other shares so receivable upon
conversion of this Series __ Convertible Preferred Stock shall
thereafter be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions contained
herein.
(h) Whenever the Conversion Price is adjusted pursuant to
this paragraph (7), (i) the Corporation shall promptly file with the
conversion agent a certificate of a firm of independent public
accountants (who may be the regular accountants employed by the
Corporation) setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment and the manner of computing the same, and (ii) a notice
stating that the Conversion Price has been adjusted and setting forth
the adjusted Conversion Price shall promptly be sent by first class
mail, postage prepaid, by the Corporation to the holders of the Series
__ Convertible Preferred Stock at their addresses as the same appear on
the stock register of the Corporation.
(i) Notwithstanding any provision of this paragraph (7), to
the extent the Corporation shall have funds legally available for such
purpose, the Corporation shall have the option, upon receipt from any
holder of notice of election to convert shares of Series __ Convertible
Preferred Stock pursuant to paragraph (7)(b), to deliver, in lieu of the
shares of Common Stock into which such shares of Series __ Convertible
Preferred Stock would otherwise be convertible, cash in an amount equal
to the product of (A) such number of shares of Common Stock into which
such shares of Series __ Convertible Preferred Stock would otherwise be
convertible multiplied by (B) the Current Market Price Per Common Share,
together with all accrued and unpaid dividends on such shares of Series
__ Convertible Preferred Stock; provided that (i) if the Corporation has
not received any required approval under the 1986 Supplement
<PAGE>
20
to The Banking Act of 1948 of New Jersey, 17 N.J. Stat. Ann. Section 376
et seq., concerning the change of control of banks, or (ii) if the
shareholders of the Corporation have not voted to approve the issuance
of the Common Stock required to be delivered upon a conversion of the
Series __ Convertible Preferred Stock, in each case, the Corporation
shall have the obligation to deliver cash pursuant to this paragraph
(7)(i) upon any exercise of the conversion privilege.
(8) Voting Rights. (a) The holders of record of shares of
Series __ Convertible Preferred Stock shall not be entitled to any
voting rights except as hereinafter provided in this paragraph (8).
(b) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series __ Convertible Preferred Stock have
not been paid in full or if the Corporation shall have failed to
discharge its Mandatory Redemption Obligation, the number of directors
then constituting the Board of Directors shall be increased by two and
the holders of shares of Series __ Convertible Preferred Stock, together
with the holders of shares of every other series of preferred stock upon
which like rights to vote for the election of two additional directors
have been conferred and are exercisable (resulting from either the
failure to pay dividends or the failure to redeem)(any such other series
is referred to as the "Preferred Shares"), voting as a single class
regardless of series, shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special
meeting of the holders of the Series __ Convertible Preferred Stock and
the Preferred Shares called as hereinafter provided. Whenever all
arrears in dividends on the Series __ Convertible Preferred Stock and
the Preferred Shares then outstanding shall have been paid and dividends
thereon shall have been paid regularly for at least one year, or the
Corporation shall have fulfilled its Mandatory Redemption Obligation, as
the case may be, then the right of the holders of the Series __
Convertible Preferred Stock and the Preferred Shares to elect such
additional two directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case of any
similar future arrearages in six quarterly dividends or failure to
fulfill any Mandatory Redemption Obligation), and the terms of office of
all persons elected as directors by the holders of the Series __
Convertible Preferred Stock and the Preferred Shares shall forthwith
terminate and the number of the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have been so
vested in the holders of shares of Series __ Convertible Preferred
<PAGE>
21
Stock and the Preferred Shares, the secretary of the Corporation may,
and upon the written request of any holder of Series __ Convertible
Preferred Stock (addressed to the secretary at the principal office of
the Corporation) shall, call a special meeting of the holders of the
Series __ Convertible Preferred Stock and of the Preferred Shares for
the election of the two directors to be elected by them as herein
provided, such call to be made by notice similar to that provided in the
Bylaws of the Corporation for a special meeting of the stockholders or
as required by law. If any such special meeting required to be called
as above provided shall not be called by the secretary within 20 days
after receipt of any such request, then any holder of shares of Series
__ Convertible Preferred Stock may call such meeting, upon the notice
above provided, and for that purpose shall have access to the stock
books of the Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office
shall not have previously terminated as above provided. If any vacancy
shall occur among the directors elected by the holders of the Series __
Convertible Preferred Stock and the Preferred Shares, a successor shall
be elected by the Board of Directors, upon the nomination of the then-
remaining director elected by the holders of the Series __ Convertible
Preferred Stock and the Preferred Shares or the successor of such
remaining director, to serve until the next annual meeting of the
stockholders or special meeting held in place thereof if such office
shall not have previously terminated as provided above.
(c) Without the written consent of a majority of the
outstanding shares of Series __ Convertible Preferred Stock or the vote
of holders of a majority of the outstanding shares of Series __
Convertible Preferred Stock at a meeting of the holders of Series __
Convertible Preferred Stock called for such purpose, the Corporation
will not (i) amend, alter or repeal any provision hereof or of the
Certificate of Incorporation (by merger or otherwise) so as to affect
the preferences, rights or powers of the Series __ Convertible Preferred
Stock; provided that any such amendment that changes the dividend
payable on or the liquidation preference of the Series __ Convertible
Preferred Stock shall require the affirmative vote at a meeting of
holders of Series __ Convertible Preferred Stock called for such purpose
or written consent of the holder of each share of Series __ Convertible
Preferred Stock; or (ii) create any class or classes of stock ranking
equal or prior to the Series __ Convertible Preferred Stock either as to
dividends or upon liquidation, dissolution or winding up or increase the
number of authorized number of shares of any
<PAGE>
22
class or classes of stock ranking equal or prior to the Series __
Convertible Preferred Stock either as to dividends or upon liquidation,
dissolution or winding up. Notwithstanding the foregoing, no consent of
the holders of the Series __ Convertible Preferred Stock shall be
required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the creation of any class of Junior Securities or
(iii) any increase or decrease in the amount of authorized Common Stock
or any increase, decrease or change in the par value thereof or in any
other terms thereof.
(d) In exercising the voting rights set forth in this
paragraph (8), each share of Series __ Convertible Preferred Stock shall
have one vote per share, except that when any other series of preferred
stock shall have the right to vote with the Series __ Convertible
Preferred Stock as a single class on any matter, then the Series __
Convertible Preferred Stock and such other series shall have with
respect to such matters one vote per $100 of stated liquidation
preference. Except as set forth herein, the shares of Series __
Convertible Preferred Stock shall not have any relative, participating,
optional or other special voting rights and powers and the consent of
the holders thereof shall not be required for the taking of any
corporate action.
(9) Stockholders Agreement. The Series __ Convertible
Preferred Stock shall be subject to the provisions of the Stockholders
Agreement among the Corporation, Kidder, Peabody Group Inc. and General
Electric Company dated ________, 19__.
(10) General Provisions. (a) The term "Person" as used
herein means any corporation, limited liability company, partnership,
trust, organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation (including treasury shares) or a subsidiary.
(c) The headings of the paragraphs of this Certificate of
Designations are for convenience of reference only and shall not define,
limit or affect any of the provisions hereof.
<PAGE>
23
IN WITNESS WHEREOF, Paine Webber Group Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned
this __ day of ________, 199_.
PAINE WEBBER GROUP INC.
By________________________
Name:
Title:
ATTEST:
________________________
Name:
Assistant Secretary
<PAGE>
Exhibit B
CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN
THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO,
OF THE
9% CUMULATIVE REDEEMABLE
PREFERRED STOCK, SERIES [ ]
($100 Stated Value)
PAINE WEBBER GROUP INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, __________, [title], of Paine Webber Group
Inc., a Delaware corporation (hereinafter called the "Corporation"),
pursuant to the provisions of Sections 103 and 151 of the General
Corporation Law of the State of Delaware, does hereby make this
Certificate of Designations and does hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of
the Corporation by the Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the Board of Directors duly
adopted the following resolution:
RESOLVED, that, pursuant to Article __ of the Certificate of
Incorporation (which authorizes __________ shares of preferred stock,
$20 par value ("Preferred Stock"), [of which __________ shares of a
series of __________ Preferred Stock are currently issued and
outstanding),] the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and
restrictions, of a series of Preferred Stock (in addition to the powers,
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, set forth in the Certificate of Incorporation which are
applicable to such series of Preferred Stock).
<PAGE>
2
RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the following
provisions:
(1) Number and Designation. 2,500,000 shares of the
Preferred Stock of the Corporation shall be designated as 9% Cumulative
Redeemable Preferred Stock, Series __ (the "Series __ Preferred Stock").
(2) Rank. The shares of Series __ Preferred Stock shall
rank prior to the shares of the Corporation's common stock, $1 par value
(the "Common Stock"), and any other class of stock of the Corporation
ranking junior to the Series __ Preferred Stock (whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise).
All equity securities of the Corporation to which the Series __
Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), including the Common
Stock, are collectively referred to herein as the "Junior Securities."
All equity securities of the Corporation with which the Series __
Preferred Stock ranks on a parity (whether with respect to dividends or
upon liquidation, dissolution, winding up or otherwise), including the
Corporation's 6% Cumulative Convertible Redeemable Preferred Stock,
Series __, are collectively referred to herein as the "Parity
Securities." The respective definitions of Junior Securities and
Parity Securities shall also include any rights or options exercisable
for or convertible into any of the Junior Securities and Parity
Securities, as the case may be.
(3) Dividends. (a) The holders of shares of Series __
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for the
payment of dividends, cash dividends at the annual rate of $9 per share.
Such dividends shall be payable in arrears in equal amounts quarterly on
March 15, June 15, September 15 and December 15 of each year (unless
such day is not a Business Day, in which event on the next succeeding
Business Day) (each of such dates being a "Dividend Payment Date" and
each such quarterly period being a "Dividend Period") commencing on the
Dividend Payment Date which next follows the issuance of such shares of
Series __ Preferred Stock. Such dividends (i) shall be cumulative from
the date of issue, whether or not declared and whether or not in any
Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends and (ii) shall
compound quarterly, to the extent they are unpaid, at the rate of 9% per
annum computed on the basis of a 360-day
<PAGE>
3
year and twelve 30-day months. Each such dividend shall be payable to
the holders of record of shares of the Series __ Preferred Stock, as
they appear on the stock records of the Corporation at the close of
business on such record dates, not more than 60 days, or less than 10
days, preceding the payment dates thereof, as shall be fixed by the
Board of Directors or a duly authorized committee thereof. Accrued and
unpaid dividends for any past Dividend Periods may be declared and paid
at any time, without reference to any Dividend Payment Date, to holders
of record on such date, not more than 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors. As used herein, the
term "Business Day" shall mean any day other than a Saturday, Sunday, a
day on which the New York Stock Exchange does not conduct regular
trading or a day on which is or is declared a national or New York State
holiday.
(b) The amount of dividends payable for each full Dividend
Period for the Series __ Preferred Stock shall be computed by dividing
the annual dividend rate by four. The amount of dividends payable for
the initial Dividend Period, or any other period shorter or longer than
a full Dividend Period, on the Series __ Preferred Stock shall be
computed on the basis of twelve 30-day months and a 360-day year.
Holders of shares of Series __ Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of
cumulative dividends, as herein provided, on the Series __ Preferred
Stock.
(c) So long as any shares of the Series __ Preferred Stock
are outstanding, no dividends, except as described in the next
succeeding sentence, shall be declared or paid or set apart for payment
on Parity Securities, for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Series __ Preferred Stock for all Dividend Periods terminating on or
prior to the date of payment of the dividend on such class or series of
parity stock. When dividends are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all dividends declared
upon shares of the Series __ Preferred Stock and all dividends declared
upon any other Parity Security shall be declared ratably in proportion
to the respective amounts of dividends accumulated and unpaid on the
Series __ Preferred Stock and accumulated and unpaid on such Parity
Security.
(d) So long as any shares of the Series __ Preferred Stock
are outstanding, no dividends (other than dividends or distributions
paid in shares of, or options,
<PAGE>
4
warrants or rights to subscribe for or purchase shares of, Junior
Securities) shall be declared or paid or set apart for payment or other
distribution declared or made upon Junior Securities, nor shall any
Junior Securities be redeemed, purchased or otherwise acquired (all such
dividends, distributions, redemptions or purchases being hereinafter
referred to as a "Junior Securities Distribution") for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation, directly
or indirectly (except by conversion into or exchange for Junior
Securities), unless in each case (i) the full cumulative dividends on
all outstanding shares of the Series __ Preferred Stock and any other
Parity Securities shall have been paid or set apart for payment for all
past Dividend Periods with respect to the Series __ Preferred Stock and
all past dividend periods with respect to such Parity Securities and
(ii) sufficient funds shall have been paid or set apart for the payment
of the dividend for the current Dividend Period with respect to the
Series __ Preferred Stock and the current dividend period with respect
to such Parity Securities.
(4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the
assets of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Junior Securities, the holders of the
shares of Series __ Preferred Stock shall be entitled to receive $100
per share of Series __ Preferred Stock plus an amount equal to all
dividends (whether or not earned or declared) accrued and unpaid thereon
to the date of final distribution to such holders; but such holders
shall not be entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of the
shares of Series __ Preferred Stock shall be insufficient to pay in full
the preferential amount aforesaid and liquidating payments on any Parity
Securities, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of Series __ Preferred Stock and
any such other Parity Securities ratably in accordance with the
respective amounts that would be payable on such shares of Series __
Preferred Stock and any such other stock if all amounts payable thereon
were paid in full. For the purposes of this paragraph (4), a sale or
transfer of all or substantially all of the Corporation's assets, shall
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation, but a consolidation or merger of the
Corporation with one or
<PAGE>
5
more corporations shall not be deemed to be a liquidation, dissolution
or winding up, voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of
the Series __ Preferred Stock, as provided in this paragraph (4), any
other series or class or classes of Junior Securities shall, subject to
the respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series __ Preferred Stock shall not
be entitled to share therein.
(5) Redemption. (a) To the extent the Corporation shall
have funds legally available for such payment, the Corporation may
redeem at its option at any time or from time to time, in whole or in
part, the shares of Series __ Preferred Stock, at a redemption price of
$100 per share in cash, together with accrued and unpaid dividends
thereon to the date fixed for redemption.
(b) To the extent the Corporation shall have funds legally
available for such payment, on [TWENTY YEAR DATE], if any shares of the
Series __ Preferred Stock shall be outstanding, the Corporation shall
redeem all outstanding shares of the Series __ Preferred Stock, at a
redemption price of $100 per share in cash, together with accrued and
unpaid dividends thereon to such date.
(c) Immediately prior to authorizing or making any
redemption pursuant to this paragraph (5) the Corporation, by resolution
of its Board of Directors, shall, to the extent of any funds legally
available therefor, declare a dividend on the Series __ Preferred Stock
payable on the redemption date in an amount equal to any accrued and
unpaid dividends on the Series __ Preferred Stock as of such redemption
date.
(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series __ Preferred
Stock pursuant to paragraph (5)(b) (the "Mandatory Redemption
Obligation"), the Mandatory Redemption Obligation shall be discharged as
soon as the Corporation is able to discharge such Mandatory Redemption
Obligation. If and so long as any Mandatory Redemption Obligation with
respect to the Series __ Preferred Stock shall not be fully discharged,
the Corporation shall not (i) directly or indirectly, redeem, purchase,
or otherwise acquire any Parity Security or discharge any mandatory or
optional redemption, sinking fund or other similar obligation in
<PAGE>
6
respect of any Parity Securities (except in connection with a
redemption, sinking fund or other similar obligation to be satisfied pro
rata with the Series __ Preferred Stock) or (ii) in accordance with
paragraph (3)(d), declare or make any Junior Securities Distribution,
or, directly or indirectly, discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of the
Junior Securities.
(e) Shares of Series __ Preferred Stock which have been
issued and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the
laws of the State of Delaware) have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as to
series and may be redesignated and reissued as part of any series of the
Preferred Stock; provided that no such issued and reacquired shares of
Series __ Preferred Stock shall be reissued or sold as Series __
Preferred Stock.
(6) Procedure for Redemption. (a) In the event that fewer
than all the outstanding shares of Series __ Preferred Stock are to be
redeemed, the number of shares to be redeemed shall be determined by the
Board of Directors and the shares to be redeemed shall be selected pro
rata (with any fractional shares being rounded to the nearest whole
share) as nearly as practicable or by lot, or by such other method as
the Board of Directors may determine to be equitable.
(b) In the event the Corporation shall redeem shares of
Series __ Preferred Stock, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than 30 days nor more
than 60 days prior to the redemption date, to each holder of record of
the shares to be redeemed at such holder's address as the same appears
on the stock register of the Corporation; provided that neither the
failure to give such notice nor any defect therein shall affect the
validity of the giving of notice for the redemption of any share of
Series __ Preferred Stock to be redeemed except as to the holder to whom
the Corporation has failed to give said notice or except as to the
holder whose notice was defective. Each such notice shall state: (i)
the redemption date; (ii) the number of shares of Series __ Preferred
Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on
<PAGE>
7
the shares to be redeemed will cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption), dividends on the shares of Series __ Preferred
Stock so called for redemption shall cease to accrue, and all rights of
the holders thereof as stockholders of the Corporation (except the right
to receive from the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for the
shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the
holder thereof.
(7) Voting Rights. (a) The holders of record of shares of
Series __ Preferred Stock shall not be entitled to any voting rights
except as hereinafter provided in this paragraph (7).
(b) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series __ Preferred Stock have not been paid
in full or if the Corporation shall have failed to discharge its
Mandatory Redemption Obligation, the number of directors then
constituting the Board of Directors shall be increased by two and the
holders of shares of Series __ Preferred Stock, together with the
holders of shares of every other series of preferred stock upon which
like rights to vote for the election of two additional directors have
been conferred and are exercisable (resulting from either the failure to
pay dividends or the failure to redeem)(any such other series is
referred to as the "Preferred Shares"), voting as a single class
regardless of series, shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special
meeting of the holders of the Series __ Preferred Stock and the
Preferred Shares called as hereinafter provided. Whenever all arrears
in dividends on the Series __ Preferred Stock and the Preferred Shares
then outstanding shall have been paid and dividends thereon shall have
been paid regularly for at least one year, or the Corporation shall have
fulfilled its Mandatory Redemption Obligation, as the case may be, then
<PAGE>
8
the right of the holders of the Series __ Preferred Stock and the
Preferred Shares to elect such additional two directors shall cease (but
subject always to the same provisions for the vesting of such voting
rights in the case of any similar future arrearages in six quarterly
dividends or failure to fulfill any Mandatory Redemption Obligation),
and the terms of office of all persons elected as directors by the
holders of the Series __ Preferred Stock and the Preferred Shares shall
forthwith terminate and the number of the Board of Directors shall be
reduced accordingly. At any time after such voting power shall have
been so vested in the holders of shares of Series __ Preferred Stock and
the Preferred Shares, the secretary of the Corporation may, and upon the
written request of any holder of Series __ Preferred Stock (addressed to
the secretary at the principal office of the Corporation) shall, call a
special meeting of the holders of the Series __ Preferred Stock and of
the Preferred Shares for the election of the two directors to be elected
by them as herein provided, such call to be made by notice similar to
that provided in the Bylaws of the Corporation for a special meeting of
the stockholders or as required by law. If any such special meeting
required to be called as above provided shall not be called by the
secretary within 20 days after receipt of any such request, then any
holder of shares of Series __ Preferred Stock may call such meeting,
upon the notice above provided, and for that purpose shall have access
to the stock books of the Corporation. The directors elected at any
such special meeting shall hold office until the next annual meeting of
the stockholders or special meeting held in lieu thereof if such office
shall not have previously terminated as above provided. If any vacancy
shall occur among the directors elected by the holders of the Series __
Preferred Stock and the Preferred Shares, a successor shall be elected
by the Board of Directors, upon the nomination of the then-remaining
director elected by the holders of the Series __ Preferred Stock and the
Preferred Shares or the successor of such remaining director, to serve
until the next annual meeting of the stockholders or special meeting
held in place thereof if such office shall not have previously
terminated as provided above.
(c) Without the written consent of a majority of the
outstanding shares of Series __ Preferred Stock or the vote of holders
of a majority of the outstanding shares of Series __ Preferred Stock at
a meeting of the holders of Series __ Preferred Stock called for such
purpose, the Corporation will not (i) amend, alter or repeal any
provision hereof or of the Certificate of Incorporation (by merger or
otherwise) so as to affect the preferences, rights or powers of the
Series __ Preferred Stock; provided that
<PAGE>
9
any such amendment that changes the dividend payable on or the
liquidation preference of the Series __ Preferred Stock shall require
the affirmative vote at a meeting of holders of Series __ Preferred
Stock called for such purpose or written consent of the holder of each
share of Series __ Preferred Stock; or (ii) create any class or classes
of stock ranking equal or prior to the Series __ Preferred Stock either
as to dividends or upon liquidation, dissolution or winding up or
increase the number of authorized number of shares of any class or
classes of stock ranking equal or prior to the Series __ Preferred Stock
either as to dividends or upon liquidation, dissolution or winding up.
Notwithstanding the foregoing, no consent of the holders of the Series
__ Preferred Stock shall be required for (i) the creation of any
indebtedness of any kind of the Corporation, (ii) the creation of any
class of Junior Securities or (iii) any increase or decrease in the
amount of authorized Common Stock or any increase, decrease or change in
the par value thereof or in any other terms thereof.
(d) In exercising the voting rights set forth in this
paragraph (7), each share of Series __ Preferred Stock shall have one
vote per share, except that when any other series of preferred stock
shall have the right to vote with the Series __ Preferred Stock as a
single class on any matter, then the Series __ Preferred Stock and such
other series shall have with respect to such matters one vote per $100
of stated liquidation preference. Except as set forth herein, the
shares of Series __ Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and
the consent of the holders thereof shall not be required for the taking
of any corporate action.
(8) Stockholders Agreement. The Series __ Preferred Stock
shall be subject to the provisions of the Stockholders Agreement among
the Corporation, Kidder, Peabody Group Inc. and General Electric Company
dated ________, 19__.
(9) General Provisions. (a) The term "Person" as used
herein means any corporation, limited liability company, partnership,
trust, organization, association, other entity or individual.
(b) The term "outstanding", when used with reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation or a subsidiary.
<PAGE>
10
(c) The headings of the paragraphs of this Certificate of
Designations are for convenience of reference only and shall not define,
limit or affect any of the provisions hereof.
IN WITNESS WHEREOF, Paine Webber Group Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned
this __ day of ________, 19__.
PAINE WEBBER GROUP INC.
By________________________
Name:
Title:
ATTEST:
________________________
Name:
Assistant Secretary
<PAGE>
This Standstill Agreement (the "Agreement"), dated ____________, 1992,
is between Parent Corporation, a Maryland corporation ("Parent"), and
General Electric Company, a New York corporation ("GE"). WHEREAS,
simultaneously with the execution of this Agreement, GE is acquiring
20,000,000 shares of Parent's Series Preferred Stock, par value $1.0
Exhibit C
STOCKHOLDERS AGREEMENT
dated __________, 1994
between
Paine Webber Group Inc.,
General Electric Company, and
Kidder, Peabody Group Inc.
<PAGE>
i
TABLE OF CONTENTS
ARTICLE I
Definitions
Section 1.01. Definitions 1
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties 3
ARTICLE III
Standstill and Voting Provisions
Section 3.01. Restrictions of Certain Actions by
Shareholder 4
Section 3.02. Board Representation 6
Section 3.03. Voting 6
ARTICLE IV
Transfer Restrictions
Section 4.01. Restrictions on Transfer 7
Section 4.02. Permitted Transfers 7
Section 4.03. Company Call Right 9
Section 4.04. Right of First Refusal 10
Section 4.05. Assignment 12
ARTICLE V
Registration Rights
Section 5.01. Registration Upon Request 12
Section 5.02. Incidental Registration Rights 14
Section 5.03. Broad Public Distribution; Lead Manager 15
<PAGE>
Section 5.04. Registration Mechanics 15
Section 5.05. Expenses 18
Section 5.06. Indemnification and Contribution 19
Section 5.07. Underwriting Agreement 22
ARTICLE VI
Shareholder Purchase Rights
Section 6.01. Shareholder Purchase Rights 23
ARTICLE VII
Approvals
Section 7.01. Company Shareholder Approval 24
ARTICLE VIII
Miscellaneous
Section 8.01. Termination 24
Section 8.02. Financial Services Group 24
Section 8.03. Legend 24
Section 8.04. Specific Performance 25
Section 8.05. Entire Agreement 25
Section 8.06. Severability 26
Section 8.07. Headings 26
Section 8.08. Counterparts 26
Section 8.09. Notices 26
Section 8.10. Successors and Assigns 27
Section 8.11. Governing Law 27
Section 8.12. Compliance by Affiliates 28
Section 8.13. Reports 28
Section 8.14. Fair Market Value Determination 28
<PAGE>
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated
____________, 1994, is between Paine Webber Group Inc., a Delaware
corporation (the "Company"), General Electric Company, a New York
corporation ("Parent"), and Kidder, Peabody Group Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Parent
("Shareholder", which term shall include Parent and any subsidiary (as
defined below) of Parent to the extent Voting Securities have been
transferred to Parent or such subsidiary pursuant to Section
4.02(a)(i)).
WHEREAS, simultaneously with the execution of this
Agreement, Shareholder is acquiring 1,000,000 shares of the Company's
Series __ 6% Cumulative Convertible Redeemable Preferred Stock, stated
value $100 per share, 2,500,000 shares of the Company's 9% Cumulative
Redeemable Preferred Stock, stated value $100 per share, and 21,500,000
shares of the Company's Common Stock, par value $1.00 per share,
pursuant to an Asset Purchase Agreement dated as of October __, 1994
between the Company, Parent and Shareholder (the "Asset Purchase
Agreement"); and
WHEREAS, the Company, Parent and Shareholder desire to
establish in this Agreement certain conditions of Parent's and
Shareholder's relationship with the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Asset Purchase Agreement, the
parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions
(a) The following terms, as used herein, have the following
meanings:
"Broad Public Distribution" means an underwritten
distribution registered under the 1933 Act or a distribution exempt from
registration thereunder in which Shareholder uses its best efforts to
cause the underwriters expressly to agree in writing for the benefit of
the Company that they collectively will not sell Voting Securities to
any "person" within the meaning of Section 13(d)(3) of the 1934 Act who,
to the best of such underwriters' knowledge after inquiry,
<PAGE>
2
would own, immediately after such distribution, Voting Securities having
aggregate voting power of more than 3% of the voting power of all the
then outstanding Voting Securities.
"Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Convertible Preferred Stock" means the Series __ 6%
Cumulative Convertible Redeemable Preferred Stock, stated value $100 per
share, of the Company.
"Equity Treatment Percentage" means the lesser of (i) 20%
and (ii) the minimum percentage of Common Stock required to be owned to
permit Parent to account for its beneficial ownership of Voting
Securities in accordance with the "equity" method of accounting.
"Fair Market Value" of the Common Stock as of any day shall
mean the average daily closing sales price of the Common Stock for the
ten consecutive trading days preceding such day. The closing price for
each day shall be the last reported sales price regular way or, in case
no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is
listed and admitted to trading, or if not listed and admitted to trading
on any such exchange, on the NASDAQ National Market System, or if not
quoted on the National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for
that purpose.
"Financial Services Group" means General Electric Capital
Services, Inc. and its subsidiaries (including, without limitation,
Kidder Peabody Group Inc. and General Electric Capital Corporation),
General Electric Investment Corporation, General Electric Investment
Management Incorporated or any other Affiliate of Parent engaged in the
financial services business.
"Preferred Stock" means, collectively, the Convertible
Preferred Stock and the Redeemable Preferred Stock.
"Redeemable Preferred Stock" means the Series __ 9%
Cumulative Redeemable Preferred Stock, stated value $100 per share, of
the Company.
<PAGE>
3
"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation of which securities
representing more than 50% of the equity and more than 50% of the
ordinary voting power are, at the time any determination is being made,
owned by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"Third Party Account" means any account managed for the
benefit of another person (other than Parent or any Affiliate of Parent)
by any member of the Financial Services Group.
"Total Voting Power" means the aggregate number of votes
which may be cast by holders of outstanding Voting Securities.
"Voting Securities" means any securities of the Company
entitled to vote generally in the election of directors of the Company
or any direct or indirect rights or options to acquire any such
securities or any securities convertible or exercisable into or
exchangeable for such securities.
(b) Except as otherwise specified herein, terms used in
this Agreement shall have the respective meanings assigned to such terms
in the Asset Purchase Agreement. The rules of interpretation specified
in Section 1.02 of the Asset Purchase Agreement shall be applicable to
this Agreement. Unless otherwise specified all references to "days"
shall be deemed to be references to calendar days.
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warrantiesection 2.01.
Representations and Warranties. Each of Parent and Shareholder
represents and warrants to the Company that (i) Shareholder is a wholly-
owned indirect subsidiary of Parent; and (ii)(a) Shareholder
"beneficially owns" (as such term is defined in Rule 13d-3 under the
1934 Act) 2,500,000 shares of Redeemable Preferred Stock, 1,000,000
shares of Convertible Preferred Stock and 21,500,000 shares of Common
Stock, (b) the Financial Services Group (which includes Shareholder)
does not beneficially own any other Voting Securities
<PAGE>
4
except for any Voting Securities held in any Third Party Account and (c)
to the best knowledge of Parent, neither it nor any of its Affiliates
beneficially owns any other Voting Securities, except for any Voting
Securities held in any Third Party Account.
ARTICLE III
Standstill and Voting Provisions
Section 3.01. Restrictions of Certain Actions by
Shareholder. Parent will not, and will cause each of its Affiliates not
to, singly or as part of a partnership, limited partnership, syndicate
or other group (as those terms are defined in Section 13(d)(3) of the
1934 Act), directly or indirectly:
(a) except as permitted under Section 6.01, acquire, offer
to acquire, or agree to acquire, by purchase, gift or otherwise, any
Voting Securities, except pursuant to a stock split, stock dividend,
rights offering, recapitalization, reclassification or similar
transaction;
(b) make, or in any way participate in any "solicitation"
of "proxies" to vote (as such terms are defined in Rule 14a-1 under the
1934 Act), solicit any consent or communicate with or seek to advise or
influence any person or entity with respect to the voting of any Voting
Securities or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the 1934 Act) with
respect to the Company;
(c) form, join, encourage or in any way participate in the
formation of, any "person" within the meaning of Section 13(d)(3) of the
1934 Act with respect to any Voting Securities; provided that this
Section 3.01(c) shall not prohibit any such arrangement solely among
Parent and any of its wholly-owned subsidiaries;
(d) deposit any Voting Securities into a voting trust or
subject any such Voting Securities to any arrangement or agreement with
respect to the voting thereof; provided that this Section 3.01(d) shall
not prohibit any such arrangement solely among Parent and any of its
wholly-owned subsidiaries;
(e) initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to
the Company as described in Rule 14a-8 under the 1934 Act, or induce or
attempt to induce any other person to initiate any stockholder proposal;
<PAGE>
5
(f) except in accordance with and pursuant to Section
3.02, seek election to or seek to place a representative on the Board of
Directors of the Company or, except with the approval of management of
the Company, seek the removal of any member of the Board of Directors of
the Company;
(g) except with the approval of management of the Company,
call or seek to have called any meeting of the stockholders of the
Company;
(h) except through its representative on the Board of
Directors of the Company, otherwise act to seek to control, disrupt or
influence the management, business, operations, policies or affairs of
the Company except with the approval of management of the Company;
(i) (A) solicit, seek to effect, negotiate with or provide
any information to any other party with respect to, (B) make any
statement or proposal, whether written or oral, to the Board of
Directors of the Company or any director or officer of the Company with
respect to, or (C) otherwise make any public announcement or proposal
whatsoever with respect to, any form of business combination transaction
involving the Company, including, without limitation, a merger, exchange
offer or liquidation of the Company's assets, or any restructuring,
recapitalization or similar transaction with respect to the Company;
provided that the foregoing shall not (x) apply to discussions between
officers, employees or agents of Parent or Shareholder and the
representative of Shareholder on the Board of Directors of the Company
or (y) in the case of clause (B) above, be interpreted to limit the
ability of such representative to make any such statement or proposal or
to discuss any such proposal with any officer, director or advisor to
the Company or the Board of Directors of the Company in connection with
the performance by such representative of his duty as a director;
(j) disclose or announce any intention, plan or
arrangement inconsistent with the foregoing; or
(k) advise, assist, instigate or encourage any third party
to do any of the foregoing (except, for purposes of clause (a) above, in
connection with any transfer of Voting Securities permitted under
Section 4.02).
If Parent or any of its Affiliates owns or acquires any
Voting Securities in violation of this Agreement, such Voting Securities
shall immediately be
<PAGE>
6
disposed of to persons who are not Affiliates thereof but only in
compliance with the provisions of this Agreement; provided that the
Company may also pursue any other available remedy to which it may be
entitled as a result of such violation.
Section 3.02. Board Representation. (a) The Company will
cause one person mutually agreed upon by Parent and the Company to be
elected to the Company's Board of Directors concurrently with the
execution hereof.
(b) Thereafter, so long as Shareholder owns Voting
Securities representing at least 10% of Total Voting Power (calculated
on a fully diluted basis assuming conversion or exchange of all
outstanding securities of the Company convertible into or exchangeable
for Voting Securities and the exercise of all rights or options to
acquire Voting Securities), subject to the further provisions of this
Section 3.02, the Company's Nominating Committee (or any other committee
exercising a similar function) (the "Nominating Committee") shall
recommend to the Board of Directors of the Company that such person (or
any successor designated by Parent and approved by the Nominating
Committee) be included in the slate of nominees recommended by the Board
of Directors of the Company to shareholders for election as directors at
each annual meeting of shareholders of the Company at which such
person's term expires.
(c) In the event that the designee of Shareholder shall
cease to serve as a director for any reason, the vacancy resulting
thereby shall be filled by a person designated by Parent and approved by
the Nominating Committee.
(d) In the event that at any time Shareholder shall own
Voting Securities representing less than 10% of Total Voting Power
(calculated as provided in Section 3.02(b)), Shareholder shall have no
further rights under this Section 3.02 and shall promptly cause to
resign, and take all other action reasonably necessary to cause the
prompt removal of, its designee to the Board of Directors of the
Company.
Section 3.03. Voting. (a) Whenever Shareholder shall have
the right to vote any Voting Securities, Shareholder shall (i) be
present, in person or represented by proxy, at all stockholder meetings
of the Company so that all Voting Securities beneficially owned by it
shall be counted for the purpose of determining the presence of a
<PAGE>
7
quorum at such meetings, and (ii) subject to Section 3.03(b) below, vote
or cause to be voted, or consent with respect to, all Voting Securities
beneficially owned by it in the manner recommended by the Company's
Board of Directors, except that during any period or at any time when
there shall be in full force and effect a valid order or judgment of a
court of competent jurisdiction or a ruling, pronouncement or
requirement of the New York Stock Exchange, Inc. ("NYSE") to the effect
that the foregoing provision of this Section 3.03 is invalid, void,
unenforceable or not in accordance with NYSE policy, then Shareholder
will, if so requested by the Board of Directors of the Company, vote or
cause to be voted all Voting Securities beneficially owned by it in the
same proportion as the votes cast by or on behalf of the other holders
of Voting Securities.
(b) Notwithstanding anything to the contrary contained in
Section 3.03(a) above, Shareholder shall have the right to vote freely,
without regard to any request or recommendation of the Board of
Directors of the Company, with respect to (i) all matters specified in
paragraph (8) of the Certificate of Designation of Rights and
Preferences for the Convertible Preferred Stock and paragraph (7) of the
Certificate of Designation of Rights and Preferences for the Redeemable
Preferred Stock and (ii) any "Rule 13e-3 transaction" (as defined in
Rule 13e-3(a)(3) under the 1934 Act as in effect on the date hereof)
unless such transaction has been approved by a majority of the
disinterested directors of the Board of Directors of the Company.
ARTICLE IV
Transfer Restrictions
Section 4.01. Restrictions on Transfer. Except as
otherwise expressly permitted in this Agreement, Parent will not, and
will not permit its Affiliates to, directly or indirectly, transfer,
sell, assign, pledge, convey, hypothecate or otherwise encumber or
dispose of ("transfer") any Voting Securities.
Section 4.02. Permitted Transfers. (a) Notwithstanding the
provisions of Section 4.01, Parent and its Affiliates shall be permitted
to transfer any portion of or all their shares of Voting Securities or
Redeemable Preferred Stock under the following circumstances:
<PAGE>
8
(i) transfers to any subsidiary of Parent, but only if such
transferee agrees in writing to be bound by the terms of this
Agreement, provided that such subsidiary shall be permitted to own
such Voting Securities only so long as such subsidiary shall
remain a subsidiary of Parent and provided further that no such
transfer shall relieve Parent or Shareholder of their obligations
under this Agreement;
(ii) subject to the Company's rights under Section 4.04, in
the case of shares of Common Stock (including Common Stock
issuable upon conversion or redemption of the Convertible
Preferred Stock), transfers made pursuant to (A) a Broad Public
Distribution or (B) Rule 144 under the 1933 Act, provided that any
such sale pursuant to Rule 144 shall be subject to the volume and
manner of sale limitations set forth in such Rule whether or not
legally required;
(iii) subject to the Company's rights under Section 4.04, in
the case of shares of Convertible Preferred Stock, after the fifth
anniversary of the date of issuance thereof, transfers made
pursuant to a demand registration under Section 5.01(a);
(iv) pursuant to a tender offer or exchange offer or
acquisition of control of the Company or similar transaction, at
any time following the time at which the Company shall publicly
announce or otherwise disclose to Shareholder that the Board of
Directors of the Company does not oppose such transaction; or
(v) transfers of any portion of or all its shares of
Redeemable Preferred Stock to any person, provided that (A) Parent
shall give not less than 45 days prior written notice to the
Company of its intention to transfer such shares and (B) such
person agrees in writing to be bound by the terms of this
Section 4.02(a)(v). Such notice shall specify the number of
shares of Redeemable Preferred Stock proposed to be transferred
and the date of the proposed transfer of such shares.
(b) Notwithstanding anything to the contrary in this
Agreement, Voting Securities shall not be transferred by Parent or any
of its Affiliates to any person pursuant to a tender offer or exchange
offer or acquisition of control of the Company or similar transaction
which is opposed by the Company's Board of Directors.
<PAGE>
9
Section 4.03. Company Call Right. (a) The Company shall
have the right (the "Call Right"), exercisable at any time or from time
to time, upon written notice to Shareholder (the "Call Notice"), to
elect to purchase a portion (to the extent provided below) of or all the
shares of Common Stock then held by Shareholder, at a purchase price per
share payable in cash (the "Call Price") equal to the greater of (x) the
Fair Market Value of the Common Stock as of the date of delivery of the
Call Notice and (y) $ ___ [a fixed amount to be determined at closing
equal to the average of the closing price of the Common Stock as of the
date the transaction is publicly announced and as of the closing date,
multiplied by 1.61051, reflecting interest at a rate of 10% compounded
annually, calculated as if such stock had then been outstanding for 5
years]. Delivery of any Call Notice by the Company to Shareholder shall
be irrevocable.
(b) Notwithstanding the provisions of Section 4.03(a), if
the Company exercises its Call Right for less than all of the Common
Stock then held by Shareholder, (i) if immediately prior to such
exercise, Parent beneficially owns not less than the Equity Treatment
Percentage of outstanding Common Stock and, at such time, Parent
accounts for such ownership of Common Stock in accordance with the
equity method of accounting, then the Company shall be permitted to
exercise its Call Right in part only to the extent that such exercise
would not reduce the percentage of outstanding Common Stock beneficially
owned by Parent below the Equity Treatment Percentage and (ii) if
immediately prior to such exercise, the Company is a 20-percent owned
corporation within the meaning of Section 243(c)(2) of the Code as in
effect on the date hereof (a "20-percent owned corporation") of the
Shareholder, then the Company shall be permitted to exercise its Call
Right in part only to the extent that such exercise would not result in
the Company ceasing to be a 20-percent owned corporation of the
Shareholder. For purposes of clause (ii) of this paragraph (b), (A) the
term "stock" shall have the same meaning as in Section 243(c)(2) of the
Code as in effect on the date hereof and (B) all shares of stock of the
Company held by Shareholder or any Affiliate of Shareholder shall be
treated as if they were held by a single legal entity. Nothing in this
Section 4.03(b) shall be construed to limit the Company's right to
exercise its Call Right at any time in respect of all the Common Stock
held by Shareholder at such time.
(c) Notwithstanding the provisions of Section 4.03(a), the
Call Right shall be suspended and shall not be
<PAGE>
10
exercisable by the Company during the pendency of any transaction
described in Section 4.02(a)(iv) following the time at which the Company
shall publicly announce or otherwise disclose to Shareholder that the
Board of Directors of the Company does not oppose such transaction.
(d) Any purchase of Common Stock by the Company pursuant to
this Section 4.03 shall be on a mutually determined closing date which
shall not be more than 30 days after delivery of the Call Notice. The
closing shall be held at 10:00 a.m., local time, at the principal office
of the Company, or at such other time or place as the parties mutually
agree.
(e) On the closing date, Shareholder shall deliver (i)
certificates representing the shares of Common Stock being sold, free
and clear of any lien, claim or encumbrance, and (ii) such other
documents, including evidence of ownership and authority, as the Company
may reasonably request. The Call Price shall be paid by wire transfer
of immediately available funds no later than 2:00 p.m., local time, on
the closing date.
Section 4.04. Right of First Refusal. (a) If Shareholder
desires to transfer any shares of Common Stock (including Common Stock
issuable upon conversion or redemption of the Convertible Preferred
Stock) pursuant to Section 4.02(a)(ii) or shares of Convertible
Preferred Stock pursuant to Section 4.02(a)(iii), Shareholder shall give
prompt written notice (the "Transfer Notice") to the Company of such
intention, specifying the number of shares of Common Stock or
Convertible Preferred Stock proposed to be transferred (the "Offered
Shares"). The Transfer Notice shall constitute an irrevocable offer
(the "Offer") by Shareholder to sell to the Company the Offered Shares
at a price (the "Offer Price") equal to (x) in the case of the
Convertible Preferred Stock, the aggregate price specified by
Shareholder in the Transfer Notice and (y) in the case of the Common
Stock, the aggregate Fair Market Value of such Offered Shares on the
date of delivery of the Transfer Notice. The Company shall have the
right, exercisable by written notice given by the Company to Shareholder
within 30 days after receipt of such Transfer Notice, to purchase (or to
cause a person or group designated by the Company to purchase) all, but
not a part of, the Offered Shares specified in such Transfer Notice for
cash at the Offer Price by delivery of a notice (the "Exercise Notice")
to Shareholder stating the Company's irrevocable acceptance of the
Offer.
<PAGE>
11
(b) If the Company elects to purchase the Offered Shares,
the closing of the purchase of the Offered Shares shall take place on a
mutually acceptable closing date which shall be not more than 30 days
after delivery of the Exercise Notice. The closing shall be held at
10:00 a.m., local time, at the principal office of the Company or at
such other time or place as the parties mutually agree.
(c) On the closing date, Shareholder shall deliver (or
cause to be delivered) (i) certificates representing the Offered Shares,
free and clear of any lien, claim or encumbrance, and (ii) such other
documents, including evidence of ownership and authority, as the Company
may reasonably request. The Offer Price shall be paid by wire transfer
of immediately available funds no later than 2:00 p.m., local time, on
the closing date.
(d) If the Company fails to elect to purchase the Offered
Shares within the period specified in Section 4.03(a), (i) Shareholder
shall be free, during the period of 90 days following the expiration of
such period, to transfer any portion of or all the Offered Shares
pursuant to Section 4.02(a)(ii) or 4.02(a)(iii), as the case may be, and
(ii) the Company shall not be entitled to exercise its Call Right with
respect to the Offered Shares during the period from the date of the
Transfer Notice to the end of such 90-day period. Offered Shares not so
transferred within such 90-day period shall again become subject to the
procedures provided for in this Section 4.04 and to the Call Right.
Notwithstanding the foregoing, in the case of any proposed transfer of
any portion or all of the Offered Shares pursuant to Section
4.02(a)(ii)(B) under Rule 144 at a price (the "Reduced Offer Price")
less than 95% of the Offer Price, Shareholder shall first offer such
Offered Shares to the Company by notice (oral or written) to the Senior
Vice President and Senior Associate General Counsel of PaineWebber
Incorporated made during regular business hours. The Company shall have
the right, exercisable by the close of business on the immediately
following Business Day after receipt of such notice from Shareholder, to
purchase all, but not a part of, such Offered Shares at the Reduced
Offer Price. If the Company does not elect to purchase such Offered
Shares, Shareholder may transfer such Offered Shares under Rule 144
pursuant to Section 4.02(a)(ii)(B) at a price equal to or above the
Reduced Offer Price, provided that any Offered Shares not so transferred
within ten Business Days shall again become subject to the procedures
provided for in this Section 4.04(d).
<PAGE>
12
Section 4.05. Assignment. The Company may assign any of
its rights under Section 4.03 or 4.04 to any person without the consent
of Shareholder; provided that no such assignment shall relieve the
Company of any of its obligations pursuant to Section 4.03 or 4.04. In
the event that the Company elects to exercise a right under Section 4.03
or 4.04, the Company may specify in its Call Notice or Exercise Notice,
as applicable, or thereafter prior to purchase, another such person as
its designee to purchase the Offered Shares to which such Call Notice or
Exercise Notice, as applicable, relates.
ARTICLE V
Registration Rights
Section 5.01. Registration Upon Request. (a) Parent shall
have the right to make written demand upon the Company, on not more than
five separate occasions (subject to the provisions of this Section
5.01), to register under the 1933 Act (i) shares of Redeemable Preferred
Stock, (ii) shares of Common Stock issued to Shareholder pursuant to the
Asset Purchase Agreement, acquired upon conversion of the Convertible
Preferred Stock, or acquired in accordance with Section 6.01 of this
Agreement or (iii) at any time following the fifth anniversary of the
date hereof, shares of Convertible Preferred Stock (the shares subject
to such demand hereunder being referred to as the "Subject Stock"), and
the Company shall use its best efforts to cause such shares to be
registered under the 1933 Act as soon as reasonably practicable so as to
permit the sale thereof promptly; provided that each such demand shall
cover at least (A) $50,000,000 liquidation preference of Redeemable
Preferred Stock, (B) $100,000,000 liquidation preference of Convertible
Preferred Stock or (C) 5,000,000 shares of Common Stock, in the case of
the first such demand relating to Common Stock, or 2,500,000 shares of
Common Stock in any subsequent demand relating to Common Stock (subject
in each case to adjustment for stock splits, reverse stock splits, stock
dividends and similar events after the date hereof), as the case may be.
In connection therewith, the Company shall as promptly as practicable
prepare, file (on Form S-3 if permitted or otherwise on the appropriate
form) and use its best efforts to cause to become effective a
registration statement under the 1933 Act to effect such registration.
Parent and Shareholder agree to provide all such information and
materials and to take all such action as may be reasonably required in
order to permit the Company to comply with all applicable requirements
of the 1933 Act and the
<PAGE>
13
Commission and to obtain any desired acceleration of the effective date
of such registration statement.
(b) Notwithstanding the provisions of Section 5.01(a) and
5.01(c), the Company (i) shall not be obligated to prepare or file more
than one registration statement pursuant to this Section 5.01 during any
12-month period and (ii) shall be entitled to postpone the filing of any
registration statement otherwise required to be prepared and filed by
the Company pursuant to Section 5.01(a) (A) for a period of up to 60
days following completion of any underwritten public offering of
securities contemplated by the Company prior to receipt of a demand for
registration hereunder, provided that the Company is advised by its
managing underwriter or underwriters in writing (with a copy to
Shareholder), that the price at which securities would be offered in
such offering would, in its or their opinion, be materially adversely
affected by the registration so requested, or (B) for a period of up to
135 days if the Company determines in its reasonable judgment and in
good faith that the registration and distribution of the shares of
Subject Stock would impair or interfere with in any material respect any
contemplated material financing, acquisition, disposition, corporate
reorganization or other similar transaction or other material corporate
development involving the Company or any of its subsidiaries or
Affiliates or would require premature disclosure thereof, and such
disclosure is not practicable in the Company's reasonable judgment in
light of the facts and circumstances then existing or would impair or
interfere with in any material respect such transaction or would
otherwise materially adversely affect the Company. In the event of such
postponement, Parent shall have the right to withdraw the request for
registration by giving written notice to the Company within 20 days
after receipt of notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes of
determining the number of registrations to which Parent is entitled
pursuant to this Section 5.01.
(c) In addition to the rights of Parent set forth in
Section 5.01(a), if at any time the Company shall exercise its right
pursuant to paragraph (5)(d) of the Certificate of Designation of Rights
and Preferences for the Convertible Preferred Stock to deliver shares of
Common Stock in lieu of cash in payment of the redemption price for any
shares of Convertible Preferred Stock, Parent shall have the right,
exercisable within 30 days following receipt of notice of such
redemption for Common Stock, to make an additional written demand upon
the Company to register under
<PAGE>
14
the 1933 Act any or all shares of Common Stock received in connection
with such redemption, and the Company shall use its best efforts to
cause such shares to be registered under the 1933 Act as soon as
reasonably practicable so as to permit the sale thereof promptly,
subject to the provisions of Section 5.01(b).
(d) Except in accordance with the provisions of the
Amended and Restated Investment Agreement (the "Yasuda Agreement") dated
as of November 5, 1992, between the Company and The Yasuda Mutual Life
Insurance Company ("Yasuda"), the Company shall not grant to any other
holder of its securities, whether currently outstanding or issued in the
future, any incidental or piggyback registration rights with respect to
any registration statement filed pursuant to a demand registration under
this Section 5.01 and, except as aforesaid with respect to the rights of
Yasuda, without the prior consent of Parent, the Company will not permit
any holder of its securities other than Yasuda to participate in any
offering made pursuant to a demand registration under this Section 5.01.
Section 5.02. Incidental Registration Rights. If the
Company proposes to register any of its Common Stock under the 1933 Act
(other than (i) pursuant to Section 5.01 hereof, (ii) securities to be
issued pursuant to a stock option or other employee benefit or similar
plan, or (iii) securities proposed to be issued in exchange for
securities or assets of, or in connection with a merger or consolidation
with, another corporation) the Company shall, as promptly as
practicable, give written notice to Parent of the Company's intention to
effect such registration. If, within 15 days after receipt of such
notice, Parent submits a written request to the Company specifying the
amount of Common Stock that it proposes to sell or otherwise dispose of
in accordance with this Section 5.02, the Company shall use its best
efforts to include the shares specified in Parent's request in such
registration. If in a registration other than pursuant to Section 2.3
of the Yasuda Agreement, the managing underwriters reasonably determine
in good faith and advise Shareholder in writing that the inclusion in
the registration statement of all the Common Stock proposed to be
included would interfere with the successful marketing and sale of the
securities proposed to be registered, then the amount of Common Stock to
be registered by Parent pursuant to this Section 5.02 shall be reduced
to the amount, if any, determined by the managing underwriters in good
faith that would not interfere with such marketing and sale, provided
that if securities are being offered for the account of any Person other
than the Company, then the
<PAGE>
15
amount of securities of such other Person and Shareholder shall be
reduced proportionately based on the number of securities each such
Person requested to be included in the offering. If in a registration
pursuant to Section 2.3 of the Yasuda Agreement, Yasuda advises the
Company that in Yasuda's reasonable judgment registration of the
Shareholder's Common Stock would adversely affect the offering and sale
of its securities under the Yasuda Agreement, then the number of
Shareholder's Common Stock to be included in such offering shall be
reduced to the amount, if any, determined by Yasuda in its reasonable
judgment, that would not adversely affect such offering and sale. No
registration effected under this Section 5.02 shall relieve the Company
of its obligation to effect any registration upon request under Section
5.01. If Shareholder has been permitted to participate in a proposed
offering pursuant to this Section 5.02, the Company thereafter may
determine either not to file a registration statement relating thereto,
or to withdraw such registration statement, or otherwise not to
consummate such offering, without any liability hereunder.
Section 5.03. Broad Public Distribution; Lead Manager.
(a) The Company shall be required to register Subject Stock that is
Common Stock pursuant to this Article V only if such Common Stock is to
be offered and sold in a Broad Public Distribution.
(b) The Company shall be required to register Subject Stock
pursuant to this Article V only if such Subject Stock is to be offered
and sold in an underwritten distribution lead-managed by the Company's
principal broker-dealer subsidiary, provided that, in the reasonable
judgment of Parent, the proposed terms of offering by such subsidiary
are customary and reasonably competitive and provided further that
Parent in all cases shall have the right to designate a non-book-running
co-lead manager for any such offering.
Section 5.04. Registration Mechanicsection 5.04.
Registration Mechanics. (a) In connection with any offering of shares
of Subject Stock registered pursuant to Section 5.01 or 5.02 herein, the
Company shall (i) furnish to Shareholder such number of copies of any
prospectus (including preliminary and summary prospectuses) and
conformed copies of the registration statement (including amendments or
supplements thereto and, in each case, all exhibits) and such other
documents as it may reasonably request, but only while the Company shall
be required under the provisions hereof to cause the registration
statement to remain current; (ii)(A) use its best efforts to register or
qualify the Subject Stock covered by such registration statement under
such blue sky or other state securities laws for offer and sale as
Shareholder shall reasonably request and (B) keep such registration or
qualification in effect for so long as the registration statement
remains in effect; provided that the Company shall not be obligated to
qualify to do business as a foreign corporation under the laws of any
jurisdiction in which it shall not then be qualified or to file any
general consent to service of process in any jurisdiction in which such
a consent has not been previously filed or subject itself to taxation in
any jurisdiction wherein it would not otherwise be subject to tax but
for the requirements of this Section 5.04; (iii) use its best efforts to
cause all shares of Subject Stock covered by such registration statement
to be registered with or approved by such other federal or state
government agencies or authorities as may be necessary in the opinion of
counsel to the Company to enable Shareholder to consummate the
disposition of such shares of Subject Stock; (iv) notify Shareholder any
time when a prospectus relating thereto is required to be delivered
under the 1933 Act upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light
of the circumstances under which they were made, and (subject to the
good faith determination of the Company's Board of Directors as to
whether to permit sales under such registration statement), at the
request of Shareholder promptly prepare and furnish to it a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were
made; (v) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC; (vi) use its best efforts to list, if
required by the rules of the applicable securities exchange or, if
securities of the same class are then so listed, the Subject Stock
covered by such registration statement on the NYSE or on any other
securities exchange on which Subject Stock is then listed; (vii) before
filing any registration statement or any amendment or supplement
thereto, and as far in advance as is reasonably practicable, furnish to
Shareholder and its counsel copies of such documents; and (viii) furnish
<PAGE>
17
to Shareholder, addressed to it, an opinion of counsel for the Company,
dated the date of the closing under the underwriting agreement relating
to any underwritten offering covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of counsel delivered to
underwriters in underwritten public offerings of securities.
(b) In connection with any offering of Subject Stock
registered pursuant to Section 5.01 or 5.02, the Company shall (x)
furnish to the underwriter, if any, unlegended certificates representing
ownership of the Subject Stock being sold in such denominations as
requested and (y) instruct any transfer agent and registrar of the
Subject Stock to release any stop transfer orders with respect to such
Subject Stock.
(c) At any time that Parent shall not be entitled to
designate a nominee for election to the Board of Directors pursuant to
Section 3.02, in connection with the preparation and filing of each
registration statement registering Subject Stock under the 1933 Act, the
Company will give Shareholder and the underwriters, if any, and their
respective counsel and accountants (collectively, the "Inspectors"),
such reasonable and customary access to its books and records
(collectively, the "Records") and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of Shareholder and such underwriters or their
respective counsel, to conduct a reasonable investigation within the
meaning of the 1933 Act. Records which the Company reasonably
determines to be confidential and which it notifies the Inspectors in
writing are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary or appropriate to avoid
or correct a misstatement or omission in the registration statement,
(ii) the portion of the Records to be disclosed has otherwise become
publicly known, (iii) the information in such Records is to be used in
connection with any litigation or governmental investigation or hearing
relating to any registration statement or (iv) the release of such
Records is ordered pursuant to a subpoena or other order. Shareholder
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company.
(d) Upon any registration becoming effective pursuant to
Section 5.01, the Company shall use its best
<PAGE>
18
efforts to keep such registration statement current for a period of 90
days or such shorter period as shall be necessary to effect the
distribution of the Subject Stock.
(e) Shareholder agrees that upon receipt of any notice from
the Company of the happening of any event of the kind described in
clause (iv) of Section 5.04(a), it will forthwith discontinue its
disposition of Subject Stock pursuant to the registration statement
relating to such Subject Stock until its receipt of the copies of the
supplemented or amended prospectus contemplated by clause (iv) of
Section 5.03(a) and, if so directed by the Company, will deliver to the
Company all copies then in its possession of the prospectus relating to
such Subject Stock current at the time of receipt of such notice. If
Shareholder's disposition of Subject Stock is discontinued pursuant to
the foregoing sentence, unless the Company thereafter extends the
effectiveness of the registration statement to permit dispositions of
Subject Stock by Shareholder for an aggregate of 90 days, whether or not
consecutive, the registration statement shall not be counted for
purposes of determining the number of registrations to which Shareholder
is entitled pursuant to Section 5.01.
Section 5.05. Expenses. In connection with any
registration pursuant to this Article V (i) Shareholder shall pay all
agent fees and commissions and underwriting discounts and commissions
related to shares of Subject Stock being sold by Shareholder and the
fees and disbursements of its counsel and accountants and (ii) the
Company shall pay all fees and disbursements of its counsel and
accountants and the expenses (including the fees of any separate
counsel) of any "qualified independent underwriter" required in
accordance with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. All other fees and expenses in connection
with any registration statement (including, without limitation, all
registration and filing fees, all printing costs, all fees and expenses
of complying with securities or blue sky laws) shall (i) in the case of
a registration pursuant to Section 5.01, be borne by Shareholder and
(ii) in the case of a registration pursuant to Section 5.02, be shared
pro rata based upon the respective market values of the securities to be
sold by the Company, Shareholder and any other holders participating in
such offering; provided that Shareholder shall not pay any expenses
relating to work that would otherwise be incurred by the Company
including, but not limited to, the preparation and filing of periodic
reports with the Commission.
<PAGE>
19
Section 5.06. Indemnification and Contribution. In the case
of any offering registered pursuant to this Article V, the Company
agrees to indemnify and hold Shareholder, each underwriter, if any, of
the Subject Stock under such registration and each person who controls
any of the foregoing within the meaning of Section 15 of the 1933 Act,
and any officer, employee or partner of the foregoing, harmless against
any and all losses, claims, damages, or liabilities (including
reasonable legal fees and other reasonable expenses incurred in the
investigation and defense thereof) to which they or any of them may
become subject under the 1933 Act or otherwise (collectively "Losses"),
insofar as any such Losses shall arise out of or shall be based upon (i)
any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such
Subject Stock (as amended if the Company shall have filed with the SEC
any amendment thereof), or the omission or alleged
<PAGE>
20
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) any
untrue statement or alleged untrue statement of a material fact
contained in the prospectus relating to the sale of such Subject Stock
(as amended or supplemented if the Company shall have filed with the SEC
any amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, that the indemnification contained in
this Section 5.06 shall not apply to such Losses which shall arise out
of or shall be based upon any such untrue statement or alleged untrue
statement, or any such omission or alleged omission, which shall have
been made in reliance upon and in conformity with information furnished
in writing to the Company by Shareholder or any such underwriter, as the
case may be, specifically for use in connection with the preparation of
the registration statement or prospectus contained in the registration
statement or any such amendment thereof or supplement therein.
Notwithstanding the foregoing provisions of this
Section 5.06, the Company will not be liable to Shareholder, any person
who participates as an underwriter in the offering or sale of Subject
Stock or any other person, if any, who controls Shareholder or any
underwriter (within the meaning of the 1933 Act), under the indemnity
agreement in this Section 5.06 for any such Losses that arise out of
Shareholder or other person's failure to send or give a copy of the
final prospectus to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the Subject Stock to such person if
such statement or omission was corrected in such final prospectus and
the Company has previously furnished copies thereof in accordance with
this Agreement.
In the case of each offering registered pursuant to this
Article V, Parent shall, or shall cause General Electric Capital
Services, Inc. or another member of the Financial Services Group,
reasonably satisfactory to the Company (the "Parent Indemnitor") to,
agree and each underwriter, if any, participating therein shall agree,
substantially in the same manner and to the same extent as set forth in
the preceding paragraph, severally to indemnify and hold harmless the
Company and each person who controls the Company within the meaning of
Section 15 of the 1933 Act, and any director, officer, employee or
partner of the Company, with respect to any statement in or omission
from such registration statement or prospectus contained in such
registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid) if such statement or omission shall have been
made in reliance upon and in conformity with information furnished in
writing to the Company by Parent, Shareholder or such underwriter, as
the case may be, specifically for use in connection with the preparation
of such registration statement or prospectus contained in such
registration statement or any such amendment thereof or supplement
thereto.
Each party indemnified under this Section 5.06 shall,
promptly after receipt of notice of the commencement of any claim
against such indemnified party in respect of which indemnity may be
sought hereunder, notify the indemnifying party in writing of the
commencement thereof. The failure of any indemnified party to so notify
an indemnifying party shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such
indemnified party on account of the indemnity contained in this Section
5.06, unless (and only to the extent) the indemnifying party was
prejudiced by such failure, and in no event shall such failure relieve
the indemnifying party from any other liability which it may have to
such indemnified party. In case any action in respect of which
indemnification may be sought hereunder shall be brought against any
indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may desire, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof through counsel reasonably satisfactory
<PAGE>
21
to the indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 5.06 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation (unless
(i) such indemnified party reasonably objects to such assumption on the
grounds that there may be defenses available to it which are different
from or in addition to those available to such indemnifying party,
(ii) the indemnifying party and such indemnified party shall have
mutually agreed to the retention of such counsel or (iii) in the
reasonable opinion of such indemnified party representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding, in which case the indemnified party shall be
reimbursed by the indemnifying party for the reasonable expenses
incurred in connection with retaining separate legal counsel). No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any claim or pending or
threatened proceeding in respect of which the indemnified party is or
could have been a party and indemnity could have been sought hereunder
by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability
arising out of such claim or proceeding.
If the indemnification provided for in this Section 5.06 is
unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless from any Losses in respect of which this
Section 5.06 would otherwise apply by its terms (other than by reason of
exceptions provided herein), then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and
several obligation to contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative benefits received by and fault of
the indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the offering to which such
contribution relates as well as any other relevant equitable
considerations. The relative benefit shall be determined by reference
to, among
<PAGE>
22
other things, the amount of proceeds received by each party from the
offering to which such contribution relates. The relative fault shall
be determined by reference to, among other things, each party's relative
knowledge and access to information concerning the matter with respect
to which the claim was asserted, and the opportunity to correct and
prevent any statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any legal or
other fees or expenses incurred by such party in connection with any
investigation or proceeding, to the extent such party would have been
indemnified for such expenses if the indemnification provided for in
this Section 5.06 was available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.06 were determined
by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Section 5.07. Underwriting Agreement. (a) In connection
with any underwritten offering of Subject Stock pursuant to a
registration requested under Section 5.01, the Company, the Parent
Indemnitor and Shareholder will enter into an underwriting agreement
with the underwriters for such offering, such agreement to contain such
representations and warranties by the Company, the Parent Indemnitor and
Shareholder and such other terms and provisions as are customarily
contained in the underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Section 5.06
(and customary provisions with respect to indemnities and contribution
by such underwriters).
(b) In connection with any underwritten offering of Subject
Stock pursuant to a registration requested under Section 5.02, the
Company may require the Common Stock requested to be registered pursuant
to Section 5.02 to be included in such underwriting on the same terms
and conditions as shall be applicable to Common Stock being sold by the
Company through underwriters under such registration. In such case, the
Parent Indemnitor and Shareholder shall be a party to any such
underwriting agreement. Such agreement shall contain such
representations, warranties and covenants by the Parent Indemnitor and
Shareholder and such other terms and provisions as are customarily
contained in
<PAGE>
23
underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contribution to the
effect and to the extent provided in Section 5.06 (and customary
provisions with respect to indemnities and contribution by such
underwriters).
ARTICLE VI
Shareholder Purchase Rights
Section 6.01. Shareholder Purchase Rights. (a) If,
immediately after giving effect to and as a result of any issuance of
Voting Securities by the Company, Parent shall beneficially own Common
Stock representing less than the Equity Treatment Percentage of the
total number of shares of Common Stock then outstanding and, at such
time, Parent accounts for such ownership of Common Stock in accordance
with the equity method of accounting, Parent shall have the right to
acquire, at any time or from time to time thereafter, in the open market
or in private transactions, a number of shares of Common Stock in the
aggregate equal to the excess of (x) the number of shares representing
the Equity Treatment Percentage of the then outstanding Common Stock
over (y) the number of shares of Common Stock then beneficially owned by
Parent (including any shares of Common Stock acquired by Shareholder
pursuant to Section 6.01(b)).
(b) If, immediately after giving effect to and as a result
of any issuance of stock by the Company on or after the date hereof, the
Company shall not be a 20-percent owned corporation of the Shareholder
and immediately prior thereto the Company was a 20-percent owned
corporation of the Shareholder, Shareholder shall have the right to
acquire at any time or from time to time thereafter, in the open market
or in private transactions, a number of shares of Common Stock
sufficient (together with any shares acquired pursuant to Section
6.01(a)) to enable Shareholder to treat the Company as a 20-percent
owned corporation. For purposes of this paragraph (b), (i) the term
"stock" shall have the same meaning as in Section 243(c)(2) of the Code
as in effect on the date hereof, and (ii) all shares of stock of the
Company held by Shareholder or any Affiliate of Shareholder shall be
treated as if they were held by a single legal entity.
(c) If the Company shall issue any Voting Securities or
stock of the Company at any time after October 17, 1994 and before the
date of this Agreement, Shareholder will have the right to acquire, at
any time or from time to time after the date hereof, in the open market
or in private
<PAGE>
24
transactions, the number of shares of Common Stock determined in
accordance with Section 6.01(a) or (b), as applicable, that Shareholder
would have had the right to acquire pursuant to this Section 6.01 had
this Agreement been in effect at such time.
ARTICLE VII
Section 7.01. Company Shareholder Approval. The Company
agrees that at its next annual shareholder meeting it shall submit for
shareholder approval, to the extent required by NYSE rules, pursuant to
applicable provisions of the NYSE Company Manual, authorization for the
issuance of the shares of Common Stock into which the Convertible
Preferred Stock is convertible. The Board has adopted a resolution
recommending such shareholder approval and the Company shall use its
best efforts to obtain such approval.
ARTICLE VIII
Miscellaneous
Section 8.01. Termination. This Agreement shall terminate
upon (a) the written agreement of the Company, Shareholder and Parent to
terminate this Agreement; or (b) the earlier of (i) the fifteenth
anniversary of this Agreement and (ii) the third anniversary of the date
on which Parent and its Affiliates shall no longer beneficially own any
Voting Securities. The provisions of Articles III and IV of this
Agreement shall terminate upon any failure by Purchaser to observe and
perform its obligations under Section 3.02.
Section 8.02. Financial Services Group. Notwithstanding any
other provision of this Agreement, nothing contained herein shall apply
to any Voting Securities held in any Third Party Account, and any such
Voting Securities shall not be counted for purposes of this Agreement as
being owned by Parent or any of its Affiliates.
Section 8.03. Legend. All certificates representing Common
Stock and Preferred Stock subject to this Agreement shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
<PAGE>
25
AND NEITHER THE SHARES NOR ANY INTEREST THEREIN MAY BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
UNDER SUCH ACT IS NOT REQUIRED. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT DATED
_____________, 199_ (A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY) WHICH PROVIDES, AMONG OTHER THINGS, FOR CERTAIN
RIGHTS OF PURCHASE OF SUCH SHARES BY THE COMPANY AND CERTAIN
RESTRICTIONS ON TRANSFER THEREOF. ANY SALE OR OTHER TRANSFER NOT
IN COMPLIANCE WITH SAID AGREEMENT SHALL BE VOID."
Section 8.04. Specific Performance. (a) Parent and
Shareholder, on the one hand, and the Company, on the other, acknowledge
and agree that irreparable damage would occur if any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. Accordingly, the parties will be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically its provisions in any court of the
United States or any state having jurisdiction, this being in addition
to any other remedy to which they may be entitled at law or in equity.
(b) Parent and Shareholder, on the one part, and the
Company, on the other part, each irrevocably agrees that any legal
action or proceeding against it with respect to this Agreement and any
transaction contemplated by this Agreement may be brought in the courts
of the State of New York, or of the United States of America for the
Southern District of New York, and by execution and delivery of this
Agreement Shareholder, Parent and the Company each irrevocably submits
to the jurisdiction of such court and irrevocably designates, appoints
and empowers the Secretary of State of the State of New York to receive
for and on its behalf service of process in the State of New York and
further irrevocably consents to the service or process outside of the
territorial jurisdiction of such courts by mailing copies by registered
United States mail, postage prepaid, to its address specified in this
Agreement.
Section 8.05. Entire Agreement. The Transaction Documents
and the documents referred to therein constitute the entire agreement
and understanding of the parties with respect to the transactions
contemplated by such parties and may be amended only by an agreement in
writing executed by both parties.
<PAGE>
26
Section 8.06. Severability. If any provision of this
Agreement is held by a court of competent jurisdiction to be
unenforceable, the remaining provisions shall remain in full force and
effect. It is declared to be the intention of the parties that they
would have executed the remaining provisions without including any that
may be declared unenforceable.
Section 8.07. Headings. Descriptive headings are for
convenience only and will not control or affect the meaning or
construction of any provision of this Agreement.
Section 8.08. Counterparts. For the convenience of the
parties, any number of counterparts of this Agreement may be executed by
the parties, and each such executed counterpart will be an original
instrument.
Section 8.09. Notices. All notices, request, demands and
other communications required or permitted hereunder shall be made in
writing by hand-delivery, registered first-class mail, telex, telecopier
or air courier guaranteeing overnight delivery:
(a) If to the Company, to:
Paine Webber Group Inc.
1285 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Telecopy: 212-713-2114:
(with copies to):
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: David G. Ormsby
Telecopy: 212-474-3700
(b) If to Shareholder (including any other subsidiary of
Parent to which shares of Common Stock or Preferred Stock are
transferred pursuant to Section 4.02(a)(i)), to:
Kidder, Peabody Group Inc.
10 Hanover Square
New York, New York 10005
Attention: John M. Liftin
Telecopy: 212-510-4920
<PAGE>
27
(with copies to):
(1) Parent; and
(2) Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Alan L. Beller
Telecopy: 212-225-3999
(c) If to Parent, to:
General Electric Company
3135 Easton Turnpike
Fairfield, Connecticut 06431
Attention: Senior Counsel for Transactions
Telecopy: 202-373-3008
(with copies to):
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis S. Hersch
Telecopy: 212-450-4800
or to such other person or address as any party shall furnish to each
other party hereto in writing.
All such notices, requests, demands and other communications
shall be deemed to have been duly given: at the time of delivery by
hand, if personally delivered; five business days after being deposited
in the mail, postage prepaid, if mailed; when answered back, if telexed;
when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
Section 8.10. Successors and Assigns. This Agreement shall
bind the successors and assigns of the parties, and inure to the benefit
of any successor or assign of any of the parties; provided that, except
as provided in Section 4.05, no party may assign this Agreement without
the other party's prior written consent.
Section 8.11. Governing Law. This Agreement will be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without giving effect to the conflict of
laws principles thereof.
<PAGE>
28
Section 8.12. Compliance by Affiliates. Subject to Section
8.02, Parent shall, and shall cause its Affiliates to, observe and
perform all covenants and agreements of Parent and Shareholder set forth
in this Agreement as if such covenants and agreements were directly
applicable to Parent and such Affiliates.
Section 8.13. Reports. So long as Shareholder shall own
any Voting Securities, the Company will furnish Shareholder with the
quarterly and annual financial reports that the Corporation is required
to file with the Commission pursuant to Section 13 or Section 15(d) of
the 1934 Act or, in the event the Company is not required to file such
reports, reports containing the same information as would be required in
such reports.
Section 8.14. Fair Market Value Determination. So long as
Shareholder shall own any Convertible Preferred Stock, if Parent shall
object to any determination of the fair market value of noncash
consideration made by the Board of Directors of the Company in
accordance with paragraph (7)(g)(ii) of the Certificate of Designation
of Rights and Preferences for such Convertible Preferred Stock, the
parties shall negotiate in good faith in order to agree on such fair
market value. If the parties are unable to agree on such fair market
value within 30 days, the Board of Directors of the Company shall retain
a nationally recognized investment banking firm reasonably satisfactory
to Parent to determine such fair market value. The fees and expenses of
such investment banking firm shall be shared equally by Parent and the
Company. Parent shall be notified promptly of any consideration other
than cash subject to any such determination and furnished with a
description of the consideration and the fair market value thereof, as
determined by the Board of Directors of the Company.
<PAGE>
29
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first referred to above.
PAINE WEBBER GROUP INC.
By:___________________________
Name:
Title:
KIDDER, PEABODY GROUP INC.
By:___________________________
Name:
Title:
GENERAL ELECTRIC COMPANY
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT D
TAX ALLOCATION AGREEMENT, dated as of
, 1994 (the "Agreement"), by and among GENERAL
ELECTRIC COMPANY, a New York corporation (the
"Parent"), KIDDER,PEABODY GROUP INC., a Delaware
corporation (the "Seller"), and PAINE WEBBER GROUP
INC., a Delaware corporation (the "Purchaser").
WHEREAS the Purchaser intends to acquire the stock of the
Included Subsidiaries from the Seller on the day before the Closing Date
as provided in and pursuant to the Asset Purchase Agreement, dated as of
October [ ], 1994, among the Purchaser, the Parent and the Seller (the
"Asset Purchase Agreement");
WHEREAS the Parent, the Seller, and the Included
Subsidiaries have heretofore been members of an affiliated group of
corporations of which Parent is the common parent (the "Affiliated
Group") within the meaning of Section 1504(a) of the Internal Revenue
Code of 1986, as amended (the "Code");
WHEREAS the Parent, the Seller, the Included Subsidiaries,
and the other members of the Affiliated Group have heretofore filed
Federal income tax returns on a consolidated basis pursuant to Section
1501 of the Code;
WHEREAS certain of the Included Subsidiaries have joined in
filing combined, consolidated or unitary state, local or other Tax
returns with the Seller or one or more Affiliates of the Seller (the
"Combined Income Tax Returns"), and each group filing such a return, a
"Combined Group");
WHEREAS the Included Subsidiaries may be liable for certain
Taxes other than Federal income Taxes of the Affiliated Group, Combined
Income Taxes (as defined below) and Transfer Taxes; and
WHEREAS the parties to this Agreement desire to allocate the
liability for the Taxes of the Included Subsidiaries.
<PAGE>
2
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises, covenants and conditions hereinafter contained, the
parties hereto agree as follows:
SECTION 1. Taxes. (a) (1) The Seller agrees that it will
file (or cause to be filed) all necessary consolidated Federal income
Tax Returns of the Affiliated Group for all taxable periods beginning
before the Closing Date, and all necessary Combined Income Tax Returns
for all taxable periods beginning before the Closing Date. The Seller
will pay or cause to be paid (i) any Federal income Taxes with respect
to such Federal income Tax Returns and (ii) any state, local, or other
Taxes with respect to such Combined Income Tax Returns ("Combined Income
Taxes").
(2) Promptly, but no later than 75 days after the Closing
Date, the Purchaser will provide the Seller with the necessary
information relating to the Included Subsidiaries and legal authority
for the Parent to prepare such Returns and to pay such Federal income
Taxes and Combined Income Taxes. The Purchaser will use its best
efforts to prepare such information in a manner consistent with past
practice of the Included Subsidiaries, and such returns and reports
shall be prepared by or on behalf of the Parent and the Seller in a
manner consistent with past practice of the Included Subsidiaries.
(b) (1) For any Straddle Period of any Included
Subsidiary, the Purchaser will timely prepare in a manner consistent
with past practice of the Included Subsidiaries and file with the
appropriate Taxing Authorities all Returns required to be filed. For
any taxable period of any Included Subsidiary that ends before the
Closing Date, the Seller will timely prepare and file or cause to be
prepared and filed with the appropriate Taxing Authorities all Returns
required to be filed before the Closing Date, and the Purchaser will
timely prepare and file or cause to be prepared and filed with the
appropriate Taxing Authorities all Returns required to be filed on or
after the Closing Date. The Purchaser and the Seller will cause all
Returns of each Included Subsidiary that include any portion of the Pre-
Closing Tax Period to be prepared and filed in a manner consistent with
past practice.
(2) The Seller will file or cause to be filed any amended
consolidated Federal income tax returns of the Affiliated Group or any
amended Combined Income Tax Returns for taxable periods beginning before
the Closing Date that
<PAGE>
3
are required as a result of examination adjustments made by the Internal
Revenue Service or by any other Taxing Authority as finally determined.
For those jurisdictions in which separate Returns are filed by any
Included Subsidiary, any required amended Returns resulting from such
examination adjustments, as finally determined, will be prepared by the
Purchaser.
(c) Except as otherwise provided in Paragraphs (a) and (b)
of this Section 1, the Purchaser will file (or cause to be filed) all
necessary Federal, state, local and other Tax Returns with respect to
the Included Subsidiaries for all taxable periods. The Purchaser will
pay (or cause to be paid) any Taxes due with respect to such Returns,
except to the extent such Taxes are indemnified by Parent and Seller
pursuant to this Agreement.
(d) Any and all Transfer Taxes incurred as a result of the
transactions contemplated by this Agreement shall be borne equally by
Seller and Purchaser; provided, however that the maximum amount of
Transfer Taxes so borne by the Purchaser pursuant to this Agreement and
the Asset Purchase Agreement shall be $4,000,000 with any excess being
borne by Seller.
SECTION 2. Indemnification. (a) The Parent and the Seller
jointly and severally agree to indemnify and hold harmless each
Purchaser Indemnitee from and against any liability with respect to
Taxes of any Included Subsidiary (in each case other than any present or
former Affiliate of the Purchaser) (1) accruing under the principles of
Section 11.01 and Section 11.04 of the Asset Purchase Agreement during
the Pre-Closing Tax Period (including all Taxes (i) attributable to the
recognition by an Included Subsidiary of any "deferred intercompany
gain" or "excess loss account" as a result of it ceasing to be a member
of the Affiliated Group, or (ii) attributable to the Section 338(g) and
Section 338(h)(10) elections (or elections under any comparable
provisions of state, local or foreign Tax law) contemplated by Section
5) and (2) attributable to income that accrued in a Pre-Closing Tax
Period but was not recognized in any Pre-Closing Tax Period as a result
of the installment method of accounting, the complete contract method of
accounting, the long-term contract method of accounting, the cash method
of accounting or Section 481 of the Code or comparable provisions of
state, local or foreign Tax law).
<PAGE>
4
(b) The Purchaser agrees to indemnify and hold harmless
each Seller Indemnitee from and against any liability with respect to
Taxes of any Included Subsidiary accruing under the principles of
Section 11.01 and Section 11.04 of the Asset Purchase Agreement during
the Post-Closing Tax Period (not including Taxes (a) attributable to the
recognition by an Included Subsidiary of any "deferred intercompany
gain" or "excess loss account" as a result of it ceasing to be a member
of the Affiliated Group, (b) attributable to the Section 338(g) and
Section 338(h)(10) elections (or any comparable provisions under state,
local or foreign Tax law) contemplated by Section 5 or (c) attributable
to income that accrued in a Pre-Closing Tax Period as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method
of accounting or Section 481 of the Code or comparable provisions of
state, local or foreign Tax law).
SECTION 3. Treatment of Closing Date. The principles and
provisions of {{ 11.01 and 11.04 of the Asset Purchase Agreement shall
apply to this Agreement.
SECTION 4. Tax Claims. The principles and provisions of {
12.04 of the Asset Purchase Agreement shall apply to this Agreement.
SECTION 5. Section 338 Election. The Purchaser will (i)
timely make an election under Section 338(g) of the Code (and any
comparable election under state or local Tax law in such jurisdictions
that also provide for an election comparable to a Code Section
338(h)(10) election) with respect to the acquisition by the Purchaser or
an Affiliate of the Purchaser of the Included Subsidiaries, (ii) join
the Seller in timely making an election under Section 338(h)(10) of the
Code (and any comparable election under state or local Tax law) with
respect thereto and (iii) cooperate with the Seller in the completion
and timely filing of such elections in accordance with the provisions of
Treasury Regulation { 1.338(h)(10)-1 (or any comparable provisions of
state or local Tax law) or any successor provisions.
SECTION 6. Tax Sharing Agreements. The Seller shall,
before the Closing Date, terminate or cause to be terminated all Tax
sharing agreements, arrangements or practices to which any Included
Subsidiary may be a party or may be bound, and no payments shall be due
thereunder from any Included Subsidiary on or after the Closing Date.
<PAGE>
5
SECTION 7. Interest. In the event that any Payment
required to be made under this Agreement is made after the due date
thereof, interest will accrue on such amount from the due date of the
payment through the date such payment is actually made at the rate
designated from time to time in Section 6621(a)(2) of the Code,
compounded on a daily basis.
SECTION 8. Cooperation. The principles and provisions of {
11.03 of the Asset Purchase Agreement shall apply to this Agreement.
SECTION 9. Definitions. Unless otherwise indicated, all
capitalized terms used herein shall have the same meaning as in the
Asset Purchase Agreement.
SECTION 10. Exclusivity. Notwithstanding anything therein
to the contrary, except as provided herein the Asset Purchase Agreement
will not apply to any liability for Taxes of any Included Subsidiary,
and the allocation of liability for such Taxes will be determined
exclusively under this Agreement.
SECTION 11. Miscellaneous. The principles and provisions
of Article XVI of the Asset Purchase Agreement shall apply to this
Agreement.
SECTION 12. Survival. Notwithstanding anything in the
Asset Purchase Agreement to the contrary, the covenants, agreements,
representations, and warranties of the parties contained in this
Agreement will survive the Closing.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
PAINE WEBBER GROUP INC.,
by
________________________
Name:
Title
<PAGE>
6
GENERAL ELECTRIC COMPANY,
by
________________________
Name:
Title:
KIDDER, PEABODY GROUP INC.,
by
_________________________
Name:
Title
<PAGE>
Exhibit 99(b)
PAINE WEBBER GROUP INC.
1285 Avenue of the Americas
New York, NY 10019
October 17, 1994
General Electric Company
30 Rockefeller Plaza
New York, N.Y. 10019
Kidder, Peabody Group Inc.
10 Hanover Square
New York, N.Y. 10005
Dear Sirs:
We refer to the Asset Purchase Agreement (the "APA") dated
as of October 17, 1994, among the three of us, which contemplates, among
other things, the issuance by Paine Webber Group Inc. ("Paine Webber")
to Kidder, Peabody Group Inc. and certain of its subsidiaries of
2,500,000 shares of 9% Redeemable Preferred Stock of Paine Webber (the
"Preferred Shares") and the payment by Paine Webber of the Deferred
Purchase Price (as defined in the APA).
This is to confirm that:
1. The holders of the Preferred Shares shall, at the
request of Paine Webber (made at any time, but only one time, on or
prior to 60 days after the Closing), exchange all or any portion of
their Preferred Shares for, at the option of Paine Webber:
(a) shares of redeemable preferred stock of Paine Webber
with a stated maturity the same as the Preferred Shares, callable at par
at any time and with an annual dividend rate of 9-3/4%;
(b) shares of redeemable preferred stock of Paine Webber
with a stated maturity the same as the Preferred Shares, noncallable
until the third anniversary of the Closing and callable at par at any
time thereafter and with an annual dividend rate of 9-1/2%;
(c) shares of redeemable preferred stock of Paine Webber
with a stated maturity the same as the Preferred Shares, noncallable
until the fifth anniversary of the Closing and callable at par at any
time thereafter and with an annual dividend rate of 9%; or
(d) any combination of the foregoing.
2. To the extent that Paine Webber elects to cause the
exchange of any Preferred Shares for shares, as described above, the
payments contemplated by Section 3.05 of the APA with respect to such
Preferred Shares shall terminate and shall not continue with respect to
such post-exchange shares.
3. To the extent that Paine Webber does not elect to cause
the exchange of Preferred Shares, the payments contemplated by Section
3.05 of the APA with respect to such Preferred Shares shall not be
affected.
4. As part of any exchange using shares described in clause
(b) above, Paine Webber may elect to cause the exchange of Preferred
Shares for shares of redeemable preferred shares described in clause (b)
above with an annual dividend rate of less than 9-1/2% (but not less
than 9%), but, to the extent that Paine Webber so elects, the payments
contemplated by Section 3.05 of the APA shall continue with respect to
the post-exchange shares but shall be reduced by substituting for the
$0.1875 number in Section 3.05(c) of the APA an amount equal to one-
quarter of the difference between $9.500 and the annual dividend on such
post-exchange shares (expressed on a dollars-per-share basis).
5. The rights, terms and preferences of any preferred stock
exchanged for Preferred Shares pursuant to this letter shall be
identical to the rights, terms and preferences of the Preferred Shares
except as specified herein.
6. Notwithstanding the foregoing, if after the Closing
Paine Webber shall request the holders of the Preferred Shares to make
any exchange described above, the parties hereto agree that the terms of
the shares described in clauses (a), (b) and (c) above will be
appropriately adjusted (if requested by the holders) so that the value
received in the exchange will be equivalent to the value surrendered in
the exchange.
If the foregoing is acceptable to you, please sign below.
PAINE WEBBER GROUP INC.,
by
___________________
Name:
Title:
GENERAL ELECTRIC COMPANY,
by
_______________________
Name:
Title:
KIDDER, PEABODY GROUP INC.,
by
________________________
Name:
Title:
