<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
DAIN RAUSCHER CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.125 per share, of Dain Rauscher
Corporation
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
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[LOGO OF DAIN RAUSCHER]
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Dain Rauscher Corporation, to be held on January 10, 2001, at 9:00 a.m., at the
12th Floor Auditorium, Dain Rauscher Plaza, 60 South Sixth Street, Minneapolis,
Minnesota.
At the special meeting you will be asked to consider and vote upon a
proposal to adopt an Agreement and Plan of Merger, dated as of September 28,
2000, pursuant to which Viking Merger Subsidiary, Inc., a newly formed Delaware
corporation and an indirect wholly owned subsidiary of Royal Bank of Canada, a
Canadian chartered bank, will be merged with and into Dain Rauscher and Dain
Rauscher will become an indirect wholly owned subsidiary of Royal Bank of
Canada. If the merger agreement is approved and the merger is subsequently
completed, each outstanding share of Dain Rauscher common stock, other than
certain shares of restricted stock that will not be vested when the merger
occurs to be converted into shares of Royal Bank of Canada stock, will be
cancelled and converted automatically into the right to receive U.S. $95 in
cash without interest. The cash you receive in the merger in exchange for your
shares of Dain Rauscher common stock will be subject to United States federal
income tax and also may be taxed under applicable state, local and foreign tax
laws.
Your board of directors has reviewed and considered the terms and conditions
of the merger agreement, has determined that the merger is in the best
interests of Dain Rauscher and its stockholders, and has approved the merger
agreement and declared it to be advisable. Credit Suisse First Boston rendered
a written opinion to your board of directors dated September 27, 2000, to the
effect that, as of that date and based upon and subject to the matters stated
in the opinion, the merger consideration of U.S. $95 in cash per share is fair,
from a financial point of view, to our stockholders. Credit Suisse First
Boston's written opinion is attached as Appendix C to the enclosed proxy
statement, and you should read it carefully and in its entirety.
Your board of directors unanimously recommends that you vote "FOR" adoption
of the merger agreement. Approval and adoption of the merger agreement requires
the affirmative vote of the holders of a majority of our issued and outstanding
shares of common stock entitled to vote thereon. Each share of Dain Rauscher
common stock is entitled to one vote on all matters to come before the special
meeting. The Dain Rauscher common stock constitutes the only outstanding class
of our capital stock.
Attached to this letter you will find a formal notice of special meeting and
a proxy statement. The accompanying proxy statement provides you with detailed
information about the special meeting and the proposed merger. If the merger
agreement is approved by the requisite holders of Dain Rauscher common stock,
the closing of the merger will occur soon after the special meeting and after
all of the other conditions to closing the merger are satisfied. Please give
this material your careful attention. You may also obtain more information
about us from documents we have filed with the Securities and Exchange
Commission.
Dain Rauscher common stock is listed on the New York Stock Exchange under
the symbol "DRC." On November 27, 2000, Dain Rauscher common stock closed at
U.S. $94.06 per share.
--------------------------------------------------------------------------------
Dain Rauscher Plaza (612) 371-2711 Dain Rauscher,
60 South 6th Street Incorporated
Minneapolis, MN 55402-4422 Member
NYSE/SIPC
<PAGE>
Your vote is important regardless of the number of shares of Dain Rauscher
common stock you own. A failure to vote will count as a vote against the
merger. Accordingly, you are requested promptly to complete, sign and date the
enclosed proxy card and return it in the envelope provided, whether or not you
plan to attend. You may also vote your shares by using a toll-free number or
via the Internet. Your proxy card contains instructions for using these
convenient services. This will not prevent you from voting your shares in
person if you subsequently choose to attend the special meeting.
Thank you for your cooperation.
Very truly yours,
/s/ Irving Weiser
Irving Weiser
Chairman, President and
Chief Executive Officer
This Proxy Statement is dated December 8, 2000, and is
first being mailed to stockholders on or about December 11, 2000
<PAGE>
DAIN RAUSCHER CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 10, 2001
TO THE STOCKHOLDERS OF DAIN RAUSCHER CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Dain
Rauscher Corporation, a Delaware corporation, will be held on January 10, 2001,
at 9:00 a.m. at the 12th Floor Auditorium, Dain Rauscher Plaza, 60 South Sixth
Street, Minneapolis, Minnesota for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan
of Merger, dated as of September 28, 2000, by and among Dain Rauscher,
Royal Bank of Canada, a Canadian chartered bank, and Viking Merger
Subsidiary, Inc., a newly formed Delaware corporation and an indirect
wholly owned subsidiary of Royal Bank of Canada. A copy of the merger
agreement is attached as Appendix A to the accompanying proxy statement.
Pursuant to the terms of the merger agreement Viking Merger Subsidiary,
Inc. will merge with and into Dain Rauscher, with Dain Rauscher continuing
as the surviving corporation and becoming an indirect wholly owned
subsidiary of Royal Bank of Canada and each share of common stock of Dain
Rauscher, other than those shares held by the stockholders, if any, who
properly exercise their appraisal rights under Delaware law and the holders
of certain shares of restricted stock that will not be vested when the
merger occurs, will be canceled and converted into the right to receive
U.S. $95 in cash without interest.
2. To transact such other business as may properly come before the
special meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on November 27, 2000,
are entitled to notice of and to vote at the special meeting and at any
adjournment or postponement of the special meeting. All stockholders are
cordially invited to attend the special meeting in person. However, to assure
your representation at the meeting in case you cannot attend, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage prepaid envelope enclosed for that purpose. You may also vote your
shares by using a toll-free number or via the Internet. Your proxy card
contains instructions for using these convenient services. Any stockholder
attending the special meeting may vote in person even if he or she has returned
a proxy card.
The Dain Rauscher board of directors has determined that the merger is in
the best interests of Dain Rauscher and its stockholders, has unanimously
approved the merger agreement and recommends that Dain Rauscher stockholders
vote "FOR" the adoption of the merger agreement.
Dain Rauscher stockholders have the right to dissent from the merger and
obtain payment in cash of the fair value of their assets of common stock under
applicable provisions of Delaware law. In order to perfect and exercise
appraisal rights, stockholders must give written demand for appraisal of their
shares before the taking of the vote on the merger at the special meeting and
must not vote in favor of the merger. A copy of the applicable Delaware
statutory provisions is included as Appendix D to the accompanying proxy
statement, and a summary of these provisions can be found under "Dissenters'
Rights of Appraisal" in the accompanying proxy statement.
<PAGE>
The adoption of the merger agreement requires the approval of the holders of
a majority of the outstanding shares of Dain Rauscher common stock entitled to
vote thereon. In the event that there are not sufficient votes to approve the
proposed merger at the time of the special meeting, the special meeting may be
adjourned in order to permit further solicitation by Dain Rauscher.
By Order of the Board of Directors
/s/ Carla J. Smith
Carla J. Smith
Secretary
Minneapolis, Minnesota
December 8, 2000
Please do not send your stock certificates at this time. If the merger
agreement is approved, you will be sent instructions regarding the surrender of
your stock certificates.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY TERM SHEET.......................................................... 1
QUESTIONS AND ANSWERS ABOUT THE MERGER...................................... 6
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION................. 8
THE PARTIES TO THE MERGER................................................... 9
THE SPECIAL MEETING OF DAIN RAUSCHER STOCKHOLDERS........................... 10
THE MERGER.................................................................. 12
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...................... 23
ACCOUNTING TREATMENT........................................................ 24
REQUIRED REGULATORY APPROVALS............................................... 24
THE MERGER AGREEMENT........................................................ 26
STOCK OPTION AGREEMENT...................................................... 36
MARKET PRICE OF DAIN RAUSCHER COMMON STOCK.................................. 39
SECURITY OWNERSHIP OF MANAGEMENT............................................ 40
DISSENTERS' RIGHTS OF APPRAISAL............................................. 42
OTHER MATTERS............................................................... 44
WHERE YOU CAN FIND MORE INFORMATION......................................... 44
</TABLE>
<PAGE>
SUMMARY TERM SHEET
This summary term sheet does not contain all of the information that is
important to you. You should carefully read the entire proxy statement to fully
understand the merger. The merger agreement is attached as Appendix A to this
proxy statement. We encourage you to read the merger agreement, as it is the
legal document that governs the merger.
Proposed Acquisition
. Stockholder Vote. You are being asked to vote to adopt a merger
agreement whereby Dain Rauscher will be acquired by Royal Bank of
Canada.
. Price for Your Stock. As a result of the merger, you will receive U.S.
$95 in cash for each of your shares of Dain Rauscher common stock.
. The Acquiror. Royal Bank of Canada is a Canadian chartered bank, with
its principal executive office located at 200 Bay Street, Toronto,
Ontario, Canada M5J 2J5. Shares of Royal Bank of Canada are listed on
the Toronto Stock Exchange and on the New York Stock Exchange. Royal
Bank of Canada ranks as Canada's largest financial institution as
measured by assets, revenues and net income as of April 30, 2000. As of
October 31, 1999, its most recent fiscal year end, Royal Bank of Canada
was the ninth largest bank in North America and among the sixty largest
banks in the world, as measured by assets. Royal Bank of Canada also has
one of the leading insurance operations among Canadian banks. Royal Bank
of Canada and its subsidiaries engage principally in personal and
commercial banking, insurance products, investment and trust services,
corporate and investment banking and on-line banking and transaction-
based services, including custody.
Dain Rauscher Stock Price
Shares of Dain Rauscher are listed on the New York Stock Exchange under the
symbol "DRC." On September 27, 2000, which was the last trading day before we
announced the merger, Dain Rauscher common stock closed at U.S. $79.88 per
share. See "Market Price for Dain Rauscher Common Stock."
Unanimous Board Recommendation
Dain Rauscher's board of directors has unanimously approved the merger and
unanimously recommends that Dain Rauscher stockholders vote to adopt the merger
agreement and approve the merger.
Fairness Opinion
Credit Suisse First Boston has delivered to Dain Rauscher's board of
directors its opinion, as of September 27, 2000, to the effect that as of that
date and based upon and subject to the matters stated in its opinion, the
merger consideration of U.S. $95 in cash per share is fair from a financial
point of view to the holders of Dain Rauscher common stock. See "Opinion of
Dain Rauscher's Financial Advisors."
Dain Rauscher's Reasons for the Merger
Dain Rauscher's board of directors consulted with senior management and Dain
Rauscher's financial and legal advisors and considered a number of factors,
including those set forth below, in reaching its decisions to approve the
merger agreement and the transactions contemplated by the merger agreement, and
to recommend that Dain Rauscher's stockholders vote "FOR" adoption of the
merger agreement.
. Background;
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. Merger consideration;
. Advice from Dain Rauscher's financial advisor;
. Review of prospects in remaining independent;
. Uncertain availability of alternative transactions;
. Certain terms of the merger agreement relating to alternative
transactions;
. Likelihood of closing; and
. Employee compensation and benefits.
The information and factors set forth above includes the material factors
considered by Dain Rauscher's board of directors. In view of the variety of
factors considered in connection with its evaluation of the merger, Dain
Rauscher's board of directors did not find it practicable to, and did not
quantify or otherwise assign relative or specific weight or values to any of
these factors, and individual directors may have given different weights to
different factors. See "The Merger--Dain Rauscher's Reasons for the Merger."
Royal Bank of Canada's Reasons for the Merger
In reaching its decision to approve the merger agreement and the
transactions contemplated by the merger agreement, Royal Bank of Canada's board
of directors considered a number of factors including those set forth below.
. Royal Bank of Canada's strategic priority to expand its U.S. operations;
. Building a U.S. wealth management capability;
. Use of Dain Rauscher's investment banking business to enhance Royal Bank
of Canada's ability to serve Canadian clients; and
. Revenue synergies.
See "The Merger--Royal Bank of Canada's Reasons for the Merger."
The Special Meeting of Stockholders
. Place, Date and Time. The special meeting will be held at the 12th Floor
Auditorium, Dain Rauscher Plaza, 60 South Sixth Street, Minneapolis,
Minnesota , at 9:00 a.m., local time, on January 10, 2001.
. What Vote is Required for Adoption of the Merger Agreement. The adoption
of the merger agreement requires the approval of the holders of a
majority of the outstanding shares of Dain Rauscher common stock
entitled to vote thereon. The failure to vote has the same effect as a
vote against adoption of the merger agreement.
. Who Can Vote at the Meeting. You can vote at the special meeting all of
the shares of Dain Rauscher common stock you own of record as of
November 27, 2000, which is the record date for the special meeting. If
you own shares that are registered in someone else's name, for example,
a broker, you need to direct that person to vote those shares or obtain
an authorization from them and vote the shares yourself at the meeting.
As of the close of business on November 27, 2000, there were 13,036,321
shares of Dain Rauscher common stock outstanding held by approximately
5,200 stockholders.
. Procedure for Voting. You can vote your shares by attending the special
meeting and voting in person or by mailing the enclosed proxy card or by
voting by telephone or by the Internet. You may revoke your proxy at any
time before the vote is taken at the meeting. To revoke your proxy, you
must either advise the Secretary of Dain Rauscher in writing, or deliver
a new proxy dated after the
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date of the proxy being revoked, before your common stock has been voted
at the special meeting, or attend the meeting and vote your shares in
person. Merely attending the special meeting will not constitute
revocation of your proxy. See "The Special Meeting of Dain Rauscher
Stockholders."
Shares Held by Directors and Executive Officers
As of November 27, 2000, approximately 8% of the outstanding shares of Dain
Rauscher common stock were held by directors and executive officers of Dain
Rauscher and their affiliates, and no shares of Dain Rauscher common stock
were held by Royal Bank of Canada. Dain Rauscher expects all of these shares
to be voted in favor of the proposal to adopt the merger agreement.
Dissenters' Rights of Appraisal
Delaware law provides you with appraisal rights in the merger. This means
that if you are not satisfied with the amount you are receiving in the merger,
you are entitled to have the value of your shares independently determined and
to receive payment based on that valuation. The ultimate amount you receive as
a dissenting stockholder in an appraisal proceeding may be more or less than,
or the same as, the amount you would have received in the merger. To exercise
your appraisal rights, you must deliver a written objection to the merger to
Dain Rauscher at or before the special meeting and you must not vote in favor
of adoption of the merger agreement. Your failure to follow exactly the
procedures specified under Delaware law will result in the loss of your
appraisal rights. See "Dissenters' Rights of Appraisal."
Material United States Federal Income Tax Consequences
The merger will be a taxable transaction to you. For United States federal
income tax purposes, your receipt of cash in exchange for your shares of Dain
Rauscher common stock generally may cause you to recognize a gain or loss
measured by the difference between the cash you receive in the merger and your
tax basis in your shares of Dain Rauscher common stock. You should consult
your own tax advisor for a full understanding of the merger's tax consequences
that are particular to you. See "Material United States Federal Income Tax
Considerations."
When the Merger Will Be Completed
We are working to complete the merger as soon as possible. We anticipate
completing the merger on January 10, 2001, following the special meeting,
subject to receipt of stockholder approval and satisfaction of other
requirements, including the conditions described immediately below. See
"Effective Time of the Merger."
Conditions to Completing the Merger
The completion of the merger depends on a number of conditions being
satisfied, including the following:
. adoption of the merger agreement by at least a majority of the
outstanding shares of Dain Rauscher common stock;
. expiration or termination of the Hart-Scott-Rodino waiting period;
. approval of governmental authorities required for the merger, including
the Canadian Minister of Finance and the New York Stock Exchange;
. the absence of any legal restraint blocking the merger;
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. Dain Rauscher's representations and warranties to Royal Bank of Canada,
as set forth in the merger agreement, shall be true and correct, except
where the failure to be true and correct would not have a material
adverse effect on Dain Rauscher;
. Royal Bank of Canada's and Viking Merger Subsidiary's representations
and warranties to Dain Rauscher, as set forth in the merger agreement,
shall be true and correct, except where the failure to be true and
correct would not have a material adverse effect on Royal Bank of
Canada;
. Dain Rauscher has performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior to
the closing of the merger;
. Royal Bank of Canada and Viking Merger Subsidiary have performed in all
material respects all obligations required to be performed by them under
the merger agreement at or prior to the closing of the merger; and
. employment agreements with some key Dain Rauscher employees remain in
full force and effect.
If the law permits, either Dain Rauscher or Royal Bank of Canada could
choose to waive a condition to its obligation to complete the merger even
though that condition has not been satisfied.
Interests of Directors and Officers in the Merger that Differ From Your
Interests
Some of Dain Rauscher's directors and officers have interests in the merger
that are different from, or are in addition to, their interests as stockholders
in Dain Rauscher. Dain Rauscher's board of directors knew about these
additional interests and considered them when they approved the merger
agreement. These interests include the following:
. some employee directors, officers and key employees, as determined by
the Chairman, Chief Executive Officer and President of Dain Rauscher, in
consultation with Royal Bank of Canada, will be eligible to participate
in a U.S. $200 million retention bonus pool consisting of retention
units which track the value of Royal Bank of Canada common stock which
will vest over a period of up to four years from the date of completion
of the merger;
. some of the officers and directors hold stock options and restricted
stock that will be converted in the merger into stock options and
restricted stock of Royal Bank of Canada;
. some of the directors and officers will continue as employees of Royal
Bank of Canada or Dain Rauscher, in some cases pursuant to written
employment agreements;
. some of the officers and directors will benefit from the acceleration of
vesting of benefits under certain stock and deferred compensation plans
on completion of the merger; and
. directors and officers of Dain Rauscher are entitled to indemnification
in certain circumstances pursuant to provisions in the merger agreement.
See "The Merger--Interests of Dain Rauscher's Directors and Officers in the
Merger."
The Merger
. Procedure for Receiving Merger Consideration. Royal Bank of Canada has
appointed Wells Fargo Shareowner Services, as paying agent, to
coordinate the payment of the cash merger consideration following the
merger. The paying agent will send you written instructions for
surrendering your certificates and obtaining the cash merger
consideration after we have completed the merger. See "The Merger
Agreement--Exchange Procedures."
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. Terminating the Merger Agreement. Dain Rauscher and Royal Bank of Canada
can mutually agree at any time to terminate the merger agreement without
completing the merger, even if the stockholders of Dain Rauscher have
approved it. Also, under certain circumstances either Dain Rauscher or
Royal Bank of Canada can decide, without the consent of the other, to
terminate the agreement prior to the closing of the merger, even if the
stockholders of Dain Rauscher have approved the merger agreement. See
"The Merger Agreement--Termination and the Effects of Termination."
. Fees and Expenses. Generally, whether or not the merger is consummated,
Dain Rauscher and Royal Bank of Canada are each responsible for their
respective expenses incurred in connection with the merger. Dain
Rauscher is required to pay a termination fee of U.S. $14.0 million to
Royal Bank of Canada if at any time prior to the special meeting, Dain
Rauscher's board of directors fails to recommend stockholder approval of
the merger agreement, withdraws its recommendation or modifies or
changes its recommendation in a manner adverse to the interests of Royal
Bank of Canada, or if Dain Rauscher or its board of directors recommends
that the Dain Rauscher stockholders approve any acquisition proposal
other than the merger. Royal Bank of Canada has agreed that the total
profit that it may receive upon payment of any termination fee payable
by Dain Rauscher under the merger agreement and exercise of the option
granted by Dain Rauscher to Royal Bank of Canada to purchase shares of
Dain Rauscher common stock will not exceed U.S. $50 million. See "The
Merger Agreement--Termination and the Effects of Termination--Fee if the
Merger Agreement is Terminated" and "--Expenses" and "Stock Option
Agreement."
Stock Option Agreement
Dain Rauscher entered into a stock option agreement with Royal Bank of
Canada that granted Royal Bank of Canada the option to acquire up to 2,571,451
shares of Dain Rauscher common stock, or approximately 19.9% of the outstanding
shares as of September 28, 2000. The exercise price of the option is U.S.
$79.88 per share, payable in cash.
Royal Bank of Canada required Dain Rauscher to grant the option as a
prerequisite to entering into the merger agreement. The stock option agreement
could have the effect of making an acquisition of Dain Rauscher by a third
party more costly because of the need to acquire in any such transaction the
option shares issued under the option agreement and could also jeopardize the
ability of a third party to acquire Dain Rauscher in a transaction to be
accounted for as a pooling-of-interests.
The option is not currently exercisable and may only be exercised by Royal
Bank of Canada under certain circumstances. Royal Bank of Canada has agreed
that the total profit that it may receive upon exercise of the option and
payment of any termination fee payable by Dain Rauscher under the merger
agreement will not exceed U.S. $50 million.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
1. Why is Dain Rauscher proposing the merger?
The board of directors of Dain Rauscher believes that the merger will
benefit you because the merger offers you an attractive premium over the
trading price of Dain Rauscher common stock prior to the announcement of the
merger. In addition the boards of directors of Royal Bank of Canada and Dain
Rauscher believe that combining the two companies' business will result in an
enterprise with a stronger global position and will create significant
opportunities for growth.
2. What will I receive for my Dain Rauscher common stock in the merger?
You will receive U.S. $95 in cash for each share of Dain Rauscher common
stock you own, if you choose not to or do not properly exercise your appraisal
rights under Delaware law. Some shares of restricted stock that do not, by
their terms, vest at or prior to the merger will be converted into restricted
Royal Bank of Canada shares.
3. What vote is required for Dain Rauscher stockholders to adopt the merger
agreement?
In order for the merger to be approved, holders of a majority of the
outstanding Dain Rauscher common stock entitled to vote thereon must vote "FOR"
adoption of the merger agreement. If your shares are not voted, it has the same
effect as a vote "AGAINST" adoption of the merger agreement. Proxies returned
to us but not marked to indicate your voting preference will be counted as
votes "FOR" adoption of the merger agreement.
4. What do I need to do now?
After carefully reading and considering the information contained in this
proxy statement, please vote your shares as soon as possible by telephone or by
the Internet, as described in the instructions on the enclosed proxy card, or
by filling out, signing, dating and returning the enclosed proxy card or by
attending the meeting.
5. If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
No. Your broker can vote your shares only if you provide instructions on how
to vote. You should instruct your broker on how to vote your shares using the
instructions provided by your broker. If you do not instruct your broker to
vote your shares, it has the same effect as a vote "AGAINST" adoption of the
merger agreement.
6. I hold share units in Dain Rauscher's retirement plan, can I vote those
share units at the special meeting?
Yes, each share unit you hold is entitled to one vote. You will receive
instructions from the trustee of the Retirement Plan as to how to vote your
share units.
7. Can I change my vote after I have mailed my proxy card?
Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You may revoke your proxy by notifying the Secretary of Dain
Rauscher in writing or by submitting a new proxy dated after the date of the
proxy being revoked or by submitting a new proxy by telephone or by the
Internet. In addition, your proxy will be revoked by you if you attend the
special meeting and vote in person. However, simply attending the special
meeting without voting will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the instructions received from that
broker to change your vote.
8. Do I need to attend the Dain Rauscher special meeting in person?
No. It is not necessary for you to attend the special meeting to vote your
shares if Dain Rauscher has previously received your proxy, although you are
welcome to attend.
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9. When will holders of Dain Rauscher common stock receive the merger
consideration?
The merger is expected to be completed promptly following the special
meeting of the Dain Rauscher stockholders. However, it is possible that delays
could require that the merger be completed at a later time. Following closing
of the merger, you will receive instructions on how to receive your cash
payment in exchange for each share of Dain Rauscher common stock. You must
return your Dain Rauscher stock certificates as described in the instructions,
and you will receive your cash payment as soon as practicable after Wells Fargo
Shareowner Services, the paying agent, receives your Dain Rauscher stock
certificate. If you hold shares through a brokerage account, your broker will
handle the surrender of stock certificates to .
10. Who will own Dain Rauscher after the merger?
After the merger, Dain Rauscher will be an indirect wholly owned subsidiary
of Royal Bank of Canada. Upon completion of the merger stockholders of Dain
Rauscher will no longer have any equity or ownership interest in Dain Rauscher,
or in Royal Bank of Canada, by virtue of their current ownership of Dain
Rauscher common stock.
11. Should I send in my Dain Rauscher stock certificates now?
No. After the merger is completed, Wells Fargo Shareowner Services, as
paying agent, will send you written instructions for exchanging your Dain
Rauscher stock certificates.
12. Will I owe taxes as a result of the merger?
The cash you receive in the merger in exchange for your shares of Dain
Rauscher common stock and any cash you may receive from exercising your
appraisal rights will be subject to United States federal income tax and also
may be taxed under applicable state, local and foreign tax laws. In general,
you may recognize gain or loss equal to the difference between the amount of
cash you receive and your adjusted tax basis in your shares of Dain Rauscher
common stock. We recommend that you read the section entitled "Material United
States Federal Income Tax Considerations" in this proxy statement for a more
detailed explanation of the tax consequences of the merger. You should consult
your tax advisor regarding the specific tax consequences of the merger
applicable to you.
13. Who can help answer my questions?
If you have additional questions about the merger or other matters discussed
in this proxy statement after reading this proxy statement, you should contact:
Dain Rauscher Corporation
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Secretary
Telephone: 612-371-2711
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy
statement, contain forward-looking statements based on estimates and
assumptions. Forward-looking statements include information concerning possible
or assumed future results of operations of each of Royal Bank of Canada and
Dain Rauscher as well as information relating to the merger. There are forward-
looking statements throughout this proxy statement, including, among others,
under the headings, "Summary Term Sheet," "Questions and Answers About the
Merger," "The Merger" and "Opinion of Dain Rauscher's Financial Advisors," and
in statements containing the words "believes," "expects," "anticipates,"
"intends," "estimates" or other similar expressions. For each of these
statements, Dain Rauscher claims the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995.
You should be aware that forward-looking statements involve known and
unknown risks and uncertainties. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that the actual results or developments we anticipate will be realized, or
even if realized, that they will have the expected effects on the business or
operations of each of Dain Rauscher and Royal Bank of Canada. These forward-
looking statements speak only as of the date on which the statements were made.
In addition to other factors and matters contained or incorporated in this
document, we believe the following factors could cause actual results to differ
materially from those discussed in the forward-looking statements:
. financial performance of each of Royal Bank of Canada and Dain Rauscher
through completion of the merger;
. changes in the capital markets served by us;
. risks from foreign operations and markets;
. the timing of, and regulatory and other conditions associated with, the
completion of the merger;
. intensified competitive pressures in the markets in which we compete;
. the loss of key employees; and
. general economic conditions.
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THE PARTIES TO THE MERGER
Dain Rauscher Corporation. Dain Rauscher, a Minneapolis, Minnesota-based
holding company formed in 1973, provides investment advice and services to
individual investors in the western United States and investment banking,
research and sales services to corporate and governmental clients nationwide
and in Europe through its principal subsidiary, Dain Rauscher Incorporated.
Dain Rauscher Incorporated deals in securities of, and is a market-maker in
securities of, issuers based throughout the United States and in Europe. Dain
Rauscher Incorporated's equity research, trading and investment banking
activities in recent years have evolved from a geographic orientation to one
focused on selected industry sectors. Dain Rauscher also clears and settles
securities trades on a fully disclosed basis for approximately 170
correspondent brokerage firms through its Dain Correspondent Services division,
which is based in St. Louis, Missouri. Another subsidiary, Insight Investment
Management Inc., serves as the investment advisor to the Great Hall(R)
Investment Funds, five open-ended money market mutual funds, and provides fixed
income portfolio management services to a variety of private accounts. Dain
Rauscher Lending Services Inc. was formed in 1997 to make certain types of
loans to customers that are collateralized by customers' control and restricted
securities. At September 30, 2000, Dain Rauscher had approximately 3,800
employees located in 27 states. Dain Rauscher is a Delaware corporation with
its executive offices located at Dain Rauscher Plaza, 60 South Sixth Street,
Minneapolis, Minnesota 55402-4422. Its telephone number is (612) 371-2711.
Royal Bank of Canada. Royal Bank of Canada is a Canadian chartered bank,
with its principal executive office located at 200 Bay Street, Toronto,
Ontario, Canada M5J 2J5. Shares of Royal Bank of Canada are listed on the
Toronto Stock Exchange and on the New York Stock Exchange. Royal Bank of Canada
ranks as Canada's largest financial institution as measured by assets, revenues
and net income as of April 30, 2000. As of October 31, 1999, its most recent
fiscal year end, Royal Bank of Canada was the ninth largest bank in North
America and among the 60 largest banks in the world, as measured by assets.
Royal Bank of Canada also has one of the leading insurance operations among
Canadian banks. Royal Bank of Canada and its subsidiaries engage principally in
personal and commercial banking, insurance products, investment and trust
services, corporate and investment banking and on-line banking and transaction-
based services, including custody.
Viking Merger Subsidiary. Viking Merger Subsidiary is a Delaware corporation
and an indirect wholly owned subsidiary of Royal Bank of Canada formed solely
for the purpose of engaging in the merger. Pursuant to the terms of the merger
agreement, at the effective time of the merger, Viking Merger Subsidiary will
be merged with and into Dain Rauscher, with Dain Rauscher being the surviving
corporation.
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THE SPECIAL MEETING OF DAIN RAUSCHER STOCKHOLDERS
Place, Date, Time and Purpose of the Special Meeting
The special meeting will be held at the 12th Floor Auditorium, Dain Rauscher
Plaza, 60 South Street, Minneapolis, Minnesota, on January 10, 2001 at 9:00
a.m. The purpose of the special meeting is to consider and vote on the proposal
to adopt the merger agreement.
The Dain Rauscher board of directors has determined that the merger is in
the best interests of Dain Rauscher and its stockholders, has unanimously
approved the merger agreement and recommends that Dain Rauscher stockholders
vote "FOR" the adoption of the merger agreement.
Who Can Vote at the Special Meeting
The holders of record of Dain Rauscher common stock as of the close of
business on November 27, 2000, which is the record date for the special
meeting, are entitled to receive notice of and to vote at the special meeting.
If you own shares that are registered in someone else's name, for example, a
broker, you need to direct that person to vote those shares or obtain an
authorization from them and vote the shares yourself at the meeting. On the
record date, there were 13,036,321 shares of Dain Rauscher common stock
outstanding held by approximately 5,200 stockholders. The number of
stockholders was determined by adding the number of record holders to the
estimated number of proxies to be sent to street name holders.
Vote Required
The adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of common stock entitled to
vote. Each share of common stock is entitled to one vote. Failure to vote your
proxy by telephone or by the Internet, to return a properly executed proxy card
or to vote in person will have the same effect as a vote "AGAINST" adoption of
the merger agreement.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for customers have the authority to vote on "routine" proposals
when they have not received instructions from beneficial owners. However,
brokers are precluded from exercising their voting discretion with respect to
the approval of non-routine matters such as adoption of the merger agreement
and, as a result, absent specific instructions from the beneficial owner of
such shares, brokers are not empowered to vote those shares, referred to
generally as "broker non-votes." Abstentions and properly executed broker non-
votes will be treated as shares that are present and entitled to vote at the
special meeting for purposes of determining whether a quorum exists and will
have the same effect as votes against adoption of the merger agreement.
The holders of a majority of the outstanding shares of Dain Rauscher common
stock entitled to be cast as of the record date, represented in person or by
proxy, will constitute a quorum for purposes of the special meeting. A quorum
is necessary to hold the special meeting. Once a share is represented at the
special meeting, it will be counted for the purpose of determining a quorum and
any adjournment of the special meeting, unless the holder is present solely to
object to the special meeting. However, if a new record date is set for an
adjourned meeting, then a new quorum will have to be established.
Voting by Proxy
This proxy statement is being sent to you on behalf of the board of
directors of Dain Rauscher for the purpose of requesting that you allow your
shares of Dain Rauscher common stock to be represented at the special meeting
by the persons named in the enclosed proxy card. All shares of Dain Rauscher
common stock represented at the meeting by proxies voted by telephone or the
Internet or by properly executed proxies will be voted in accordance with the
instructions indicated on that proxy. If you vote by telephone or by the
Internet or you sign and return a proxy card without giving voting
instructions, your shares will be voted as recommended by Dain Rauscher's board
of directors. The board unanimously recommends a vote "FOR" adoption of the
merger agreement.
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The persons named in the proxy card will use their own judgment to determine
how to vote your shares regarding any matters not described in this proxy
statement that are properly presented at the special meeting. Dain Rauscher
does not know of any matter to be presented at the meeting other than the
proposal to adopt the merger agreement.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either advise the Secretary of Dain
Rauscher in writing, deliver a proxy dated after the date of the proxy you wish
to revoke, submit a new proxy by telephone or by the Internet or attend the
meeting and vote your shares in person. Merely attending the special meeting
will not constitute revocation of your proxy.
If you hold share units under Dain Rauscher's Retirement Plan, you will
receive instructions from the trustee of the Retirement Plan as to how to vote
your share units. Each share unit is entitled to one vote.
If your Dain Rauscher common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow to
have your shares voted. Your broker or bank may allow you to deliver your
voting instructions via telephone or the Internet. Please see the instruction
form that accompanies this proxy statement.
Dain Rauscher will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, directors, officers and employees of Dain Rauscher
may solicit proxies personally and by telephone. None of these persons will
receive additional or special compensation for soliciting proxies. Dain
Rauscher will, upon request, reimburse brokers, banks and other nominees for
their expenses in sending proxy materials to their customers who are beneficial
owners and obtaining their voting instructions. Dain Rauscher has engaged
D.F. King & Co., Inc. to assist in the solicitation of proxies for the meeting
and will pay D.F. King a fee of approximately U.S. $9,000.
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THE MERGER
The discussion of the merger in this proxy statement is qualified by
reference to the merger agreement, which is attached to this proxy statement as
Appendix A. You should read the entire merger agreement carefully.
Background of the Merger
From time to time Dain Rauscher's management has had informal discussions
about possible strategic alliances involving Dain Rauscher and other securities
or financial services firms. In connection with such discussions with a
particular interested party about a potential strategic alliance, in February
2000, a mutual confidentiality agreement was signed and Credit Suisse First
Boston Corporation was retained and made a presentation to the Dain Rauscher
board concerning the performance and prospects of the securities industry and
Dain Rauscher, and an analysis of comparable companies and recent transactions
in the securities industry. The parties were not able to reach agreement upon
tentative terms and, as a result, the preliminary discussions terminated in
March 2000.
In late March, 2000, Mr. Weiser was contacted by a representative of Lazard
Freres & Co. concerning an interest expressed in Dain Rauscher by Royal Bank of
Canada. Mr. Weiser was given information about Royal Bank of Canada and a
meeting was arranged. At a meeting on April 5, 2000, representatives of Royal
Bank of Canada explained how an alliance of the two companies could provide an
enhanced U.S. presence for Royal Bank of Canada while providing additional
resources for Dain Rauscher. Mr. Weiser indicated that a transaction between
Dain Rauscher and Royal Bank of Canada should only proceed based on a well
articulated strategy for the enhanced future prospects and growth of both
firms.
During an executive session at the end of a regularly scheduled Dain
Rauscher board meeting on April 27, 2000, there were further discussions
concerning the Company's strategies and alternatives.
Mr. Weiser met with two senior executives of Royal Bank of Canada in
Minneapolis, Minnesota on June 21, 2000, to hold further preliminary
discussions. A group of senior officers from Dain Rauscher met with their
counterparts from Royal Bank of Canada in Toronto on July 21 and July 26, 2000,
to discuss Royal Bank of Canada's and Dain Rauscher's respective wealth
management and capital markets businesses. Following these meetings, Mr. Weiser
discussed with Dain Rauscher management various factors regarding a potential
strategic transaction between Royal Bank of Canada and Dain Rauscher. Mr.
Weiser then met with Mr. Cleghorn, the Chairman and Chief Executive Officer of
Royal Bank of Canada, and other representatives of Royal Bank of Canada on
August 4, 2000, for further discussions.
At a meeting of Dain Rauscher's board of directors on August 11, 2000, the
board of directors heard presentations on the strategies and direction of each
of Dain Rauscher's businesses. In an executive session attended by Dain
Rauscher's general counsel and an attorney from Dorsey & Whitney, the board
discussed strategic alternatives involving Dain Rauscher, including a
discussion of Dain Rauscher's strategies and prospects if it were to remain
independent. Mr. Weiser briefed the board on his discussions with
representatives of Royal Bank of Canada and the tentative valuation range he
believed they were considering. Mr. Weiser also explained that he had been
contacted by a representative of the potential strategic partner with whom
discussions had taken place earlier in the year. This potential partner
indicated that it would now be willing to tentatively consider a higher value
range than had been discussed earlier in the year if a different form of
consideration were used. A presentation prepared by Credit Suisse First Boston
showing conditions in the securities industry and updating the prior study on
recent transactions was presented by management. Mr. Weiser also reviewed Dain
Rauscher's financial performance relative to the industry and updated
expectations for the year and Dain Rauscher's stock performance relative to
other securities firms, the market, and the two potential strategic partners
during the year. The board did not take any formal action but concurred with
Mr. Weiser's recommendation to continue to explore available opportunities.
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Following the August 11th board meeting, there were additional discussions
with the earlier potential strategic partner regarding the possibility of
increasing the value being offered for Dain Rauscher. It was ultimately
concluded that no additional value would be offered by the earlier potential
strategic partner, and discussions terminated.
At the same time, discussions between representatives of Dain Rauscher and
Royal Bank of Canada continued. During meetings and phone calls in late August
and early September 2000, Royal Bank of Canada presented Mr. Weiser with its
strategic vision for using Dain Rauscher as its U.S. growth platform in the
wealth management and capital markets businesses. These discussions also
included strategic opportunities that the combined firms could pursue in the
European equity capital markets arena.
It appeared to Dain Rauscher management that Royal Bank of Canada would make
a proposal involving terms that were improved over those previously suggested.
On September 19, 2000, a special meeting of the board of directors was held to
discuss a possible transaction with Royal Bank of Canada. Representatives of
Credit Suisse First Boston and Dain Rauscher's general counsel and outside
counsel were in attendance. Mr. Weiser advised the directors what had occurred
since their last meeting. Credit Suisse First Boston updated the board with
respect to the market valuation of Dain Rauscher and comparable firms and
transactions. Legal counsel advised the board on its legal responsibilities and
anticipated legal requirements in connection with any possible transaction. No
formal action was taken by the board of directors at that time but it was the
sense of the board that the terms being discussed were generally satisfactory
and Mr. Weiser was authorized and directed to proceed to negotiate the final
terms.
From September 19 through September 23, 2000, Royal Bank of Canada conducted
extensive due diligence on Dain Rauscher. During that week there were various
discussions between lawyers and investment bankers for each of the parties on
various issues. On September 21, 2000, Royal Bank of Canada provided a first
draft of the proposed merger agreement. The parties negotiated that draft and
other terms of the transaction.
In connection with a meeting of Dain Rauscher's board of directors in August
2000, management of Dain Rauscher had prepared an updated "forecast" of Dain
Rauscher's results for 2000, based upon partial year-to-date results and
management's estimate of future performance for the remainder of 2000. Such
estimates were provided on a confidential basis to Royal Bank of Canada as a
part of its due diligence review of Dain Rauscher during September 2000. As of
early August, management forecasted net revenues for 2000 of approximately $1.1
billion, net income of approximately $104 million and earnings per share of
$7.20. These estimates were developed based on assumptions which management
believed to be reasonable at that time concerning market conditions and company
performance during the balance of 2000, including an assumption that the equity
and fixed income capital markets would improve late in the third quarter and
into the fourth quarter of 2000. Such estimates were consistent with the
average of the 2000 earnings estimates published by the independent analysts
following Dain Rauscher at that time.
These estimates were not prepared with a view to public disclosure or
compliance with published guidelines established by the SEC or the American
Institute of Certified Public Accountants regarding projections. The estimates
are included in this proxy statement solely because such information was
provided to Royal Bank of Canada. These estimates were based on market
conditions and management's beliefs concerning possible company performance for
the balance of 2000 as of early August 2000 and do not reflect actual
performance, changes in market conditions or other changes in management's
estimates since that time. In addition, the $7.20 earnings per share forecast
does not reflect the impact of the announced acquisition on the number of fully
diluted shares that would be used in the earnings per share calculation if such
calculation were to be performed on a current basis. As a result of these and
other factors, you are cautioned not to base your analysis of Dain Rauscher's
business and prospects upon these estimates. Neither Dain Rauscher's auditor
nor any other independent accountants compiled, examined or performed any
procedures with respect to the estimates, and Dain Rauscher's auditors disclaim
any association with the foregoing prospective financial information.
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On the evening of September 27, 2000, the Dain Rauscher board of directors
met, was updated by Mr. Weiser on the status of discussions, heard
presentations by, and received an oral fairness opinion, later confirmed in
writing, from, Credit Suisse First Boston, received a description by legal
counsel of the terms of the transaction and authorized the merger agreement,
grant of the 19.9% stock option and various other related documents and
matters. There were final negotiations on the specific terms of the definitive
merger agreement, which was signed the morning of September 28, 2000.
Dain Rauscher's Reasons for the Merger
Dain Rauscher's board of directors consulted with senior management and Dain
Rauscher's financial and legal advisors and considered a number of factors,
including those set forth below, in reaching its decision to approve the merger
agreement and the transactions contemplated by the merger agreement, and to
recommend that Dain Rauscher's stockholders vote "FOR" adoption of the merger
agreement.
. Background. Dain Rauscher's board of directors was knowledgeable about
the progress that Dain Rauscher had made in the last few years, was
aware of other purchases and sales of securities firms (including its
own acquisitions), the recent activity in sales of regional and national
securities firms and recent inquiries and discussions about the possible
purchase of Dain Rauscher. It was also aware of the length of time that
the Royal Bank of Canada and the prior strategic transaction proposals
were under consideration, the fact that no superior proposals were made
during that period and that numerous other transactions had been
announced during that period. As described under "--Background of the
Merger" Dain Rauscher's board of directors held numerous meetings during
the year preceding approval to understand comparable transactions and
contacts made to and discussions with the management of Dain Rauscher by
various third parties.
. Merger Consideration. In addition to the analysis and presentations by
Dain Rauscher's financial advisor referred to in "Opinion of Dain
Rauscher's Financial Advisor" below which were based upon comparable
companies, comparable transactions and discounted cash flow analyses,
Dain Rauscher's board of directors reviewed the price to book multiple
(which was 3.0x, and 4.0x on a tangible basis, and which it believed to
be the most prevalent benchmark comparison in the securities industry)
of recent transactions and other multiples and determined that the ratio
represented by the Royal Bank of Canada proposal was favorable. In
addition, the board of directors looked at the premium represented by
the merger consideration compared to recent trading prices (U.S. $79.88
on September 27, 2000, a 19% premium) and the premium offered over
trading prices before the announced acquisition of PaineWebber (U.S.
$65.00 on July 7, 2000, a 46.2% premium).
. Advice from Dain Rauscher's Financial Advisor. Dain Rauscher's board of
directors considered the detailed presentations made by Credit Suisse
First Boston, Dain Rauscher's financial advisor, with respect to the
merger and the proposed consideration offered to the holders of Dain
Rauscher common stock in the merger, which are discussed further below
under "Opinion of Dain Rauscher's Financial Advisor," and Credit Suisse
First Boston's oral opinion, subsequently confirmed in writing, to the
effect that, as of the date of its opinion, the merger consideration to
be received by the holders of Dain Rauscher common stock was fair, from
a financial point of view, to the holders of Dain Rauscher common stock.
The full text of this opinion is attached to this proxy statement as
Appendix C.
. Review of Prospects in Remaining Independent. Dain Rauscher's board of
directors considered Dain Rauscher's financial condition, results of
operations and business and earnings prospects, including its prospects,
if it were to remain independent in light of the relevant factors,
including the consolidation and other developments occurring in the
securities industry.
. Uncertain Availability of Alternative Transactions. Dain Rauscher's
board of directors considered that, while Dain Rauscher had been
contacted from time to time in the past by various third parties
expressing an interest in a possible transaction with Dain Rauscher,
there was uncertainty whether an alternative transaction would be
available in the future on terms more favorable to Dain Rauscher's
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stockholders than the Royal Bank of Canada proposal, and discussions
with the other potential strategic partners had either failed to proceed
beyond the exploratory stage or failed to result in a transaction that
was as favorable.
. Certain Terms of the Merger Agreement Relating to Alternative
Transactions. The Dain Rauscher board of directors considered the terms
of the merger agreement, including the terms relating to termination of
the agreement by Dain Rauscher, and the terms of the stock option
agreement with Royal Bank of Canada under which Royal Bank of Canada has
the option to acquire up to 19.9% of Dain Rauscher's outstanding shares
as of September 27, 2000. The exercise price of the option is U.S.
$79.88 per share, payable in cash.
The board of directors noted that the termination payment provisions of
the merger agreement and the stock option agreement could have the
effect of discouraging alternative proposals for a business combination
between Dain Rauscher and a third party. On balance, however, the board
of directors determined that the amount and terms of the termination
fee and the stock option, are customary for transactions of this size
and type, were required to induce Royal Bank of Canada to enter into
the merger agreement and would not preclude any such alternative
proposals from being made.
. Likelihood of Closing. The board of directors considered the limited
nature of the closing conditions included in the merger agreement,
including regulatory consents and the likelihood that the merger would
be approved by requisite regulatory authorities and adoption of the
merger agreement by Dain Rauscher's stockholders.
. Employee Compensation and Benefits. The board of directors considered
the provisions of the merger agreement and other employment arrangements
that protect the benefits, compensation, employment, severance and
termination plans or other arrangements afforded to Dain Rauscher
employees, including the provisions that certain stock options will be
exercisable for Royal Bank of Canada common stock and certain restricted
stock will be converted into Royal Bank of Canada common stock. The
board also considered the matters described under "Interests of Certain
Persons in the Merger--Employment Agreements." The board of directors
also considered that the merger agreement provides for a retention
program in an aggregate amount of U.S. $200 million including retention
grants to some key employees who were required to enter into employment
agreements as a condition to Royal Bank of Canada's willingness to enter
into the merger agreement.
. Taxability; No Participation in Future Growth. The board of directors
also considered that the merger will be a taxable transaction to Dain
Rauscher's stockholders and that because Dain Rauscher stockholders are
receiving cash for their stock, they will not participate in the future
growth of either Dain Rauscher or Royal Bank of Canada.
The foregoing discussion of the information and factors considered by Dain
Rauscher's board of directors, while not exhaustive, includes the material
factors considered by the board of directors. In view of the variety of factors
considered in connection with its evaluation of the merger, Dain Rauscher's
board of directors did not find it practicable to, and did not, quantify or
otherwise assign relative or specific weight or values to any of these factors,
and individual directors may have given different weights to different factors.
Recommendation of Dain Rauscher's Board of Directors
After careful consideration, Dain Rauscher's board of directors has
unanimously determined that the merger agreement is advisable and in the best
interests of Dain Rauscher and its stockholders, has unanimously determined
that the merger is fair to, and in the best interests of, the stockholders of
Dain Rauscher, has unanimously approved the merger agreement, and unanimously
recommends that Dain Rauscher stockholders vote "FOR" the adoption of the
merger agreement.
Opinion of Dain Rauscher's Financial Advisor
Credit Suisse First Boston Corporation has acted as financial advisor to
Dain Rauscher in connection with the merger. Credit Suisse First Boston was
selected by Dain Rauscher based on Credit Suisse First Boston's experience,
expertise and familiarity with Dain Rauscher and its business. Credit Suisse
First Boston is an
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internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in transactions like the proposed
merger.
In connection with Credit Suisse First Boston's engagement, Dain Rauscher
requested that Credit Suisse First Boston evaluate the fairness to Dain
Rauscher's stockholders, from a financial point of view, of the consideration
to be received by Dain Rauscher's stockholders in the merger. On September 27,
2000, at a meeting of Dain Rauscher's board of directors to review and consider
the merger, Credit Suisse First Boston rendered to Dain Rauscher's board an
oral opinion to the effect that, as of such date and based upon and subject to
matters stated in its opinion, the consideration to be paid in the merger was
fair to the holders of common stock of Dain Rauscher, other than Royal Bank of
Canada and its affiliates, from a financial point of view. Credit Suisse First
Boston confirmed its oral opinion of September 27, 2000 by delivery of a
written opinion dated the same date.
Credit Suisse First Boston's opinion speaks only as of September 27, 2000.
Credit Suisse First Boston has rendered its opinion without considering any
fact or circumstance occurring after September 27, 2000, and therefore Credit
Suisse First Boston has not rendered an opinion as to whether the consideration
to be paid in the merger is fair to the holders of common stock of Dain
Rauscher from a financial point of view as of the date of this proxy statement.
Events could occur before the special meeting of Dain Rauscher's
stockholders which could result in a different valuation or conclusion. In the
event that there is any material change to the terms of the merger or other
material change or condition affecting Dain Rauscher or its business, the board
of directors will consider the advisability of requesting an updated fairness
opinion at that time. However, Credit Suisse First Boston is not obligated to
update its opinion, and Credit Suisse First Boston will have to evaluate
whether it would be able to give an updated fairness opinion based on the then
prevailing facts and circumstances. As of the date of this proxy statement, the
board of directors does not believe any such material changes have occurred.
The full text of Credit Suisse First Boston's written opinion dated
September 27, 2000, which sets forth the assumptions made, matters considered
and limitations on the review undertaken, is attached as Appendix C to this
proxy statement. You should read the opinion carefully in its entirety. The
summary of the opinion of Credit Suisse First Boston set forth in this document
is qualified in its entirety by reference to the full text of the opinion.
The opinion of Credit Suisse First Boston is directed to Dain Rauscher's
board of directors and relates only to the fairness of the merger consideration
from a financial point of view. The opinion does not address any other aspect
of the merger and does not constitute a recommendation to any stockholder as to
how a stockholder should vote at the special meeting.
In arriving at its opinion, Credit Suisse First Boston reviewed certain
publicly available business and financial information relating to Dain
Rauscher, as well as a draft of the merger agreement. Credit Suisse First
Boston also reviewed certain other information, including financial forecasts,
provided to it by Dain Rauscher and met with Dain Rauscher's management to
discuss the business and prospects of Dain Rauscher. Credit Suisse First Boston
also considered certain financial and stock market data of Dain Rauscher, and
Credit Suisse First Boston compared those data with similar data for other
publicly held companies in businesses similar to Dain Rauscher, and Credit
Suisse First Boston considered, to the extent publicly available, the financial
terms of certain other business combinations and other transactions which have
recently been effected or announced. Credit Suisse First Boston also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which it deemed relevant. Dain Rauscher
placed no limitations on Credit Suisse First Boston with respect to the
investigations made or procedures followed by it in rendering its opinion.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied on its being complete and accurate in all material respects. With
respect to the financial forecasts, Credit Suisse First Boston assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of Dain Rauscher's management as to the future
financial performance of Dain Rauscher. Credit Suisse First Boston also assumed
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that the definitive merger agreement conforms in all respects material to its
analysis to the draft reviewed by Credit Suisse First Boston. In addition,
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of Dain Rauscher, nor was Credit Suisse First Boston furnished with
any such evaluations or appraisals. Credit Suisse First Boston's opinion is
necessarily based upon financial, economic, market and other conditions as they
existed and could be evaluated on the date of its opinion. Credit Suisse First
Boston was not requested to, and did not, determine or recommend the specific
amount of consideration payable in the merger, which was determined by arms'-
length negotiations between Dain Rauscher and Royal Bank of Canada.
In preparing its opinion to Dain Rauscher's board of directors, Credit
Suisse First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses set forth below does not purport to be a complete description of the
analyses underlying Credit Suisse First Boston's opinion, but rather sets forth
a description of the material analyses performed by Credit Suisse First Boston
for the purposes of its opinion. In arriving at its opinion, Credit Suisse
First Boston made qualitative judgments as to the significance and relevance of
each analysis and factor considered by it. Credit Suisse First Boston did not
quantify or otherwise assign relative weights to the specific analyses it
performed. Accordingly, Credit Suisse First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying its analyses and its
opinion.
In addition, the following description of the financial analyses made by
Credit Suisse First Boston includes information presented in tabular format. In
order to fully understand the financial analyses performed by Credit Suisse
First Boston, the tables must be read together with the text of each
description. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables without considering the
full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by Credit
Suisse First Boston.
No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to Dain Rauscher or the proposed merger,
nor is an evaluation of the results of such analyses entirely mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics and other factors that could affect
the acquisition, public trading or other values of the companies, transactions
or business segments being analyzed. In its analyses, Credit Suisse First
Boston made numerous assumptions with respect to Dain Rauscher, industry
performance, general business, economic, and financial market conditions and
other matters, many of which are beyond Dain Rauscher's control. The estimates
contained in Credit Suisse First Boston's analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.
Credit Suisse First Boston's opinion and analyses were only one of many
factors considered by Dain Rauscher's board of directors in its evaluation of
the merger and should not be viewed as determinative of the views of Dain
Rauscher's board of directors or management with respect to the consideration
to be paid in the proposed merger or the merger itself.
The following is a summary of the material procedures followed, findings and
recommendations, and the basis for and methods of arriving at such findings and
recommendations, by Credit Suisse First Boston in connection with its opinion
dated September 27, 2000.
Summary of Transaction
Credit Suisse First Boston reviewed the summary terms of the transaction for
the Board of Directors including the fact that Royal Bank of Canada proposed to
pay in cash $95.00 per share of Dain Rauscher
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common stock. This represented a premium to the market price of such common
stock, as traded on the New York Stock Exchange, as follows:
<TABLE>
<S> <C>
From September 27, 2000 (the last full trading day prior to
announcement of the merger).................................... 18.9%
Over the 30-day closing average from August 26 to September 27,
2000........................................................... 19.7%
From December 31, 1999.......................................... 104.0%
</TABLE>
Based on selected financial data of Dain Rauscher, Credit Suisse First
Boston calculated for Dain Rauscher transaction multiples, on a fully diluted
basis, to: last twelve months' net revenues, last twelve months' earnings per
share, year 2000 estimated earnings per share, book value, and tangible book
value.
<TABLE>
<S> <C>
Last 12 Months' Net Revenues........................................ 1.29x
Last 12 Months' Earnings Per Share.................................. 13.6x
Year 2000E Earnings Per Share....................................... 13.2x
Book Value.......................................................... 3.01x
Tangible Book Value................................................. 4.01x
</TABLE>
Year 2000 estimates are based on I/B/E/S International Inc., an industry
service provider of earnings information.
Comparable Companies Analysis
Using publicly available information, Credit Suisse First Boston analyzed
certain financial and stock market data for three selected companies in the
retail brokerage industry that Credit Suisse First Boston considered to be
comparable to Dain Rauscher. Credit Suisse First Boston compared such data,
after applying an equity control premium of 20%, with comparable data for Dain
Rauscher. In performing this analysis, Credit Suisse First Boston reviewed
selected financial data for the following selected companies:
. A.G. Edwards;
. Morgan Keegan; and
. Raymond James.
For each of the selected companies and for Dain Rauscher, Credit Suisse
First Boston calculated multiples of the equity value of Dain Rauscher to: last
twelve months' net revenues, last twelve months' earnings per share, year 2000
estimated earnings per share, book value, and tangible book value.
Credit Suisse First Boston's analysis of the selected companies resulted in
the following range of multiples:
<TABLE>
<CAPTION>
Relevant Peer
Multiple Range Median
-------------- ------
<S> <C> <C>
Last 12 Months' Net Revenue.......................... 0.97x -- 1.57x 1.29x
Last 12 Months' Earnings Per Share................... 12.3x -- 12.7x 12.5x
Year 2000E Earnings Per Share........................ 11.5x -- 12.4x 11.5x
Book Value........................................... 2.10x -- 2.67x 2.22x
Tangible Book Value.................................. 2.10x -- 2.67x 2.34x
</TABLE>
Financial data used to calculate the multiples for the selected companies
was based on market data reported by those companies in their most recent
regulatory filings as of September 25, 2000, and year 2000 estimates are based
on I/B/E/S International Inc., an industry service provider of earnings
information. An equity control premium of 20% was derived from the average
control premium in relevant transactions since 1997. In addition, all per share
data was calculated on the assumption that there are 14.85 million shares
outstanding, on a fully-diluted basis. Based on the analysis described above,
Credit Suisse First Boston derived an equity value reference range of $80.00 to
$100.00 per share of Dain Rauscher common stock.
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Comparable Transactions Analysis
Using publicly available information, Credit Suisse First Boston analyzed
the following nine transactions involving acquisitions by banks of broker-
dealers that were announced during the period from April 1997 to August 2000:
. Bankers Trust/Alex Brown;
. First Union/Wheat First;
. US Bancorp/Piper Jaffray;
. KeyCorp/McDonald;
. Wachovia/Interstate Johnson;
. First Union/Everen;
. Wells Fargo/Ragen MacKenzie;
. Chase/Hambrecht & Quist; and
. The MONY Group/Advest.
For each of the selected transactions, Credit Suisse First Boston calculated
multiples for: last twelve months' net revenues; last twelve months' earnings
per share; current year estimated earnings per share; book value; and tangible
book value.
Credit Suisse First Boston's analysis of these selected transactions
resulted in the following range of multiples:
<TABLE>
<CAPTION>
Comparable Comparable
Range Median
------------ ----------
<S> <C> <C>
Last 12 Months' Net Revenue............................. 0.82x--3.08x 1.33x
Last 12 Months' Earnings Per Share...................... 13.3x--20.5x 16.1x
Year 2000E Earnings Per Share........................... 12.3x--18.1x 15.6x
Book Value.............................................. 1.98x--4.04x 2.42x
Tangible Book Value..................................... 2.05x--4.69x 2.63x
</TABLE>
Based on the analysis described above, Credit Suisse First Boston derived an
equity value reference range of $77.00 to $109.00 per share of Dain Rauscher
common stock.
Discounted Cash Flow Analysis
Credit Suisse First Boston performed a discounted cash flow analysis of Dain
Rauscher's projected after-tax free cash flows. This analysis was based on
forecasts for a five year period through calendar year 2005, utilizing
estimated calendar year 2000 earnings and a long term growth supplied by
I/B/E/S International and assumed a 10% required tangible equity to assets
ratio. Credit Suisse First Boston estimated the present value of the cash flow
available for distribution to Dain Rauscher's stockholders and estimated the
terminal value based on multiples ranging from 10x to 12x the projected 2005
calendar year net income of Dain Rauscher.
Credit Suisse First Boston then calculated implied equity values by
utilizing discount rates ranging from 13.0% to 15.0%. Credit Suisse First
Boston arrived at these discount rates based on its judgment of the cost of
equity for the same three companies selected for Credit Suisse First Boston's
analysis of comparable companies, and arrived at these terminal value multiples
based upon the current values of such selected companies.
Based upon this analysis, Credit Suisse First Boston derived an equity value
reference range of $80.00 to $100.00 per share of Dain Rauscher common stock.
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Engagement of Credit Suisse First Boston
Pursuant to the terms of Credit Suisse First Boston's engagement as Dain
Rauscher's financial advisor, Dain Rauscher has agreed to pay Credit Suisse
First Boston a total fee of $9.9 million, $1.25 million of which became payable
upon the delivery of Credit Suisse First Boston's opinion. Payment of the
remainder of its fee is contingent upon the consummation of the proposed
merger. Dain Rauscher has also agreed to reimburse Credit Suisse First Boston
for its out-of-pocket expenses and to indemnify Credit Suisse First Boston
against liabilities resulting from or arising out of its engagement.
In the past, Credit Suisse First Boston and its affiliates have provided
financial advice and services to both Dain Rauscher and Royal Bank of Canada in
connection with matters unrelated to this merger for which Credit Suisse First
Boston and its affiliates have received compensation.
In the ordinary course of its business, Credit Suisse First Boston and its
affiliates may actively trade the debt and equity securities of both Dain
Rauscher and Royal Bank of Canada for Credit Suisse First Boston's and its
affiliates' own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Royal Bank of Canada's Reasons for the Merger
One of Royal Bank of Canada's strategic priorities is the expansion of its
U.S. operations in businesses in which Royal Bank of Canada is strong in Canada
and sees opportunities for growth in the United States. In that regard, the
acquisition of Dain Rauscher, with its capabilities in wealth management and
investment banking, is consistent with Royal Bank of Canada's U.S. growth
strategy.
With respect to Dain Rauscher's full service brokerage, the acquisition
represents a major step for Royal Bank of Canada in building a U.S. wealth
management capability and will approximately double the size of Royal Bank of
Canada's existing full service brokerage operations globally as measured by
revenues, assets under administration and the number of employees considered
investment advisers under Canadian securities laws. It also provides a base for
further growth, both internally and through acquisitions.
Dain Rauscher's investment banking business enhances Royal Bank of Canada's
ability to serve Canadian clients as they access U.S. capital markets, and
provides additional resources for U.S. equity origination and distribution.
Dain Rauscher has a strong position in equity origination and distribution for
companies in the technology and energy sectors--two sectors Royal Bank of
Canada has targeted for growth in the United States.
Royal Bank of Canada expects revenue synergies between this acquisition and
its existing operations, including the potential sale of products of Security
First Network Bank and Prism Financial Corporation, each a subsidiary of Royal
Bank of Canada, to Dain Rauscher's wealth management customers. In the
corporate and investment banking business, Dain Rauscher's clients could be
provided RBC Dominion Securities, a subsidiary of Royal Bank of Canada, high-
yield bonds, mergers and acquisitions advice and credit and treasury products.
RBC Dominion Securities' Canadian clients could be offered Dain Rauscher's U.S.
research, underwriting and capital markets services.
Interests of Dain Rauscher's Directors and Officers in the Merger
Some of Dain Rauscher's directors and officers have interests in the merger
that are different from, or are in addition to, their interests as stockholders
in Dain Rauscher. Dain Rauscher's board of directors knew about these
additional interests and considered them when they approved the merger
agreement. These interests include the following:
. Retention Bonus Pool. Some officers and key employees, as determined by
the Chairman, Chief Executive Officer and President of Dain Rauscher, in
consultation with Royal Bank of Canada, will be eligible to participate
in a retention bonus pool consisting of U.S. $200 million in retention
units
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which track the value of Royal Bank of Canada common stock. The
retention unit awards will vest over a period of up to four years from
the date of the completion of the merger.
. Stock Options and Restricted Stock. Some of the officers and directors
hold stock options and restricted stock that were granted on or after
January 28, 2000 that will be converted into stock options and
restricted stock of Royal Bank of Canada. Stock options that were
granted prior to January 28, 2000, other than certain options held by
Mr. Weiser, whether or not currently exercisable will be canceled after
completion of the merger and the holder of the option will be entitled
to receive an amount in cash equal to the difference between U.S. $95
and the exercise price per share of the Dain Rauscher option multiplied
by the number of Dain Rauscher shares previously subject to that option.
Mr. Weiser's option to purchase 150,000 shares, at an exercise price of
U.S. $50 per share, granted January 4, 2000, will be converted into an
option to purchase Royal Bank of Canada common stock as described below.
Restrictions on restricted stock awards granted prior to January 28,
2000 generally will lapse upon completion of the merger. Stock options
and restricted shares of Dain Rauscher that are converting into stock
options and restricted shares of Royal Bank of Canada generally become
fully vested by the second anniversary of the completion of the merger.
. Benefit Plans. All unvested account balances under Dain Rauscher's
Management Deferred Stock Plan and Wealth Accumulation Plan will become
vested and the entire account balances will be distributed to
participants in these plans upon completion of the merger. All unvested
account balances under the Directors' Deferred Compensation Plan will
become vested and the entire account balance will be distributed to
participants in this plan upon completion of the merger.
. Employment Agreements. Irving Weiser entered into an employment
agreement with Dain Rauscher on September 28, 2000 to serve as the
Chairman and Chief Executive Officer of Dain Rauscher after completion
of the merger. The employment agreement becomes effective upon the
completion of the merger and continues until December 31, 2003. Pursuant
to this employment agreement, Mr. Weiser will receive an annual base
salary of U.S. $300,000 and a guaranteed bonus of at least U.S. $3
million during each year of the term of his employment agreement.
Pursuant to the retention program, on the effective date of the merger,
Mr. Weiser will also be granted retention units with a fair market value
equal to U.S. $6.5 million which will vest over a three-year period. In
addition, Mr. Weiser agreed that for a one-year period following the
date the merger is completed, he would not exercise the option granted
to him on January 4, 2000, to purchase 150,000 shares of the Company's
stock at a purchase price of U.S. $50.00 per share, an aggregate gain
value on the effective date of the merger of U.S. $6.75 million. This
option which by its terms would have become fully vested upon completion
of the merger, will be converted into an option to purchase shares of
common stock of Royal Bank on the same terms applicable to other options
being converted into options of Royal Bank stock. The restriction on Mr.
Weiser's ability to exercise this option would lapse if Mr. Weiser's
employment were to terminate for any reason during such one-year period
or if Royal Bank were to be merged or the subject of a tender or
exchange offer for over 50% of its outstanding stock.
Mr. Weiser's employment agreement provides that in the event Mr.
Weiser's employment is terminated other than for cause or disability, or
if Mr. Weiser terminates his employment for good reason, the combined
company will provide the following severance benefits:
. an amount equal to Mr. Weiser's annual salary and guaranteed bonus
that has accrued to the date of termination, but has not been paid
and an amount equal to the amount of salary and guaranteed bonus that
Mr. Weiser would have received had he remained employed throughout
the term of his employment agreement;
. for the remainder of Mr. Weiser's life and that of his wife, the
combined company will provide medical and dental benefits to Mr.
Weiser and his wife on the same basis that such benefits are provided
to similarly situated senior executives, provided that such benefits
are not otherwise available from another employer other than certain
non-profit or non-commerical employers;
. the retention units that Mr. Weiser received will vest and be paid
immediately;
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. any unvested long-term incentive awards or other incentive awards
will vest and become immediately exercisable free of restrictions, to
the extent those restrictions relate to continued employment; and
. the combined company will pay Mr. Weiser any other amounts or
benefits that he is eligible to receive under any plan, program,
policy or practice or contract or agreement of the combined company
and its affiliated companies through the date of termination.
The employment agreement provides that if any payment made by the
combined company to or for the benefit of Mr. Weiser, whether or not
paid pursuant to the terms of the employment agreement, would be subject
to excise tax payments under Section 4999 of the Internal Revenue Code,
then Dain Rauscher will make an additional payment to Mr. Weiser in an
amount that, after deducting all federal, state and local taxes imposed
on the additional payment, and the excise tax, will equal the tax
payable by Mr. Weiser.
Mr. Weiser's employment agreement also includes confidentiality
provisions which survive termination of employment and noncompetition
and nonsolicitation provisions which endure for the longer of three
years from the completion of the merger or one year from the date of
termination of employment.
. Peter Grant entered into an employment agreement with Dain Rauscher on
September 28, 2000 to serve as the President and Chief Operating Officer
of the Equity Capital Markets Division of Dain Rauscher after completion
of the merger. The employment agreement becomes effective upon the
completion of the merger and continues until December 31, 2003. Pursuant
to this employment agreement, Mr. Grant will receive an annual base
salary of U.S. $200,000 and a guaranteed bonus of at least U.S. $3.5
million during each year of the term of his employment agreement.
Pursuant to the retention program, on the effective date of the merger,
Mr. Grant will also be granted retention units with a fair market value
equal to U.S. $13.5 million which will vest over a three-year period.
The employment agreement provides that in the event Mr. Grant's
employment is terminated other than for cause or disability, or if Mr.
Grant terminates his employment for good reason, the combined company
will provide the following severance benefits:
. an amount equal to Mr. Grant's annual salary and guaranteed bonus
that has accrued to the date of termination, but has not been paid
and an amount equal to the amount of salary and guaranteed bonus that
Mr. Grant would have received had he remained employed throughout the
term of his employment agreement;
. for the remainder of Mr. Grant's life and that of his wife, the
combined company will provide medical and dental benefits to Mr.
Grant and his wife on the same basis that such benefits are provided
to similarly situated senior executives, provided that such benefits
are not otherwise available from another employer other than certain
non-profit or non-commercial employers;
. the retention units that Mr. Grant received will vest and be paid
immediately;
. any unvested long-term incentive awards or other incentive awards
will vest and become immediately exercisable free of restrictions, to
the extent those restrictions relate to continued employment; and
. the combined company will pay Mr. Grant any other amounts or benefits
that he is eligible to receive under any plan, program, policy or
practice or contract or agreement of Dain Rauscher and its affiliated
companies through the date of termination.
The employment agreement provides that if any payment made by the
combined company to or for the benefit of Mr. Grant, whether or not paid
pursuant to the terms of the employment agreement, would be subject to
excise tax payments under Section 4999 of the Internal Revenue Code,
then Dain Rauscher will make an additional payment to Mr. Grant in an
amount that, after deducting all federal, state and local taxes imposed
on the additional payment, and the excise tax, will equal the tax
payable by Mr. Grant.
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The employment agreement also includes confidentiality provisions which
survive termination of employment and noncompetition and nonsolicitation
provisions which endure for the longer of three years from the
completion of the merger or one year from the date of termination of
employment.
. Three additional key employees will continue as employees of Dain
Rauscher after the effective time pursuant to written employment
agreements that were entered into on September 28, 2000 pursuant to
which these employees will receive guaranteed base salary, bonus and
grants of retention units under the retention program.
. Tax Gross-Up Payments. The value of the acceleration of vesting of
equity awards under Dain Rauscher's stock incentive plans may result in
excess parachute payments to some Dain Rauscher employees within the
meaning of Section 280G of the Internal Revenue Code. Dain Rauscher's
board of directors has adopted a resolution that will provide an
additional payment to these employees in an amount that, after deducting
all federal, state and local taxes imposed on such additional payment
and the excise tax, will equal the excise tax payable by the employees.
The purpose of this resolution is to assure that the employees retain
the economic value of the stock options granted by Dain Rauscher.
. Indemnification. Dain Rauscher's certificate of incorporation and the
merger agreement contain provisions regarding indemnification of the
directors and officers of Dain Rauscher and the merger agreement
provides for the maintenance of directors' and officers' insurance for a
period of six years after the effective time of the merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the merger to holders of Dain Rauscher common stock. The
discussion is based upon the Internal Revenue Code, Treasury regulations, IRS
rulings and judicial and administrative decisions in effect as of the date of
this proxy statement. Due to the complexity of the Internal Revenue Code, the
following discussion is limited to the material federal income tax aspects of
the merger for a stockholder of Dain Rauscher who is a citizen or resident of
the United States and who, on the date on which the merger is completed, holds
shares of Dain Rauscher common stock as a capital asset. The general tax
principles discussed below are subject to retroactive changes that may result
from amendments to the Internal Revenue Code after the date of this proxy
statement. The following discussion does not address taxpayers subject to
special treatment under the federal income tax laws, such as insurance
companies, financial institutions, dealers in securities, tax-exempt
organizations, S corporations and taxpayers subject to the alternative minimum
tax. In addition, the following discussion may not apply to stockholders who
acquired their shares of Dain Rauscher common stock upon the exercise of
employee stock options or otherwise as compensation or who hold their shares as
part of a hedge, straddle or conversion transaction. The following discussion
does not address potential foreign, state, local and other tax consequences of
the Merger. All stockholders are urged to consult their own tax advisors
regarding the federal income tax consequences, as well as the foreign, state
and local tax consequences of the disposition of their shares in the merger.
For federal income tax purposes, the merger will be treated as a taxable
sale or exchange of Dain Rauscher common stock for cash by each Dain Rauscher
stockholder (including any stockholder who properly exercises dissenters'
rights) other than any holder of restricted shares to be converted into Royal
Bank restricted stock. Accordingly, the federal income tax consequences to the
Dain Rauscher stockholders receiving cash will generally be as follows:
. The stockholder may recognize a capital gain or loss by reason of the
disposition of his, her or its shares of Dain Rauscher common stock
pursuant to the merger.
. The capital gain or loss, if any, will be long-term with respect to
shares of Dain Rauscher common stock held for more than 12 months as of
the effective time of the merger.
. The amount of capital gain or loss to be recognized by each stockholder
will be measured by the difference between the amount of cash received
by the stockholder in connection with the merger, or
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<PAGE>
cash received in connection with the exercise of dissenter's rights, and
the stockholder's tax basis in the shares of Dain Rauscher common stock
at the effective time of the merger.
Cash payments made pursuant to the merger, including any cash paid to a
stockholder who properly exercises dissenters' rights, will be reported to the
extent required by the Internal Revenue Code to Dain Rauscher stockholders and
the Internal Revenue Service. These amounts will ordinarily not be subject to
withholding of U.S. federal income tax. However, backup withholding of the tax
at a rate of 31% may apply to a stockholder who fails to supply Dain Rauscher
or Wells Fargo Shareowner Services, as paying agent, with the stockholder's
taxpayer identification number or fails to report all interest and dividends
required to be shown on the stockholder's federal income tax returns.
Accordingly, each Dain Rauscher stockholder will be asked to provide a correct
taxpayer identification number on a Substitute Form W-9 which is to be
included in the appropriate letter of transmittal for the shares of Dain
Rauscher common stock. Withholding may also apply to Dain Rauscher
stockholders who are otherwise exempt from this withholding, such as a non-
resident alien, if that person fails to properly document its status as an
exempt recipient.
ACCOUNTING TREATMENT
The merger will be accounted for by the use of the purchase method of
accounting, in accordance with International Accounting Standards. This means
that Royal Bank of Canada will record as goodwill the excess of the purchase
price of Dain Rauscher over the fair value of Dain Rauscher's identifiable
assets, including intangible assets, and liabilities.
REQUIRED REGULATORY APPROVALS
The consummation of the merger is subject to a number of regulatory
approvals that are described below. While Royal Bank of Canada and Dain
Rauscher have no reason to believe that they will not be able to obtain these
regulatory approvals in a timely manner and without the imposition of
burdensome conditions, they cannot be certain that these approvals will be
obtained within the period of time contemplated by the merger agreement or on
conditions that would not be detrimental to the combined company or at all.
Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
rules promulgated under that legislation, Royal Bank of Canada and Dain
Rauscher cannot complete the merger until they notify and furnish information
to the Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice, and specified waiting period requirements are
satisfied. Royal Bank of Canada and Dain Rauscher filed notification and
report forms under the Hart-Scott-Rodino Act with the FTC and the Antitrust
Division on , 2000.
At any time before or after completion of the merger, the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the merger or seeking divestiture of substantial assets of
Royal Bank of Canada or Dain Rauscher. Private parties may also bring actions
under the antitrust laws under certain circumstances. Although Royal Bank of
Canada and Dain Rauscher believe that the merger is legal under the antitrust
laws, there can be no assurance that a challenge to the merger on antitrust
grounds will not be made or, if a challenge is made, that it will not be
successful.
Canadian Approvals
Under applicable Canadian law, the merger constitutes a substantial
investment by Royal Bank of Canada in a financial institution and other
entities. Accordingly, prior written approval of the Canadian Minister of
Finance on the recommendation of the Canadian Superintendent of Financial
Institutions is required before the merger can be completed.
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Broker-Dealer Regulations
Because Dain Rauscher owns a registered broker-dealer, Royal Bank of Canada
and Dain Rauscher must make certain filings with, or give notifications to, a
number of U.S. federal, state and foreign governmental and self-regulatory
agencies, and securities and other exchanges, before the merger is completed.
Other Applications and Notices
Royal Bank of Canada and Dain Rauscher conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the merger. Royal Bank of Canada
and Dain Rauscher are currently in the process of reviewing whether other
filings or approvals may be required or desirable in other jurisdictions. Royal
Bank of Canada and Dain Rauscher have no reason to believe that any of these
requirements cannot be satisfied within the time period contemplated by the
merger agreement. Either or both parties may not complete some of these filings
or obtain some of these approvals prior to the effective time of the merger if,
as a matter of practice, they are not required to be obtained prior to the
effectiveness of the merger transaction.
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THE MERGER AGREEMENT
This section describes the material terms of the merger agreement. The
description in this section is not complete. You should read the merger
agreement, and the other information that is incorporated by reference in this
proxy statement, carefully and in its entirety for a more complete
understanding of the merger. The complete text of the merger agreement is
attached to this proxy statement as Appendix A and is incorporated by reference
into this proxy statement.
The Merger
Viking Merger Subsidiary, a Delaware corporation and an indirect wholly
owned subsidiary of Royal Bank of Canada, will merge with and into Dain
Rauscher. Viking Merger Subsidiary was created solely for the purposes of the
merger and has no significant assets and no operations of its own.
Effective Time of the Merger
The merger will become effective when Royal Bank of Canada and Dain Rauscher
file a certificate of merger with the Secretary of State of the State of
Delaware or at a later time as specified in the certificate of merger. The
closing of the merger will take place on a date that is not later than the
third business day after the conditions contained in the merger agreement have
been satisfied or waived or at the election of Royal Bank of Canada the last
business day of the month in which such day occurs, or on another date agreed
upon by Royal Bank of Canada and Dain Rauscher.
Royal Bank of Canada's Right to Revise the Structure of the Merger
Royal Bank of Canada may elect to restructure the merger:
. so that Dain Rauscher is merged into Viking Merger Subsidiary or another
wholly owned subsidiary of Royal Bank of Canada; or
. so that an indirect wholly owned subsidiary other than Viking Merger
Subsidiary is merged into Dain Rauscher.
Royal Bank of Canada may not restructure the merger as set forth above if
the restructuring would:
. alter or change the amount or kind of merger consideration;
. adversely change the treatment of holders of Dain Rauscher options; or
. materially impede or delay the consummation of the transactions
contemplated by the merger agreement.
Consideration to be Received in the Merger
At the time the merger becomes effective, each issued and outstanding share
of Dain Rauscher common stock, other than shares held by Royal Bank of Canada
or its subsidiaries, shares held by Dain Rauscher as treasury shares, certain
shares of restricted stock to be converted into shares of Royal Bank of Canada
stock or shares held by stockholders exercising dissenters' rights, will be
canceled and converted into the right to receive U.S. $95 in cash without
interest.
Exchange Procedures
Promptly after the effective time of the merger, Wells Fargo Shareowner
Services as paying agent, will mail to each former holder of record of Dain
Rauscher common stock a letter with instructions on how to exchange Dain
Rauscher stock certificates for the cash merger consideration.
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Please do not send in your Dain Rauscher stock certificates until you
receive the letter of transmittal and instructions from Wells Fargo Shareowner
Services. Do not return your stock certificates with the enclosed proxy card.
If your shares of Dain Rauscher stock are held through a broker, your broker
will surrender your shares for cancellation.
After you mail the letter of transmittal, duly executed and completed in
accordance with its instructions, and your stock certificates to Wells Fargo
Shareowner Services, Royal Bank of Canada will cause your check to be mailed to
you. The Dain Rauscher stock certificates you surrender will be canceled. After
the completion of the merger, there will be no further transfers of Dain
Rauscher common stock, and Dain Rauscher stock certificates presented for
transfer after the completion of the merger will be canceled and exchanged for
the merger consideration. If payment is to be made to a person other than the
registered holder of the shares of Dain Rauscher common stock, the certificate
surrendered must be properly endorsed or in proper form for transfer and any
transfer or similar taxes must be paid by the person requesting the transfer or
that person must establish to Royal Bank of Canada's satisfaction that such tax
is not applicable.
If your Dain Rauscher stock certificates have been lost, stolen or
destroyed, you will have to prove your ownership of those certificates and that
they were lost, stolen or destroyed before you receive any consideration for
your shares. Wells Fargo Shareowner Services will send you instructions on how
to provide such evidence.
If you do not return a completed letter of transmittal and your Dain
Rauscher stock certificates to Wells Fargo Shareowner Services within 180 days
after the effective time of the merger, you may be required to look to Royal
Bank of Canada, as a general creditor of Royal Bank of Canada, for payment of
the cash merger consideration.
Representations and Warranties
The merger agreement contains a number of customary representations and
warranties made by Dain Rauscher and Royal Bank of Canada relating to
themselves and their respective subsidiaries. Dain Rauscher has made
representations and warranties regarding, among other things:
. its due organization, good standing and qualification;
. its capital stock;
. its subsidiaries;
. its corporate power, authority and action;
. its governmental filings, reports, SEC documents and financial
statements;
. the absence of any violations as a result of the merger agreement;
. the absence of undisclosed liabilities;
. the absence of certain changes or events;
. its properties and securities;
. litigation and regulatory actions;
. its compliance with laws and registrations with appropriate authorities;
. its investment advisory clients and activities;
. environmental matters;
. its use of brokers or finders;
. its compensation and benefit plans;
. the absence of knowledge of any reason for regulatory approvals to be
withheld;
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. its labor relations;
. its insurance;
. its tax matters;
. its use of derivatives;
. its accounting contracts and proprietary rights;
. its intellectual property;
. the opinion of Credit Suisse First Boston;
. the existence of certain non-competition contracts; and
. its Rights Plan.
Royal Bank of Canada has made representations and warranties regarding,
among other things:
. its due organization, good standing and authority;
. its corporate authority and action;
. its governmental filings;
. the absence of any violations as a result of the merger agreement;
. the absence of knowledge of any reason why regulatory approvals would be
withheld;
. the availability of funds;
. the interim operations of Viking Merger Subsidiary;
. its use of brokers and finders; and
. its legal proceedings and regulatory actions.
Conduct of Business Pending the Merger
During the period from the signing of the merger agreement until the merger
becomes effective, Dain Rauscher has agreed, subject to the exceptions
specified in the merger agreement and plans disclosed to Royal Bank of Canada
in connection with the merger agreement, that Dain Rauscher and each of its
subsidiaries, among other things:
. will carry on its business in the ordinary and usual course and, to the
extent consistent with that obligation, will use its reasonable best
efforts to preserve its business organizations and assets and maintain
its rights, franchises and existing relations with clients, customers,
suppliers, counterparties, employees and business associates;
. will not, and will not enter into an agreement to, issue, sell or
otherwise permit to become outstanding, or authorize the creation of,
any additional shares of capital stock of Dain Rauscher or any of its
subsidiaries, nor will it permit any additional shares of its capital
stock to become subject to new grants of rights, options or similar
stock-based rights, with certain exceptions specified in conversations
with Royal Bank of Canada;
. will not declare, set aside for payment, or pay any dividend or other
distribution on the capital stock of Dain Rauscher or any of its
subsidiaries, other than dividends or distributions from wholly owned
subsidiaries of Dain Rauscher to Dain Rauscher or another of its wholly
owned subsidiaries and regular quarterly cash dividends on common stock
at a rate not to exceed U.S. $0.22 per share per quarter;
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. will not adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire any shares of Dain Rauscher capital stock;
. will not enter into, amend, modify or renew any employment, consulting,
severance or similar contract except as specified in or in connection
with the merger agreement;
. will not increase the salary, wages or other benefits of employees
except as specified in or in connection with the merger agreement;
. will not enter into, establish, adopt or amend in any material respect,
except as specified in or in connection with the merger agreement, any
benefit plan in respect of any director, officer or employee of Dain
Rauscher or any of its subsidiaries or take any action to accelerate
vesting thereunder;
. will not sell, transfer, mortgage, encumber or otherwise dispose of, or
permit the creation of any lien in respect of, or discontinue any
material amount of its assets, businesses or properties, except in the
ordinary course of business consistent with past practice;
. will not acquire assets, business or properties, except in the ordinary
course of business consistent with past practice;
. will not amend the corporate governance documents of Dain Rauscher or
any of its subsidiaries;
. will not implement or adopt any change in accounting principles or
material accounting practices except as may be required by a change in
U.S. GAAP;
. will not make or change any material tax election, change any method of
tax accounting, file any tax return or settle any dispute with respect
to a material amount of taxes;
. will not enter into, amend or terminate material contracts, except in
the ordinary course of business consistent with past practice;
. will not settle any material claim, except those involving solely money
damages and meeting the other conditions set out in the merger
agreement;
. will not knowingly take any action that is reasonably likely to result
in any of Dain Rauscher's representations or warranties being untrue
such that a condition to the merger would not be satisfied;
. will not knowingly take any action that is reasonably likely to result
in any of the conditions to the merger not being satisfied;
. will not knowingly engage in a new line of business or acquire assets
not currently held by Dain Rauscher or its subsidiaries that would not
be permissible for a United States financial holding company or that
would subject Royal Bank of Canada or Dain Rauscher or any of their
respective subsidiaries to regulation by a government entity that does
not presently regulate them or whose regulation is materially different
from regulations that are currently applicable to Royal Bank of Canada
or Dain Rauscher;
. will not incur debt other than in the ordinary course of business
consistent with past practice;
. except to the extent required, based on the written advice of outside
counsel, in the exercise of the fiduciary obligations of Dain Rauscher
or one of its subsidiaries to an investment company, will not request
that any action be taken by any board of trustees of that investment
company, other than routine actions that could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect
on Dain Rauscher or any investment company;
. will not agree, commit to or enter into any agreement to take any of the
actions discussed above.
In addition, during the period from the signing of the merger agreement
until the merger becomes effective, Royal Bank of Canada has agreed, subject to
exceptions specified in the merger agreement and plans disclosed to Dain
Rauscher in connection with the merger agreement, that it and each of its
subsidiaries will
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not knowingly take any action reasonably likely to result in any of Royal Bank
of Canada's representations and warranties being untrue such that a condition
to the merger would not be satisfied or any of the conditions to the Merger
Agreement would not be satisfied.
No Solicitation of Acquisition Proposals
Dain Rauscher has agreed that it will not, and it will use its reasonable
best efforts to cause its officers, directors, agents, advisors and affiliates
not to, solicit or encourage inquiries or proposals with respect to, or engage
in any negotiations concerning, or provide any confidential information to, or
have any discussions with, any person relating to any acquisition proposal
other than that contemplated by the merger agreement. However, Dain Rauscher
and its board of directors have the right to:
. make any disclosure to Dain Rauscher's stockholders if, in the good
faith judgment of its board of directors, failure to do so would be
inconsistent with its obligations under applicable law;
. provide information to, or engage in such discussions or negotiations
with, any person who has made a bona fide written acquisition proposal,
received after September 28, 2000, that did not result from the breach
of Dain Rauscher's obligations not to solicit or engage in discussions
or negotiations with respect to an acquisition proposal except as
contemplated in the merger agreement, if the acquisition proposal is a
superior proposal, Dain Rauscher's board of directors, after having
consulted with and considering the advice of outside counsel, has
determined in good faith that providing such information or engaging in
such negotiations or discussions is required under Delaware law, and
Dain Rauscher has received a confidentiality agreement from the person
making the proposal; and
. recommend an acquisition proposal to its stockholders, and withdraw its
favorable recommendation of the merger, if the acquisition proposal is a
superior proposal, Dain Rauscher's board of directors, after having
consulted with and considering the advice of outside counsel, has
determined in good faith that making the recommendation is required
under Delaware law and Dain Rauscher has received a confidentiality
agreement from the person making the superior proposal.
A superior proposal is an acquisition proposal by a third party on terms
that Dain Rauscher's board of directors determines in its good faith judgment,
after consultation with its financial advisors, to be more favorable from a
financial point of view to Dain Rauscher's stockholders than the merger and the
other transactions contemplated by the merger agreement. In making this
determination, the board must consider the likelihood of consummation of the
third-party transaction on the terms set forth in the third-party proposal,
taking into account all legal, financial, regulatory and other aspects of that
proposal and any other relevant factors permitted under applicable law. The
Dain Rauscher board must also notify Royal Bank of Canada that, absent action
on the part of Royal Bank of Canada, it would consider the third-party
acquisition proposal to be a superior proposal and must give Royal Bank of
Canada at least five business days to respond to the third-party acquisition
proposal. The Dain Rauscher board must then consider any amendment or
modification to the merger agreement proposed by Royal Bank of Canada in
response to this proposal in determining whether it is a superior proposal.
Dain Rauscher has also agreed to:
. terminate any activities, discussions or negotiations with any parties
regarding acquisition proposals conducted prior to the date the merger
agreement was signed; and
. notify Royal Bank of Canada promptly of receipt of any acquisition
proposal and its material terms, including the identity of the person
making the acquisition proposal.
Stock Plans and Other Employee Benefits
Royal Bank of Canada has agreed that following the merger it will cause
various obligations under Dain Rauscher's stock plans and employee benefits
plans to continue, pursuant to their terms.
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Stock Options, Restricted Stock and Other Stock Plans
Prior to the effective time of the merger, Dain Rauscher will use its
reasonable best efforts to take such actions as may be necessary, including
obtaining consents from option holders if necessary, so that as of the
effective time of the merger each option to purchase Dain Rauscher shares that
was granted prior to January 28, 2000, other than options granted to Irving
Weiser pursuant to an option agreement between Mr. Weiser and Dain Rauscher
dated January 4, 2000, whether or not then exercisable, is canceled. The
holders of each option that is canceled will be entitled to receive, upon
surrender of the option, an amount in cash equal to the difference between U.S.
$95 and the exercise price per share of the Dain Rauscher option multiplied by
the number of Dain Rauscher shares previously subject to that Dain Rauscher
option.
At the effective time of the merger, each then-outstanding option to
purchase Dain Rauscher shares that was granted by Dain Rauscher on or after
January 28, 2000, whether vested or unvested, will be assumed by Royal Bank of
Canada and converted into an option to acquire a number of whole shares of
Royal Bank of Canada common stock on the same terms and conditions as set forth
in Dain Rauscher's stock plan as in existence immediately prior to the
effective time, equal to the product of:
. the number of Dain Rauscher shares subject to the option,
. an exchange ratio equal to a fraction, the numerator of which is U.S.
$95 and the denominator of which is the average of the closing price of
the Royal Bank of Canada shares on the New York Stock Exchange for the
five trading days immediately preceding the date of the merger,
The per share exercise price, rounded to the nearest cent, will be equal to:
. the exercise price per Dain Rauscher share purchasable pursuant to the
option, divided by
. the exchange ratio referred to above.
At the effective time of the merger, each option to purchase Dain Rauscher
shares that was granted to Mr. Weiser pursuant to the January 4, 2000, option
agreement will be assumed by Royal Bank of Canada on the terms set forth above
and will be exercisable according to the terms of an employment agreement
between Mr. Weiser and Dain Rauscher dated September 28, 2000.
Dain Rauscher and Royal Bank of Canada will take those actions as may be
necessary to cause each share of restricted Dain Rauscher common stock issued
after January 28, 2000, to remain outstanding until, and to be converted at,
the effective time of the merger into a number of shares of restricted Royal
Bank of Canada equal to the product of one multiplied by the exchange ratio and
rounded to the nearest whole number of shares. The shares of restricted Royal
Bank of Canada common stock will be subject to the same terms and conditions as
the restricted Dain Rauscher common stock.
Other Employee Benefits
Dain Rauscher and Royal Bank of Canada have agreed that, after completion of
the merger:
. Royal Bank of Canada or the combined company will honor, in accordance
with their terms, all benefit obligations to Dain Rauscher employees
accrued as of the effective time of the merger and all employee
severance obligations under plans and policies in existence on September
28, 2000; and
. for one year after the effective time of the merger, Royal Bank of
Canada or the combined company will provide Dain Rauscher employees with
employee benefits that are substantially comparable to those provided by
Dain Rauscher to its employees or former employees immediately prior to
the merger.
In addition, to ensure that the combined company will have the benefit of
continuity of employment, Dain Rauscher will cooperate with Royal Bank of
Canada prior to the effective time of the merger to establish compensation
practices applicable after the effective time comparable to those currently
applied by Dain Rauscher, and it is the intention of Dain Rauscher and Royal
Bank of Canada that these practices may be amended as necessary to ensure that
Dain Rauscher remains competitive in its ability to attract talented personnel
and to meet its business needs.
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Pursuant to the merger agreement, a retention bonus pool will be allocated
among key employees of Dain Rauscher, as determined by the Chairman, Chief
Executive Officer and President of Dain Rauscher, in consultation with Royal
Bank of Canada, consisting of U.S. $200 million in retention units, which track
the value of Royal Bank of Canada common stock and which will vest over a
period of up to four years.
Indemnification; Directors' and Officers' Insurance
After the merger, Royal Bank of Canada, to the fullest extent permitted
under applicable law, will cause the surviving entity to indemnify and hold
harmless the individuals who immediately prior to the merger were directors or
officers of Dain Rauscher against all costs arising from or relating to or
otherwise in respect of any actual or threatened claim or action arising out of
matters existing before or at the effective time of the merger.
Royal Bank of Canada will use reasonable best efforts to require the
surviving entity to provide, for a period of six years after the merger becomes
effective, directors' and officers' liability insurance that will reimburse
present and former officers and directors of Dain Rauscher or its subsidiaries
for claims against them arising from events that occurred before the effective
time of the merger, in coverage and amounts that are no less than, and on terms
that are no less advantageous in any material respect than, that provided by
Dain Rauscher, provided that Royal Bank of Canada will not be required to spend
more than 200% of the amount currently spent by Dain Rauscher for that
insurance.
Additional Covenants
The merger agreement contains additional covenants regarding the conduct of
the parties prior to the merger, some of which are described below.
Reasonable Best Efforts
Subject to the terms of the merger agreement, Dain Rauscher and Royal Bank
of Canada will use their reasonable best efforts in good faith to take, or
cause to take, all actions, and to do, or cause others to do, all things
necessary, proper or desirable, or advisable under applicable laws, so as to
permit consummation of the merger as promptly as practicable. Each party will
cooperate fully with the other to that end.
Stockholder Meetings
Dain Rauscher and Royal Bank of Canada will cooperate to file with the
Securities and Exchange Commission any documents necessary to complete the
merger. Dain Rauscher will take all action necessary to convene a special
meeting of its stockholders as promptly as practicable after September 28,
2000, at which the holders of Dain Rauscher's common stock will consider the
adoption of the merger agreement, even if the board makes no recommendation
with respect to this proposal or recommends that the stockholders reject this
proposal unless the merger agreement is terminated before the date of the
special meeting.
The board of directors of Dain Rauscher will recommend to its stockholders
the adoption of the merger agreement and will use its best reasonable efforts,
subject to the terms of the merger agreement and applicable law, to solicit
that adoption, subject to the right of the board to withdraw its recommendation
under certain circumstances.
Regulatory Applications; Consents
Dain Rauscher, Royal Bank of Canada and their respective subsidiaries will
cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings, notices, applications, consents,
registrations, approvals, permits or authorizations with, to or of all third
parties and governmental authorities necessary to consummate the transactions
contemplated by the merger agreement as promptly as reasonably practicable.
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Conditions to Consummation of the Merger
The obligations of the parties to the merger agreement are subject to the
fulfillment or waiver of various conditions as described in this section.
Conditions to Royal Bank of Canada's and Dain Rauscher's Obligations
Royal Bank of Canada and Dain Rauscher are obligated to complete the merger
only if each of the following conditions is satisfied or waived:
. The merger agreement must be adopted by the holders of a majority of the
outstanding shares of Dain Rauscher common stock.
. All approvals, consents and authorizations of, filings and registrations
with, and applications and notifications to all governmental authorities
and other third parties required for the consummation of the merger must
have been obtained or made and must be in full force and effect and all
waiting periods required by law must have expired other than those that,
if they were not obtained or made or if they had not expired, would not
reasonably be expected to have a material adverse effect on Royal Bank
of Canada or Dain Rauscher. No governmental or regulatory consent will
be deemed obtained or made if it is subject to any condition or
restriction the effect of which, together with any other such conditions
or restrictions, would be reasonably likely to have a material adverse
effect on the surviving corporation in the merger or Royal Bank of
Canada after the merger.
. No governmental authority may have enacted or issued any statute, rule,
injunction or other order that restrains or prohibits the consummation
of the merger and the related transactions.
Canadian Approvals
Under applicable Canadian law, the merger constitutes a substantial
investment by Royal Bank of Canada in a financial institution and other
entities. Accordingly, prior written approval of the Canadian Minister of
Finance on the recommendation of the Canadian Superintendent of Financial
Institutions is required before the merger can be completed.
Conditions to the Obligations of Dain Rauscher
Dain Rauscher will be obligated to complete the merger only if each of the
following conditions is satisfied or waived:
. The representations and warranties of Royal Bank of Canada must be true
and correct as of the date of the merger agreement and as of the date of
closing, except where the failure to be true and correct would not have
a material adverse effect on Royal Bank of Canada, and Dain Rauscher
must have received a certificate to that effect, dated the closing date,
signed by a senior executive officer on behalf of Royal Bank of Canada.
. Royal Bank of Canada and Viking Merger Subsidiary must have performed
all obligations required by the merger agreement at or prior to the
closing date, and Dain Rauscher must have received a certificate to that
effect, dated the closing date, signed by a senior executive officer on
behalf of Royal Bank of Canada.
Conditions to the Obligations of Royal Bank of Canada and Viking Merger
Subsidiary
Royal Bank of Canada and Viking Merger Subsidiary will be obligated to
complete the merger only if each of the following conditions is satisfied or
waived:
. The representations and warranties of Dain Rauscher must be true and
correct as of the date of the merger agreement and as of the date of
closing, except where the failure to be true and correct would not have
a material adverse effect on Dain Rauscher, and Royal Bank of Canada
must have received a certificate to that effect, dated the closing date,
signed by Dain Rauscher's Chief Executive Officer and Chief Financial
Officer on behalf of Dain Rauscher.
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. Dain Rauscher must have performed in all material respects all
obligations required by the merger agreement at or prior to the closing
date, and Royal Bank of Canada must have received a certificate to that
effect, dated the closing date, signed by Dain Rauscher's Chief
Executive Officer and Chief Financial Officer on behalf of Dain
Rauscher.
. The employment agreements of Irving Weiser, Peter Grant and certain
other key employees must be in full force and effect and each person is
employed by Dain Rauscher as of the closing and has not committed an act
or omission that would permit termination "for cause" under their
respective employment agreements. This condition would not be considered
unsatisfied if either Mr. Weiser or Mr. Grant, or any or all of the
other key employees, were to die or become disabled.
Termination and the Effects of Termination
The merger agreement may be terminated under the circumstances described in
this section. In some cases this may require Dain Rauscher to pay a termination
fee which is described in the next section.
Termination by Royal Bank of Canada or Dain Rauscher
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger:
. by the mutual consent of Royal Bank of Canada, Viking Merger Subsidiary
and Dain Rauscher;
. by Royal Bank of Canada or Dain Rauscher, in the event of:
. a breach by the other party of any representation, warranty,
covenant or agreement contained in the merger agreement, which
breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of the breach; and
. which breach, individually or in the aggregate with other breaches,
would cause a condition of the merger agreement not to be satisfied
or is reasonably likely to prevent, materially delay or materially
impair the ability of the parties to consummate the merger;
. by Royal Bank of Canada or Dain Rauscher if the merger is not completed
on or before March 31, 2001;
. by Royal Bank of Canada or Dain Rauscher, if the approval of any
governmental authority required for consummation of the merger has been
denied by final non-appealable action of the governmental authority, as
further discussed in the merger agreement;
. by Royal Bank of Canada, if Dain Rauscher's stockholders fail to approve
the merger;
. by Royal Bank of Canada, if at any time prior to the special meeting,
Dain Rauscher's board of directors fails to recommend stockholder
approval of the merger agreement, withdraws its recommendation to
approve the merger agreement, or modifies or changes its recommendation
in a manner adverse to the interests of Royal Bank of Canada; or
. by Royal Bank of Canada, if Dain Rauscher or its board of directors
recommends that Dain Rauscher's stockholders approve any acquisition
proposal other than the merger.
Fee if the Merger Agreement is Terminated
Dain Rauscher must pay to Royal Bank of Canada a cash termination fee of
U.S. $14 million if Royal Bank of Canada terminates the merger agreement:
. at any time prior to the special meeting because Dain Rauscher's board
of directors fails to recommend stockholder approval of the merger
agreement, withdraws its recommendation to approve
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the merger agreement, or modifies or changes its recommendation in a
manner adverse to the interests of Royal Bank of Canada; or
. because Dain Rauscher or its board of directors recommends that Dain
Rauscher's stockholders approve any acquisition proposal other than the
merger.
The payment of this fee is in addition to any other rights that Royal Bank
of Canada has under the merger agreement, the stock option agreement described
below or otherwise. Royal Bank of Canada has agreed that the total profit that
it may receive upon exercise of the option and payment of any termination fee
payable by Dain Rauscher under the merger agreement will not exceed U.S. $50
million. See "Stock Option Agreement."
Expenses
Each party will bear all expenses incurred by it in connection with the
merger agreement.
Amendment and Waiver
Before the merger, any provision of the merger agreement may be waived by
the party benefited by the provision in a written document signed by that
party, or amended or modified at any time by an agreement in writing executed
in the same manner as the merger agreement. However, after the stockholders of
Dain Rauscher adopt the merger agreement, no amendment may be made which under
applicable law would require further approval of the stockholders without
obtaining the required further approval.
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STOCK OPTION AGREEMENT
This section describes the material terms of the stock option agreement
between Dain Rauscher and Royal Bank of Canada. The following description of
the stock option agreement is not complete and you should read the stock option
agreement, and the other information that is incorporated by reference in this
proxy statement, carefully and in its entirety for a more complete
understanding of the stock option agreement. The complete text of the stock
option agreement is attached to this proxy statement as Appendix B and is
incorporated by reference into this proxy statement.
Pursuant to the stock option agreement, Royal Bank of Canada has the right,
under the circumstances described below, to acquire up to 2,571,451 of the
authorized but unissued shares of Dain Rauscher common stock, or approximately
19.9% of the outstanding shares as of September 28, 2000, at a per share
exercise price of U.S. $79.88, payable in cash. The stock option agreement
could have the effect of making an acquisition of Dain Rauscher by a third
party more costly because of the need to acquire from Royal Bank of Canada in
any third-party transaction the option shares issued under the option
agreement, and could also jeopardize the ability of a third party to acquire
Dain Rauscher in a transaction to be accounted for as a pooling-of-interests.
The option may be exercised by Royal Bank of Canada, in whole or in part, at
any time or from time to time, if any of the following initial triggering
events has occurred as long as Royal Bank of Canada sends written notice of the
exercise within 90 days of the triggering event:
. Dain Rauscher, without the consent of Royal Bank of Canada, has entered
into an agreement with any person other than Royal Bank of Canada or its
subsidiaries under which substantially all of the assets or operations
of Dain Rauscher, more than 10% of the voting power of Dain Rauscher or
one of its subsidiaries securities, will be acquired, or the board of
directors of Dain Rauscher has recommended that the stockholders of Dain
Rauscher approve or accept any acquisition proposal with any person
other than Royal Bank of Canada or its subsidiaries;
. any person other than Royal Bank of Canada, or its subsidiaries has
acquired beneficial ownership, or the right to acquire beneficial
ownership, of 10% or more of the outstanding shares of Dain Rauscher
common stock;
. the stockholders of Dain Rauscher voted and failed to approve the merger
agreement, or a meeting of the stockholders of Dain Rauscher has not
been held or has been canceled before termination of the merger
agreement, if before that meeting or termination of the merger
agreement, there has been a public announcement that any person other
than Royal Bank of Canada or its subsidiaries has made or intends to
make a bona fide acquisition proposal to Dain Rauscher;
. the board of directors of Dain Rauscher has withdrawn, modified or
qualified, or publicly announced its intention to withdraw, modify or
qualify, in any manner adverse to Royal Bank of Canada, its
recommendation that the stockholders of Dain Rauscher approve the merger
in anticipation of engaging in a transaction involving an acquisition
proposal, or Dain Rauscher has authorized, recommended, proposed, or
publicly announced its intention to authorize, recommend or propose an
acquisition proposal with any person other than Royal Bank of Canada or
its subsidiaries;
. any person other than Royal Bank of Canada or its subsidiaries has filed
with the Securities and Exchange Commission a registration statement or
tender offer materials with respect to a potential exchange or tender
offer that would constitute an acquisition proposal, or filed a
preliminary proxy statement with the Securities and Exchange Commission
with respect to a potential vote by its stockholders to approve the
issuance of shares to be offered in the exchange offer;
. Dain Rauscher has willfully breached any covenant or obligation
contained in the merger agreement after an overture is made by a third
party to Dain Rauscher or its stockholders with respect to an
acquisition proposal, and following that breach Royal Bank of Canada
would be entitled to terminate the merger agreement, and the breach has
not been cured by the time Royal Bank of Canada provides notice that it
will exercise the stock option;
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. any person other than Royal Bank of Canada and its subsidiaries, without
Royal Bank of Canada's consent, has filed an application or notice with
any regulatory or antitrust authority regarding an acquisition proposal;
and
. one of the following subsequent triggering events has occurred before
the effective time of the merger, the termination of the merger
agreement in accordance with its terms occurs before the occurrence of
an initial triggering event or the passage of 18 months after
termination of the merger agreement if such termination follows the
occurrence of an initial triggering event:
. any person acquires beneficial ownership of 25% or more of the then
outstanding shares of Dain Rauscher common stock; or
. Dain Rauscher, without the consent of Royal Bank of Canada, has
entered into an agreement for an acquisition proposal for a merger,
the acquisition of substantially all of the assets or operations of
Dain Rauscher, or the acquisition of more than 25% of the voting
power of Dain Rauscher securities, with any person other than Royal
Bank of Canada or any of its subsidiaries, or the board of directors
of Dain Rauscher has recommended that the stockholders of Dain
Rauscher approve or accept an acquisition proposal with any person
other than Royal Bank of Canada or its subsidiaries.
Royal Bank of Canada cannot exercise the stock option at any time when Royal
Bank of Canada is in material breach of any of its covenants or agreements
contained in the merger agreement such that Dain Rauscher would be entitled to
terminate the merger agreement in accordance with its terms.
In lieu of the payment of the option price and the receipt of the option
shares, under certain circumstances, Royal Bank of Canada may require Dain
Rauscher to repurchase the stock option at a cash purchase price equal to the
product determined by multiplying the number of option shares as to which the
option has not yet been exercised, by the excess of the fair market value of
the Dain Rauscher common stock, as determined in accordance with the terms of
the stock option agreement, over the exercise price of the stock option
agreement. Under certain circumstances, Royal Bank of Canada may require Dain
Rauscher to repurchase option shares at a cash price set forth in the option
agreement.
The option agreement provides that if Royal Bank of Canada desires to sell
any of the shares acquired as a result of exercising the stock option, and that
sale requires the registration of the shares under the Securities Act of 1933,
Dain Rauscher will be required to prepare and file, subject to certain
limitations, a registration statement under the Securities Act for the purpose
of permitting that sale of shares by Royal Bank of Canada.
In the event that prior to the effective time of the merger, the termination
of the merger agreement in accordance with its terms occurs before the
occurrence of an initial triggering event or the passage of 18 months after
termination of the merger agreement if such termination follows the occurrence
of an initial triggering event:
. Dain Rauscher enters into a merger agreement with any person other than
Royal Bank of Canada or any of its subsidiaries and Dain Rauscher does
not survive the merger;
. Dain Rauscher enters into a merger agreement with a person other than
Royal Bank of Canada or its subsidiaries and Dain Rauscher survives, but
the outstanding shares of Dain Rauscher common stock are exchanged for
securities of another person or cash or other property, or the then
outstanding shares of Dain Rauscher common stock represent less than 50%
of outstanding shares of the merged company; or
. Dain Rauscher enters into an agreement to sell all or a substantial part
of its assets or operations to any person other than Royal Bank of
Canada or any of its subsidiaries,
then the agreement governing the applicable transaction must provide that upon
the completion of that transaction, the stock option will be converted into an
option of the acquiring person or any person that controls the acquiring
person, and that option will have substantially the same terms and conditions
of the stock option.
37
<PAGE>
Notwithstanding any other provision of the stock option agreement, in no
event may the stock option be exercised for a number of shares that would, as
of the date of exercise, provide Royal Bank of Canada with a Notional Total
Profit, as defined below, of more than U.S. $50 million. As defined in the
merger agreement, "Notional Total Profit" means, with respect to any number of
shares as to which Royal Bank of Canada proposes to exercise the stock option,
the Total Profit, as defined below, determined as of the date of that proposed
exercise assuming that the stock option were exercised on that date for that
number of shares and assuming that those shares, together with all other option
shares held by Royal Bank of Canada and its affiliates as of that date, were
sold for cash at the closing market price for Dain Rauscher common stock as of
the close of business of the preceding trading day, less customary brokerage
commissions. The term "Total Profit" means the sum, before taxes, of the
following:
. the amount of cash received by Royal Bank of Canada as a result of the
repurchase of the stock option by Dain Rauscher;
. the amount of cash received by Royal Bank of Canada as a result of the
repurchase of option shares by Dain Rauscher, less the purchase price
for such option shares;
. the net cash amounts received by Royal Bank of Canada as a result of the
sale of option shares, or any other securities into which such option
shares are converted or exchanged, to any unaffiliated party, less Royal
Bank of Canada's purchase price for such option shares;
. the net cash amounts received by Royal Bank of Canada on the transfer of
the stock option to any unaffiliated party;
. any amount equivalent to the items listed above with respect to the
substitute option; and
. any termination fee received pursuant to the merger agreement.
38
<PAGE>
MARKET PRICE OF DAIN RAUSCHER COMMON STOCK
Dain Rauscher common stock is listed on the New York Stock Exchange under
the symbol "DRC." The following table sets forth, for the periods indicated,
the high and low sales prices per share for Dain Rauscher common stock as
reported on the New York Stock Exchange:
<TABLE>
<CAPTION>
High Low
------ ------
(in U.S. $)
<S> <C> <C>
1998:
First Quarter.................................................. $69.00 $53.50
Second Quarter................................................. $60.19 $50.81
Third Quarter.................................................. $58.75 $31.19
Fourth Quarter................................................. $37.81 $27.31
1999:
First Quarter.................................................. $36.75 $28.31
Second Quarter................................................. $54.13 $34.44
Third Quarter.................................................. $58.44 $45.25
Fourth Quarter................................................. $56.94 $42.88
2000:
First Quarter.................................................. $66.31 $43.31
Second Quarter................................................. $70.63 $48.44
Third Quarter.................................................. $93.13 $62.00
Fourth Quarter (through December 1, 2000)...................... $94.69 $92.50
</TABLE>
The closing market price per share of Dain Rauscher common stock on
September 27, 2000, which was the last full trading day immediately preceding
the public announcement of the proposed merger, was U.S. $79.88. On December 7,
2000, which is the latest practicable date prior to the printing of this proxy
statement, the closing price for Dain Rauscher common stock was U.S. $94.19.
As of November 27, 2000, there were 13,036,321 shares of Dain Rauscher
common stock outstanding held by approximately 5,200 stockholders. The number
of stockholders was determined by adding the number of record holders to the
estimated number of proxies to be sent to street name holders.
Dain Rauscher has paid quarterly dividends of U.S. $0.22 per Dain Rauscher
share during the past several years.
39
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Dain Rauscher's common stock by directors and executive officers
(designated under the rules of the Securities and Exchange Commission) and all
directors and executive officers as a group (16 persons). Unless indicated
otherwise, the information below is current as of September 30, 2000, and each
named beneficial owner possesses sole voting and investment power with respect
to all shares. Dain Rauscher is not aware that any person or group beneficially
owned 5 percent or more of its common stock as of such date. On September 30,
2000, Dain Rauscher had 12,956,994 shares of common stock outstanding.
<TABLE>
<CAPTION>
Title Amount and
of Nature of Beneficial Percent
Name of Beneficial Owner Class Ownership of Class
------------------------ ----- -------------------- --------
<S> <C> <C> <C>
John C. Appel........... Common 179,255(/1/)(/2/)(/3/) 1.4%
J. Evans Attwell........ Common 19,261(/1/)(/4/) *
Susan S. Boren.......... Common 25,083(/1/)(/4/) *
F. Gregory Fitz-Gerald.. Common 31,240(/1/)(/4/) *
Peter M. Grant.......... Common 71,800(/1/)(/2/)(/3/)(/6/) *
Walter F. Mondale....... Common 11,415(/1/)(/4/) *
C.A. Rundell, Jr........ Common 16,782(/1/)(/4/) *
Robert L. Ryan.......... Common 18,782(/1/)(/4/) *
Arthur R. Schultze,
Jr..................... Common 35,325(/1/)(/4/) *
Ronald A. Tschetter..... Common 162,033(/1/)(/2/)(/3/) 1.3%
Irving Weiser........... Common 417,381(/1/)(/2/)(/3/)(/5/) 3.1%
Kenneth J. Wessels...... Common 70,949(/1/)(/3/) *
All directors and
executive officers as a
group (16 persons)..... Common 1,099,905(/1/)(/2/)(/3/)(/4/)(/5/)(/6/)(/7/) 8.4%
</TABLE>
--------
* Less than 1%
(1) This number includes the following number of shares which could be issued
upon exercise of options exercisable within 60 days of September 30, 2000:
Mr. Appel 96,150; Mr. Attwell, 12,976; Ms. Boren, 12,976; Mr. Fitz-Gerald,
12,976; Mr. Grant, 4,734; Mr. Mondale, 10,976; Mr. Rundell, 12,976; Mr.
Ryan, 12,976; Mr. Schultze, 10,000; Mr. Tschetter, 63,250; Mr. Weiser,
258,467; Mr. Wessels, 42,592; and all directors and executive officers as a
group, 564,534. This number excludes the following number of shares
issuable under options that become exercisable on closing of the merger:
Mr. Appel, 32,750; Mr. Grant, 34,266; Mr. Tschetter, 30,350; Mr. Weiser,
189,833; Mr. Wessels, 25,334; and all directors and executive officers as a
group, 340,598.
(2) This number includes the following number of shares allocated to accounts
under Dain Rauscher's Retirement Plan as of September 30, 2000: Mr. Appel,
15,113; Mr. Grant, 78; Mr. Tschetter, 27,163; Mr. Weiser, 18,831; and all
directors and executive officers as a group, 64,652. As of September 30,
2000, a total of 3,005,185 shares of Dain Rauscher common stock, or 23
percent of the outstanding, were held in the Retirement Plan. Voting of
shares held in the Retirement Plan is passed through to the participating
employees.
(3) This number includes the following number of deemed shares credited to
accounts under the Management Deferred Stock Plan as of June 30, 2000 (the
most recently available information): Mr. Appel, 60,619; Mr. Grant, 22,493;
Mr. Tschetter, 60,218; Mr. Weiser, 88,095; Mr. Wessels, 18,357; and all
directors and executive officers as a group, 252,938. Prior to January
1999, shares purchased with participant contributions to the Management
Deferred Stock Plan were held in a separate trust. After January 1999,
shares amounts are deemed to be credited to the respective participant
accounts. As of June 30, 2000, a total of 402,921 shares or deemed shares
were credited to the accounts of participants in the Management Deferred
Stock Plan and 279,992 shares, or 2.2 percent of the outstanding, were held
in the related trust that had been funded prior to January 1999. Shares
held in the trust will be voted by the trustee in its sole discretion.
Deemed shares credited under the Management Deferred Stock Plan, other than
those held in
40
<PAGE>
the trust, are not issued and outstanding and therefore do not have voting
rights. This number also includes the following number of deemed shares
credited to accounts under the Wealth Accumulation Plan as of June 30, 2000
(the most recent date for which information is available): all directors and
executive officers as a group, 1,076. As of June 30, 2000, 899,100 deemed
shares of Dain Rauscher common stock were credited to the accounts of
participants under the Wealth Accumulation Plan. Because these are deemed
shares and there is no related trust, no voting rights are associated with
these shares. The Wealth Accumulation Plan is a deferred compensation plan
in which certain executive officers not named in this proxy statement
formerly were eligible to participate. Executive officers are no longer
eligible to participate in the Wealth Accumulation Plan.
(4) This number includes the following number of deferred shares of Dain
Rauscher common stock credited to each non-employee director's account
under the Directors' Deferred Compensation Plan: Mr. Attwell, 537; Ms.
Boren, 1,575; Mr. Fitz-Gerald, 3,264; Mr. Mondale, 139; Mr. Rundell, 806;
Mr. Ryan, 806; and Mr. Schultze, 3,612. Deferred shares are deemed to be
credited to each director's account, and may not be voted, pledged or
transferred by the participant.
(5) This number includes 17,306 shares beneficially owned by Mr. Weiser's
spouse and disclaimed by Mr. Weiser.
(6) This number includes the following number of restricted shares that will
vest on closing of the merger: Mr. Grant, 28,470; and all directors and
executive officers as a group, 31,310. This number also includes the
following number of restricted shares that will not vest on closing of the
merger: Mr. Grant, 16,000; and all directors and executive officers as a
group, 28,000. By their terms these restricted shares become fully vested
no later than January 28, 2005, but will be accelerated and become fully
vested by the second anniversary of the merger or earlier date on which the
officer is terminated other than for cause, quits for good reason, or dies
or becomes disabled. Holders of restricted shares may vote and receive
distributions on these shares, but may not dispose of or pledge them.
Restricted shares are also subject to forfeiture under certain
circumstances until they are fully vested.
(7) This number includes 15 shares of Dain Rauscher common stock credited to
the accounts of certain unnamed executive officers under the Employee Stock
Purchase Plan which was approved by Dain Rauscher stockholders in April
2000.
41
<PAGE>
DISSENTERS' RIGHTS OF APPRAISAL
Under Delaware law, if you do not wish to accept the cash payment provided
for in the merger agreement, you have the right to dissent from the merger and
to receive payment in cash for the fair value of your Dain Rauscher common
stock. Dain Rauscher stockholders electing to exercise appraisal rights must
comply with the provisions of Section 262 of the Delaware General Corporation
Law in order to perfect their rights. Dain Rauscher will require strict
compliance with the statutory procedures. A copy of Section 262 is attached as
Appendix D.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect appraisal rights. This summary,
however, is not a complete statement of all applicable requirements and is
qualified in its entirety by reference to Section 262 of the Delaware General
Corporation Law, the full text of which appears in Appendix D of this proxy
statement.
Section 262 requires that stockholders be notified not less than 20 days
before the special meeting to vote on the merger that appraisal rights will be
available. A copy of Section 262 must be included with such notice. This proxy
statement constitutes Dain Rauscher's notice to its stockholders of the
availability of appraisal rights in connection with the merger in compliance
with the requirements of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of Section 262 contained
in Appendix D since failure to timely and properly comply with the requirements
of Section 262 will result in the loss of your appraisal rights under Delaware
law.
If you elect to demand appraisal of your shares, you must satisfy each of
the following conditions:
. You must deliver to Dain Rauscher a written demand for appraisal of your
shares before the vote with respect to the merger is taken. This written
demand for appraisal must be in addition to and separate from any proxy
or vote abstaining from or voting against adoption of the merger
agreement. Voting against or failing to vote for adoption of the merger
agreement by itself does not constitute a demand for appraisal within
the meaning of Section 262.
. You must not vote in favor of adoption of the merger agreement. A vote
in favor of the adoption of the merger agreement, by proxy or in person,
will constitute a waiver of your appraisal rights in respect of the
shares so voted and will nullify any previously filed written demands
for appraisal.
If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for your shares of
Dain Rauscher common stock as provided for in the merger agreement, but you
will have no appraisal rights with respect to your shares of Dain Rauscher
common stock.
All demands for appraisal should be addressed to the Secretary at Dain
Rauscher Corporation, Dain Rauscher Plaza, 60 South Sixth Street, Minneapolis,
Minnesota 55402, before the vote on the merger is taken at the special meeting,
and should be executed by, or on behalf of, the record holder of the shares of
Dain Rauscher common stock. The demand must reasonably inform Dain Rauscher of
the identity of the stockholder and the intention of the stockholder to demand
appraisal of his, her or its shares.
To be effective, a demand for appraisal by a holder of Dain Rauscher common
stock must be made by, or in the name of, such registered stockholder, fully
and correctly, as the stockholder's name appears on his or her stock
certificate(s) and cannot be made by the beneficial owner if he or she does not
also hold the shares of record. The beneficial holder must, in such cases, have
the registered owner submit the required demand in respect of those shares.
If shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of a demand for appraisal should be made in
that capacity; and if the shares are owned of record by more than one person,
as in a joint tenancy or tenancy in common, the demand should be executed by or
for all joint
42
<PAGE>
owners. An authorized agent, including an authorized agent for two or more
joint owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, he or she is acting as agent
for the record owner. A record owner, such as a broker, who holds shares as a
nominee for others, may exercise his or her right of appraisal with respect to
the shares held for one or more beneficial owners, while not exercising this
right for other beneficial owners. In that case, the written demand should
state the number of shares as to which appraisal is sought. Where no number of
shares is expressly mentioned, the demand will be presumed to cover all shares
held in the name of the record owner.
If you hold your shares of Dain Rauscher common stock in a brokerage account
or in other nominee form and you wish to exercise appraisal rights, you should
consult with your broker or the other nominee to determine the appropriate
procedures for the making of a demand for appraisal by the nominee.
Within 10 days after the effective date of the merger, Royal Bank of Canada
must give written notice that the merger has become effective to each Dain
Rauscher stockholder who has properly filed a written demand for appraisal and
who did not vote in favor of the merger. At any time within 60 days after the
effective date, any stockholder who has demanded an appraisal has the right to
withdraw the demand and to accept the cash payment specified by the merger
agreement for his or her shares of Dain Rauscher common stock. Within 120 days
after the effective date, either Royal Bank of Canada or any stockholder who
has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares held by all stockholders entitled to appraisal. Royal Bank of Canada has
no obligation to file such a petition in the event there are dissenting
stockholders. Accordingly, the failure of a stockholder to file such a petition
within the period specified could nullify the stockholder's previously written
demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a copy of the
petition is delivered to Royal Bank of Canada, Royal Bank of Canada will then
be obligated, within 20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list containing the names
and addresses of all stockholders who have demanded an appraisal of their
shares. After notice to dissenting stockholders, the Chancery Court is
empowered to conduct a hearing upon the petition, and to determine those
stockholders who have complied with Section 262 and who have become entitled to
the appraisal rights provided thereby. The Chancery Court may require the
stockholders who have demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation thereon of the pendency
of the appraisal proceedings; and if any stockholder fails to comply with that
direction, the Chancery Court may dismiss the proceedings as to that
stockholder.
After determination of the stockholders entitled to appraisal of their
shares of Dain Rauscher common stock, the Chancery Court will appraise the
shares, determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of the
proceeding, if the Chancery Court so determines, to the stockholders entitled
to receive the same, upon surrender by such holders of the certificates
representing those shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of your
shares as determined under Section 262 could be more, the same, or less than
the value that you are entitled to receive under the terms of the merger
agreement.
Costs of the appraisal proceeding may be imposed upon Royal Bank of Canada
and the stockholders participating in the appraisal proceeding by the Chancery
Court as the Chancery Court deems equitable in the circumstances. Upon the
application of a stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal. Any stockholder who had demanded appraisal rights
will not, after the
43
<PAGE>
effective date, be entitled to vote shares subject to that demand for any
purpose or to receive payments of dividends or any other distribution with
respect to those shares, other than with respect to payment as of a record date
prior to the effective date; however, if no petition for appraisal is filed
within 120 days after the effective date of the merger, or if the stockholder
delivers a written withdrawal of his or her demand for appraisal and an
acceptance of the merger within 60 days after the effective date of the merger,
then the right of that stockholder to appraisal will cease and that stockholder
will be entitled to receive the cash payment for shares of his, her or its Dain
Rauscher common stock pursuant to the merger agreement. Any withdrawal of a
demand for appraisal made more than 60 days after the effective date of the
merger may only be made with the written approval of the surviving corporation
and must, to be effective, be made within 120 days after the effective date.
In view of the complexity of Section 262, Dain Rauscher stockholders who may
wish to dissent from the merger and pursue appraisal rights should consult
their legal advisors.
OTHER MATTERS
You should rely only on the information contained in this proxy statement to
vote your shares at the special meeting. Dain Rauscher has not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement. This proxy statement is dated December 8, 2000. You
should not assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of this document
to stockholders is not intended to create any implication to the contrary.
In order to be considered for inclusion in the proxy statement for the next
annual meeting, if any, of stockholders of Dain Rauscher, any stockholder
proposal intended to be presented at the meeting must be received by Dain
Rauscher on or before December 1, 2000. The annual meeting will be held only if
the merger is not completed.
The board of directors of Dain Rauscher does not intend to bring before the
meeting any matters other than those set forth herein, and has no present
knowledge that any other matters will or may be brought before the meeting by
others. If, however, any other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to vote the
proxies in accordance with their judgment.
WHERE YOU CAN FIND MORE INFORMATION
Dain Rauscher and Royal Bank of Canada file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information Dain Rauscher or Royal Bank
of Canada files at the SEC's public reference rooms in Washington D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Dain Rauscher's and Royal
Bank of Canada's public filings are also available to the public from document
retrieval services and Dain Rauscher's public filings are also available to the
public at the Internet website maintained by the SEC at http://www.sec.gov.
44
<PAGE>
APPENDIX A
EXECUTION COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of September 28, 2000
by and among
DAIN RAUSCHER CORPORATION
ROYAL BANK OF CANADA
and
VIKING MERGER SUBSIDIARY, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
RECITALS
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions................................................ 1
1.02 Interpretation..................................................... 6
ARTICLE II
The Merger
2.01 The Merger......................................................... 6
2.02 Effective Time..................................................... 7
2.03 Closing............................................................ 7
2.04 Reservation of Right to Revise Structure........................... 7
ARTICLE III
Consideration; Exchange
3.01 Merger Consideration............................................... 7
3.02 Rights as Stockholders; Stock Transfers............................ 8
3.03 Payment for Shares................................................. 8
3.04 Dissenting Stockholders............................................ 8
3.05 Options; Restricted Stock.......................................... 8
ARTICLE IV
Actions Pending the Effective Time
4.01 Forbearances of the Company........................................ 9
4.02 Forbearances of Parent............................................. 11
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules............................................... 11
5.02 Standard........................................................... 12
5.03 Representations and Warranties of the Company...................... 12
5.04 Representations and Warranties of Parent........................... 24
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts............................................ 25
6.02 Proxy Statement.................................................... 25
6.03 Company Stockholders Meeting....................................... 26
6.04 Press Releases..................................................... 26
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
6.05 Access; Information................................................. 26
6.06 Acquisition Proposals............................................... 27
6.07 No Rights Triggered................................................. 28
6.08 Regulatory Applications............................................. 28
6.09 Employee Matters.................................................... 28
6.10 Notification of Certain Matters..................................... 29
6.11 Indemnification; Directors' and Officers' Insurance................. 29
6.12 Section 15 of the Investment Company Act............................ 30
6.13 ERISA Clients....................................................... 31
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.......... 31
7.02 Conditions to Obligation of the Company............................. 32
7.03 Conditions to Obligation of Parent and the Merger Subsidiary........ 32
ARTICLE VIII
Termination
8.01 Termination......................................................... 32
8.02 Effect of Termination and Abandonment............................... 33
8.03 Termination Fee..................................................... 33
ARTICLE IX
Miscellaneous
9.01 Survival............................................................ 34
9.02 Waiver; Amendment................................................... 34
9.03 Counterparts........................................................ 34
9.04 Governing Law and Venue............................................. 34
9.05 Expenses............................................................ 34
9.06 Notices............................................................. 34
9.07 Entire Understanding; No Third-Party Beneficiaries.................. 35
9.08 Assignment.......................................................... 35
9.09 Enforcement......................................................... 36
ANNEXES
Annex A Form of Stock Option Agreement
Annex B List of Designated Executives to Execute Employment Agreements
Annex C Form of Certificate of Incorporation of Surviving Corporation
</TABLE>
A-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of September 28, 2000 (this
"Agreement"), by and among Dain Rauscher Corporation (the "Company"), Royal
Bank of Canada (the "Parent") and Viking Merger Subsidiary, Inc. (the "Merger
Subsidiary").
RECITALS
A. The Company. The Company is a Delaware corporation, having its principal
place of business in Minneapolis, Minnesota.
B. Parent. Parent is a Canadian chartered bank, having its principal place
of business in Toronto, Ontario, Canada.
C. The Merger Subsidiary. The Merger Subsidiary is a Delaware corporation
and a wholly owned subsidiary of Parent that has been organized for the purpose
of effecting the Merger (as defined herein) in accordance with this Agreement.
D. The Merger. Subject to the terms and conditions contained in this
Agreement, the parties to this Agreement intend to effect the merger of the
Merger Subsidiary with and into the Company, with the Company being the
corporation surviving such merger.
E. Stock Option Agreement. As a condition and inducement to Parent's
willingness to enter into this Agreement, the Board of Directors of the Company
has approved the grant to Parent of an option to purchase shares of Company
Common Stock (as defined herein) pursuant to a Stock Option Agreement with
Parent (the "Stock Option Agreement"), and concurrently with the execution and
delivery of this Agreement, the Company has executed and delivered the Stock
Option Agreement with Parent, in the form of Annex A.
F. Employment Agreements. As further conditions and inducements to Parent's
willingness to enter into this Agreement, concurrently with the execution and
delivery of this Agreement, each of the Designated Executives (as defined
herein) has executed and delivered an employment agreement with the Company
(each, an "Employment Agreement").
G. Board Action. The respective Boards of Directors of each of the Company,
Parent and the Merger Subsidiary have each adopted resolutions approving this
Agreement and the Merger, and, in the case of each of the Boards of Directors
of the Company and Parent, the Stock Option Agreement, and, in the case of each
of the Boards of Directors of the Company and the Merger Subsidiary, declaring
the advisability of this Agreement in accordance with the Delaware General
Corporation Law, as amended, (the "DGCL").
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
Certain Definitions; Interpretation
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal" has the meaning assigned in Section 6.06.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of
this definition, "control" when used with respect to any specified person
means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
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"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"AMEX" means the American Stock Exchange.
"Bankruptcy and Equity Exception" has the meaning assigned in Section
5.03(e)(i).
"Business Day" means any day other than Saturday, Sunday and any day on
which banks in the State of New York are required or authorized by law or
regulation to be closed.
"Bylaws" has the meaning assigned in Section 2.01(c).
"Certificate of Incorporation" has the meaning assigned in Section
2.01(b).
"CFTC" means the Commodities Futures Trading Commission.
"Client" means any person to whom the Company or any of its Subsidiaries
provides investment advisory services under any Contract.
"Closing" and "Closing Date" have the meanings assigned in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Common Stock" means the common stock, par value $0.125 per
share, of the Company.
"Company Financial Statements" has the meaning assigned in Section
5.03(h)(ii).
"Company IP Rights" has the meaning assigned in Section 5.03(y)(i).
"Company Options" means, collectively, outstanding options to purchase
shares of Company Common Stock under the Company Stock Plans.
"Company Proxy Statement" has the meaning assigned in Section 6.02.
"Company Requisite Vote" has the meaning assigned in Section 5.03(e).
"Company Restricted Stock" has the meaning assigned in Section 3.05(d).
"Company SEC Documents" has the meaning assigned in Section 5.03(h).
"Company Stock Plans" has the meaning assigned in Section 5.03(b).
"Company Stockholders Meeting" has the meaning assigned in Section 6.03.
"Compensation and Benefit Plans" has, with respect to any person, the
meaning assigned in Section 5.03(r)(i).
"Confidentiality Agreement" has the meaning assigned in Section 6.05(b).
"Constitutive Documents" means with respect to any juridical person,
such person's articles or certificate of incorporation and its bylaws, or
similar constitutive documents.
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"Contract" means, with respect to any person, any agreement, indenture,
undertaking, debt instrument, contract, lease, understanding, arrangement,
or commitment to which such person or any of its Subsidiaries is a party or
by which any of them may be bound or to which any of their properties may
be subject.
"Costs" has the meaning assigned in Section 6.11(a).
"Designated Executives" means, collectively, the individuals identified
in Annex B.
"DGCL" has the meaning assigned in the Recitals.
"Disclosure Schedule" has the meaning assigned in Section 5.01.
"Dissenters' Shares" means shares of Company Common Stock the holders of
which shall have perfected and not withdrawn or lost their appraisal rights
in accordance with Section 262 of the DGCL.
"Effective Time" means the date and time at which the Merger becomes
effective in accordance with Section 2.02.
"Employees" has the meaning assigned in Section 5.03(r)(i).
"Employment Agreement" means an employment agreement entered into
between the Company, on the one hand, and each of the Designated
Executives, on the other hand.
"Environmental Laws" means any federal, state or local law, regulation,
order, decree, permit, authorization, common law or agency requirement with
force of law relating to: (a) the protection or restoration of the
environment, health or safety (in each case as relating to the environment)
or natural resources; or (b) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has, with respect to any person, the meaning assigned
in Section 5.03(r)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Fund Board" has the meaning assigned in Section 5.03(z)(i).
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any United States or foreign government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including, without limitation, the SEC or any
other government authority, agency, department, board, commission or
instrumentality of the United States or any foreign government or any state
or other political subdivision thereof or any state insurance or banking
authority, the Board of Governors of the Federal Reserve System or the
Federal Deposit Insurance Corporation and any court, tribunal or
arbitrator(s) of competent jurisdiction.
"Hazardous Substance" means any hazardous or toxic substance, material
or waste, including those substances, materials and wastes listed in the
United States Department of Transportation Hazardous Materials Table (49
CFR ss. 172.101), or by the United States Environmental Protection Agency
as hazardous substances (40 CFR pt 302) and amendments thereto, petroleum
products or other such substances, materials and wastes that are or become
regulated under any applicable local, state or federal law, including
petroleum compounds, lead, asbestos and polychlorinated biphenyls.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Indemnified Parties" has the meaning assigned in Section 6.11(a).
"Insurance Amount" has the meaning assigned in Section 6.11(c).
"Intellectual Property Rights" has the meaning assigned in Section
5.03(y)(iii).
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations thereunder.
"Investment Company" means any investment company within the meaning of
the Investment Company Act, disregarding Section 3(c) thereof, that is
sponsored, organized, advised or managed by the Company or one of its
Subsidiaries or with respect to which the Company or one of its
Subsidiaries acts as "principal underwriter" as defined in the Investment
Company Act (including the Registered Funds).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
"IRS" means the United States Internal Revenue Service.
"Lien" means any charge, mortgage, pledge, security interest,
restriction (other than a restriction on transfer arising under Securities
Laws), claim, lien, or encumbrance of any nature whatsoever.
"Litigation" has the meaning assigned in Section 5.03(l).
"Material Adverse Effect" means, with respect to Parent, the Company, or
the Surviving Corporation, respectively, an effect or change that,
individually or in the aggregate with such other effects or changes, is
both material and adverse with respect to the respective financial
condition, results of operations, assets or business of Parent and its
Subsidiaries, the Company and its Subsidiaries or the Surviving Corporation
and its Subsidiaries, in each case taken as a whole; provided, that
"Material Adverse Effect" shall not be deemed to include any effect
resulting from this Agreement or the announcement thereof or the effects of
(i) changes of general scope in the economy or capital markets conditions
of the United States or Canada or (ii) changes in GAAP, provided, further,
that any exception in these clauses (i) and (ii) shall not apply to any
change to the extent such change disproportionately affects the applicable
party and its Subsidiaries compared to its peers.
"Merger" has the meaning assigned in Section 2.01(a).
"Merger Consideration" has the meaning assigned in Section 3.01(a).
"Merger Subsidiary" has the meaning assigned in the preamble to this
Agreement.
"MSRB" means the Municipal Securities Rulemaking Board.
"Multiemployer Plan"has the meaning assigned in Section 5.03(r)(ii).
"NASD" means the National Association of Securities Dealers, Inc.
"New Plans" has the meaning assigned in Section 6.09(b).
"NYSE" means the New York Stock Exchange, Inc.
"Parent" has the meaning assigned in the preamble to this Agreement.
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"Parent Restricted Stock" has the meaning assigned in Section 3.05(d).
"Paying Agent" has the meaning assigned in Section 3.03.
"Pension Plan" has, with respect to any person, the meaning assigned in
Section 5.03(r)(ii).
"Person" means any individual, bank, corporation, limited liability
company, partnership, association, joint-stock company, business trust,
unincorporated organization or other entity.
"Previously Disclosed" has the meaning assigned in Section 5.01.
"Registered Funds" has the meaning assigned in Section 5.03(z)(i).
"Reports" has the meaning assigned in Section 5.03(g).
"Representatives" means, with respect to any person, such person's
directors, officers, employees, legal, financial or other advisors or any
representatives of such legal, financial or other advisors.
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any preemptive or other right to subscribe for or acquire, or any options,
calls or commitments relating to, or any stock or equity appreciation right
or other instrument the value of which is determined in whole or in part by
reference to the market price or value of, shares of capital stock of such
person.
"Rights Agreement" means the Rights Agreement of the Company, dated as
of April 30, 1997.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securities Laws" means, collectively, the Securities Act, the Exchange
Act, the Investment Advisers Act, the Investment Company Act and all state
securities and "blue sky" laws and rules and regulations thereunder.
"Self-Regulatory Organization" means the NASD, the NYSE, the AMEX, the
MSRB, the Chicago Stock Exchange, The Chicago Mercantile Exchange, the
Chicago Board of Trade, the Cincinnati Stock Exchange, the Minneapolis
Grain Exchange and the New York Futures Exchange, the Philadelphia Stock
Exchange or any other commission, board, agency or body that is not a
Governmental Authority but is charged with the supervision or regulation of
brokers, dealers, securities underwriting or trading, stock exchanges,
commodities exchanges, insurance companies or agents, investment companies
or investment advisers, or to the jurisdiction or supervision of which the
Company or one of its Subsidiaries is otherwise subject.
"Stock Option Agreement" has the meaning assigned in the Recitals.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" has the meaning assigned in Section 6.06.
"Surviving Corporation" has the meaning assigned in Section 2.01(a).
"Tax Returns" means, collectively, all returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws.
"Taxes" means all taxes, levies or other similar assessments, however
denominated and whether imposed by a taxing authority within or without the
United States, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
unemployment, social security, employer health, excise, estimated,
severance, stamp, occupation, property or other taxes, custom duties, or
other
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similar assessments of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority whether arising before, on or after the Effective Date.
"Treasury Shares" means shares of Company Common Stock, if any, owned by
the Company or any of its Subsidiaries other than shares (i) held by the
Company or any of its Subsidiaries in connection with any market-making or
proprietary trading activity or for the account of another person, (ii) as
to which the Company is or may be required to act in a fiduciary or similar
capacity or (iii) held in satisfaction of a debt previously contracted.
1.02 Interpretation. When a reference is made in this Agreement to Recitals,
Sections, Annexes or Schedules, such reference shall be to a Recital or Section
of, or Annex or Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation". No rule of construction against the
draftsperson shall be applied in connection with the interpretation or
enforcement of this Agreement. Whenever this Agreement shall require a party to
take an action, such requirement shall be deemed an undertaking by such party
to cause its Subsidiaries, and to use its reasonable best efforts to cause its
other Affiliates, to take appropriate action in connection therewith.
ARTICLE II
The Merger
2.01 The Merger. At the Effective Time:
(a) Structure and Effects of the Merger. Subject to Section 2.04, the
Merger Subsidiary will merge with and into the Company in accordance with
the terms set forth in this Agreement (the "Merger") and the separate
corporate existence of the Merger Subsidiary will thereupon cease. The
Company will be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and will continue
to be governed by the laws of the State of Delaware, and the separate
corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, will continue unaffected by the Merger,
except as set forth in Section 2.01(b). The Merger will have the effects
specified in the DGCL.
(b) Certificate of Incorporation. At the Effective Time, and without
any further action on the part of Parent, the Merger Subsidiary or any
holder of any shares of capital stock of the Company, the certificate of
incorporation of the Company as in effect at the Effective Time shall be
amended and restated to read in its entirety as set forth in Annex C, which
shall be the certificate of incorporation of the Surviving Corporation (the
"Certificate of Incorporation"), until duly amended in accordance with the
terms thereof and the DGCL.
(c) Bylaws. The bylaws of the Surviving Corporation (the "Bylaws") will
be the bylaws of the Merger Subsidiary as in effect immediately prior to
the Effective Time, until duly amended in accordance with the terms thereof
and the aforementioned Certificate of Incorporation.
(d) Directors. The directors of the Surviving Corporation will be the
members of the Executive Committee of the Company immediately prior to the
Effective Time and such additional individuals as designated by Parent, and
such directors, together with any additional directors as may thereafter be
elected, shall hold such office until such time as their successors shall
be duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation
and the Bylaws.
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(e) Officers. The officers of the Surviving Corporation will be the
officers of the Company immediately prior to the Effective Time (as may be
modified by the respective Employment Agreements of the Designated
Executives), together with any additional officers as may be agreed upon
prior to the Effective Time by the Merger Subsidiary and the Company, and
such officers, together with any additional officers as may thereafter be
elected, shall hold such office until such time as their successors shall
be duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation
and the Bylaws.
2.02 Effective Time. The Merger shall become effective upon the filing, in
the office of the Secretary of State of the State of Delaware, of a certificate
of merger in accordance with Section 251 of the DGCL, or at such later date and
time as may be set forth in such certificate. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall use their
reasonable best efforts to cause the Merger to become effective (a) on a date
that is not later than three Business Days after the last of the conditions set
forth in Article VII (other than conditions that by their terms cannot be
satisfied until the time of Closing) shall have been satisfied or waived in
accordance with the terms of this Agreement (or, at the election of Parent, on
the last business day of the month in which such day occurs) or (b) on such
other date as the parties may agree in writing.
2.03 Closing. The closing of the Merger (the "Closing") shall take place at
the offices of Sullivan and Cromwell, 125 Broad Street, New York, New York, or
at such other time and place as the parties shall agree, on the date (the
"Closing Date") when the Effective Time is intended to occur.
2.04 Reservation of Right to Revise Structure. At Parent's election, the
Merger may alternatively be structured (a) so that the Company is merged with
and into Merger Subsidiary (with Merger Subsidiary surviving) or a directly or
indirectly wholly owned subsidiary of Parent other than the Merger Subsidiary,
(b) so that a directly or indirectly wholly owned subsidiary of Parent other
than Merger Subsidiary is merged with and into the Company; provided, however,
that no such change shall (i) alter or change the amount or kind of the Merger
Consideration or alter or change adversely the treatment of the holders of
Company Options, or (ii) materially impede or delay consummation of the
transactions contemplated by this Agreement. In the event of such an election,
the parties agree to execute an appropriate amendment to this Agreement in
order to reflect such election.
ARTICLE III
Consideration; Exchange
3.01 Merger Consideration. Subject to the terms and conditions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of Parent, the Merger Subsidiary or any holder
of shares of capital stock of the Company:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares subject to
Section 3.05(d), Dissenters' Shares, Treasury Shares and shares held
directly or indirectly by Parent, except shares held by Parent or any of
its Subsidiaries in a fiduciary capacity or in satisfaction of a debt
previously contracted) will be converted into the right to receive U.S.
$95.00 in cash, without interest thereon (the "Merger Consideration").
(b) Each share of Company Common Stock that, immediately prior to the
Effective Time, is a Treasury Share or is owned directly or indirectly by
Parent, except shares held by Parent or any of its Subsidiaries in a
fiduciary capacity or in satisfaction of a debt previously contracted, will
be canceled and retired and will cease to exist, and no exchange or payment
will be made therefor.
(c) At the Effective Time, each share of Common Stock, par value $0.01
per share, of the Merger Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation.
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3.02 Rights as Stockholders; Stock Transfers. At the Effective Time, holders
of Company Common Stock (other than Dissenters' Shares) will cease to be, and
will have no rights as, stockholders of the Company, other than to receive (a)
any dividend or other distribution with respect to such Company Common Stock
with a record date occurring prior to the Effective Time and (b) the Merger
Consideration provided in this Article III. After the Effective Time, there
will be no transfers on the stock transfer books of the Company or the
Surviving Corporation of shares of Company Common Stock (other than Dissenters'
Shares, if applicable).
3.03 Payment for Shares. Parent shall make available or cause to be made
available to a bank appointed by Parent (which shall be reasonably acceptable
to the Company), as paying agent (the "Paying Agent"), amounts sufficient in
the aggregate to provide all funds necessary for the Paying Agent to make
payments of Merger Consideration to holders of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. Promptly after
the Effective Time, Parent shall cause the Paying Agent to mail to each person
who was, at the Effective Time, a holder of record of outstanding shares of
Company Common Stock a form (mutually agreed to by Parent and the Company) of
letter of transmittal and instructions for use in effecting the surrender of
the certificates which, immediately prior to the Effective Time, represented
any of such shares in exchange for payment therefor. Upon surrender to the
Paying Agent of such certificates, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, Parent
shall promptly cause the Paying Agent to pay to each person entitled thereto a
check in the amount to which such person is entitled, after giving effect to
any required United States federal, state or local tax withholdings. No
interest will be paid or will accrue on the amount payable upon the surrender
of any such certificate. If payment is to be made to a person other than the
registered holder of the certificate surrendered, it shall be a condition of
such payment that the certificate so surrendered be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other similar taxes required by reason of the
payment to a person other than the registered holder of the certificate
surrendered or establish to the satisfaction of Parent or the Paying Agent that
such tax has been paid or is not applicable. One hundred and eighty days
following the Effective Time, Parent shall be entitled to cause the Paying
Agent to deliver to it any funds (including any interest received with respect
thereto) made available to the Paying Agent that have not been disbursed to
holders of certificates formerly representing shares of Company Common Stock
outstanding on the Effective Time, and thereafter such holders shall be
entitled to look to Parent only as general creditors thereof with respect to
the cash payable upon due surrender of their certificates. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to any
holder of certificates formerly representing shares of Company Common Stock for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
3.04 Dissenting Stockholders. Dissenters' Shares shall be purchased and paid
for in accordance with Section 262 of the DGCL. The Company shall give Parent
(a) prompt notice of any written demands for fair value received by the
Company, withdrawals of such demands, and any other related instruments served
pursuant to the DGCL and received by the Company and (b) the opportunity to
direct all negotiations and proceedings with respect to demands for fair value
under the DGCL. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for fair value
for Dissenters' Shares or offer to settle, or settle, any such demands.
3.05 Options; Restricted Stock. (a) Prior to the Effective Time, the Company
shall use reasonable best efforts to take such actions as may be necessary,
including obtaining consents from option holders to the extent required, such
that at the Effective Time each Company Option, other than the Company Options
described in paragraphs (b) and (c), whether or not then exercisable, shall be
canceled and only entitle the holder thereof, upon surrender thereof, to
receive an amount in cash equal to the difference between the Merger
Consideration and the exercise price per share of Common Stock of such Company
Option multiplied by the number of shares of Common Stock previously subject to
such Company Option.
(b) At the Effective Time, each Company Option that was granted by the
Company on or after January 28, 2000, and that is outstanding immediately
prior to the Effective Time, whether vested or unvested, will be assumed by
Parent. Each Company Option so assumed by Parent shall continue to have,
and be subject to, the same terms and conditions as set forth in the
Company Stock Plan (and any
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agreement) under which it was granted as in existence immediately prior to
the Effective Time, except that (i) each Company Option shall be
exercisable, when vested, for that number of whole shares of common stock
of Parent ("Parent Common Stock") equal to the product of the number of
shares of Company Common Stock covered by the Company Option multiplied by
a fraction, the numerator of which is U.S. $95.00 and the denominator of
which is the average for the five trading days immediately preceding the
Closing Date of the closing price of Parent Common Stock on the New York
Stock Exchange (such fraction, the "Exchange Ratio"), provided that any
fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded to the nearest whole share; and (ii) the exercise price
per share of Parent Common Stock (expressed in U.S. dollars) shall be equal
to the exercise price per share of Company Common Stock divided by the
Exchange Ratio, provided that such exercise price shall be rounded to the
nearest cent.
(c) Each Company Option that was granted to Irving Weiser pursuant to
the option award agreement between Mr. Weiser and the Company, dated
January 4, 2000 shall be assumed by Parent in accordance with paragraph (b)
above, and shall be exerciseable according to the terms of the Employment
Agreement between Mr. Weiser and the Company dated as of the date hereof.
(d) The Company and Parent shall take such action as may be necessary
to cause each share of restricted Company Common Stock ("Company Restricted
Stock") issued in calendar year 2000 to remain outstanding until, and to be
automatically converted at, the Effective Time into a number of shares of
restricted Parent Common Stock ("Parent Restricted Stock") equal to the
product of one (1) multiplied by the Exchange Ratio (and rounded to the
nearest whole number of shares. Such shares of Parent Restricted Stock
shall otherwise be subject to the same terms and conditions as such Company
Restricted Stock, including terms and conditions pursuant to the related
Company Stock Plans and agreements, which shall be assumed by Parent as of
the Effective Time, under which they were issued. At the Effective Time,
all references in the related Company Stock Plans and agreements thereunder
to the Company shall be deemed to refer to Parent.
ARTICLE IV
Actions Pending the Effective Time
4.01 Forbearances of the Company. Except as expressly contemplated by this
Agreement and the Stock Option Agreement or as Previously Disclosed, without
the prior written consent of Parent, during the period from the date of this
Agreement to the Effective Time, the Company will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of the Company and its
Subsidiaries other than in the ordinary and usual course consistent with
past practice, fail to use reasonable best efforts consistent with the
terms and provisions of this Agreement to preserve intact its business
organizations, operations and assets and maintain its rights, franchises
and existing relations with clients, customers, suppliers, counterparties,
employees and business associates; subject to the restriction in Section
4.01(m)(ii), engage in any material new activities or lines of business or
make any material changes to its existing activities or lines of business;
or take any action which would reasonably be expected to have a material
adverse effect upon the Company's ability to perform any of its material
obligations under this Agreement or the Stock Option Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof or pursuant to the Stock Option
Agreement, (i) issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of capital stock of the
Company or any of its Subsidiaries or any Rights in respect thereof, (ii)
enter into any agreement with respect to the foregoing, or (iii) permit any
additional shares of capital stock of the Company or any of its
Subsidiaries to become subject to new grants of employee or director stock
options, other Rights or similar stock-based employee rights.
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(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than dividends from wholly owned Subsidiaries to the
Company or another wholly owned Subsidiary of the Company, and regular
quarterly cash dividends on the Company Common Stock at a rate not
exceeding U.S. $0.22 per share per calendar quarter) or other distribution
(whether in stock, cash or property) on or in respect of, or declare or
make any distribution on, any shares of capital stock of the Company or any
of its Subsidiaries or (ii) directly or indirectly adjust, split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into, amend, modify
or renew any employment, consulting, severance or similar contract,
agreement or arrangement or any other agreement with any director, officer
or employee of the Company or any of its Subsidiaries, or grant any salary
or wage increase or increase any employee benefit (including incentive or
bonus payments), except (i) for changes that are required by applicable
law, (ii) to satisfy Previously Disclosed contractual obligations existing
as of the date hereof, (iii) for merit-based or annual salary increases in
the ordinary course of business and in accordance with past practice or
(iv) for employment arrangements for, or grants of awards to, newly hired
employees in the ordinary and usual course of business consistent with past
practice provided that total annual guaranteed compensation for such newly-
hired employee shall not exceed U.S. $500,000.
(e) Benefit Plans. Enter into, establish, adopt or amend or communicate
any intention to take such action (except (i) as may be required by
applicable law or (ii) to satisfy Previously Disclosed contractual
obligations existing as of the date hereof) any pension, retirement, stock
option, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or
employee of the Company or any of its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder.
(f) Dispositions. Except (i) as Previously Disclosed or (ii) for sales
of securities or other investments or assets in the ordinary and usual
course of business consistent with past practice, sell, transfer, mortgage,
encumber or otherwise dispose of or permit the creation of any Lien in
respect of or discontinue any material amount of its assets, business or
properties.
(g) Acquisitions. Except (i) as Previously Disclosed or (ii) in the
ordinary and usual course of business consistent with past practice,
acquire any assets, business, or properties of any other entity.
(h) Constitutive Documents. Amend the Constitutive Documents of the
Company or any of its Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP.
(j) Tax Matters. Make or change any material Tax election, change any
method of Tax accounting, file any income Tax Return, settle any audit,
examination or deficiency Litigation with respect to a material amount of
Taxes, request any private letter or similar Tax ruling or enter into any
closing agreement with any taxing authority with respect to a material
amount of Taxes; provided, however, that the Company may change a method of
tax accounting if it obtains the prior written consent of Parent (which
consent shall not be unreasonably withheld and shall be granted if such
change is required by a change in applicable law).
(k) Contracts. Except in the ordinary and usual course of business
consistent with past practice, enter into or terminate any material
Contract or amend or modify in any material respect any of its existing
material Contracts.
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(l) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually and in the aggregate for all such settlements, not more than
U.S. $250,000 and which would not reasonably be expected to establish an
adverse precedent or basis for subsequent settlements or require material
changes in business practices.
(m) Adverse Actions. (i) Knowingly take any action that would
reasonably be expected to (x) result in any of the Company's
representations or warranties set forth in this Agreement (subject to the
standard set forth in Section 5.02) or the Stock Option Agreement being or
becoming untrue at any time at or prior to the Effective Time or (y) result
in any of the conditions to the Merger set forth in Article VII not being
satisfied except, in each case, as may be required by applicable law, or
(ii) engage in any new line of business or make any acquisition that would
not be permissible for a United States financial holding company (as
defined in the Bank Holding Company Act of 1956, as amended) or would
subject Parent, the Company or any Subsidiary of either to material
regulation by a Governmental Authority that does not presently regulate
such company or to regulation by a Governmental Authority that is
materially different from current regulation.
(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary and usual course of business consistent with past practice.
(o) Fund Action. Except as and to the extent required, based upon the
written advice of outside counsel, in the exercise of the fiduciary
obligations of the Company or one of its Subsidiaries to any Investment
Company, request that any action be taken by any Fund Board, other than (i)
routine actions that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or
any Investment Company or (ii) actions Previously Disclosed.
(p) Commitments. Agree, commit to or enter into any agreement to take
any of the actions referred to in Section 4.01 (a) through (n).
4.02 Forbearances of Parent. Except as expressly contemplated by this
Agreement and the Stock Option Agreement, without the prior written consent of
the Company, Parent will not, and will cause each of its Subsidiaries not to,
knowingly take any action which could reasonably be expected to result in (a)
any of its representations and warranties set forth in this Agreement (subject
to the standard set forth in Section 5.02) or the Stock Option Agreement being
or becoming untrue in any material respect at any time at or prior to the
Effective Time, (b) any of the conditions to the Merger set forth in Article
VII not being satisfied, except, in each case, as may be expressly required by
applicable law.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, the Company has
delivered to Parent, and Parent has delivered to the Company, a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate (subject to the
standard set forth in Section 5.02) either (a) in response to an express
informational requirement contained in or requested by a provision hereof or
(b) as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04, respectively, or to one or more of its covenants
contained in Article IV; provided that the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by the disclosing party that such item (or any
undisclosed item or information of comparable or greater significance)
represents a material exception or fact, event or circumstance with respect to
the Company or Parent, respectively. Information set forth in a Disclosure
Schedule, whether in response to an express informational requirement or as an
exception to one or more representations or warranties or one or more
covenants, in each case that is contained in a correspondingly enumerated
section of such Disclosure Schedule, is described herein as "Previously
Disclosed" and each of Parent and the Company hereby represents and warrants
that such information is true and correct.
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5.02 Standard. No disclosure contemplated by Section 5.01 or representation
or warranty of the Company or Parent contained in Section 5.03 (other than
Sections 5.03(b), 5.03(c)(i) (the (A) first sentence thereof and (B) the third,
fourth and fifth sentences thereof, but, in the case of (B), only in respect of
Dain Rauscher Incorporated), 5.03(e) and 5.03(i)) or 5.04 (other than Sections
5.04(b) and 5.04(e)) shall be deemed untrue or incorrect for any purpose under
this Agreement, and no party hereto shall be deemed to have breached a
particular representation or warranty or to have made any misrepresentation, as
a consequence of the existence of any fact, event, or circumstance that should
have been disclosed as an exception to a particular representation or warranty,
unless such fact, event or circumstance, whether individually or taken together
with all other facts, events or circumstances that should have been but were
not so disclosed (whether or not as exceptions) with respect to any such
particular representation or warranty contained in Section 5.03 or 5.04,
results or would reasonably be expected to result in a Material Adverse Effect
with respect to the Company, in the case of Section 5.03, or Parent, in the
case of Section 5.04, or would materially impair the ability of the parties to
consummate the Merger in a timely manner.
5.03 Representations and Warranties of the Company. Except as Previously
Disclosed in a section of its Disclosure Schedule corresponding to the relevant
paragraph below, the Company hereby represents and warrants to Parent and the
Merger Subsidiary as follows:
(a) Organization, Standing and Authority. The Company has been duly
incorporated and is an existing corporation in good standing under the laws
of the State of Delaware. The Company is duly qualified to do business and
is in good standing in the States of the United States and each foreign
jurisdiction where its ownership or leasing of property or the conduct of
its business requires it to be so qualified. Each of the Company and its
Subsidiaries has in effect all federal, state, local, and foreign
governmental authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now conducted. Dain
Rauscher Incorporated is duly registered, qualified to do business and in
good standing as a broker-dealer with the SEC, and is a member in good
standing of all Self-Regulatory Organizations to which it is subject, and a
list of such Self-Regulatory Organizations has been delivered to Parent.
(b) Capital Stock. As of the date of this Agreement, the Company has
(i) 60,000,000 authorized shares of Company Common Stock, of which
12,921,865 shares were outstanding as of September 27, 2000 (along with the
associated rights to purchase Series A Junior Participating Preferred
Stock, par value $1.00 per share) and 373,918 shares are held as Treasury
Shares as of September 27, 2000, (ii) 2,000,000 authorized shares of $1 Par
Value Preferred Stock, par value $1.00 per share, of which no shares are
issued and outstanding, (iii) 1,940 authorized shares of 7% Convertible
Preferred Stock, par value $100.00 per share, of which no shares are issued
and outstanding, (iv) 500,000 authorized shares of $16 Par Value Preferred
Stock, par value $16.00 per share, of which no shares are issued and
outstanding and (v) 200,000 authorized shares of Series A Junior
Participating Preferred Stock, par value $1.00 per share, of which no
shares are issued and outstanding. All of the outstanding shares of Company
Common Stock have been duly authorized and are validly issued, fully paid
and nonassessable, and have not been issued in violation of any preemptive
rights. Set forth on the Company's Disclosure Schedule is a list of each
Compensation and Benefit Plan under which any shares of capital stock of
the Company or any Rights with respect thereto have been or may be awarded
or issued ("Company Stock Plans"). As of September 26, 2000, the Company
has outstanding Company Options representing the right to acquire 2,547,528
shares of Company Common Stock. Except as described in the immediately
preceding sentence, the Company has no Company Common Stock authorized for
issuance pursuant to any Company Stock Plans. Except as described in this
Section 5.03(b), there are no outstanding Rights of any kind with respect
to the Company, and no securities or obligations evidencing such Rights are
authorized, issued or outstanding. The shares of Company Common Stock
issuable pursuant to the Stock Option Agreement have been duly authorized
for issuance by the Company and, upon any issuance of such shares in
accordance with the terms of the Stock Option Agreement, such shares will
be duly authorized, validly issued, fully paid and nonassessable and free
and clear of any Liens. The Company does not have
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outstanding any bonds, debentures, notes or other obligations the holders
of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders
of the Company on any matter.
(c) Subsidiaries.
(i) Exhibit 21 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 includes all the Subsidiaries of
the Company which as of the date hereof are Significant Subsidiaries.
The Company has Previously Disclosed a list of all its Subsidiaries,
including the states in which such Subsidiaries are organized, a brief
description of such Subsidiaries' principal activities, and if any of
such Subsidiaries is not wholly owned by the Company or one of its
Subsidiaries, the percentage owned by the Company or any such
Subsidiary and the names and percentage ownership by any other person.
No equity securities of any of the Company's Subsidiaries are or may
become required to be issued (other than to the Company or a wholly
owned Subsidiary of the Company) by reason of any Rights with respect
thereto. There are no Contracts by which any of the Company's
Subsidiaries is or may be bound to sell or otherwise issue any shares
of its capital stock, and there are no Contracts relating to the rights
of the Company to vote or to dispose of such shares. All of the shares
of capital stock of each of the Company's Subsidiaries are fully paid
and nonassessable and subject to no preemptive rights or Rights and,
except as Previously Disclosed, are owned by the Company or a Company
Subsidiary free and clear of any Liens. Each of the Company's
Subsidiaries is in good standing under the laws of the jurisdiction in
which it is organized, and is duly qualified to do business and in good
standing in each jurisdiction where its ownership or leasing of
property or the conduct of its business requires it to be so qualified.
(ii) The Company has Previously Disclosed, as of the date hereof, a
list of all equity securities it or one of its Subsidiaries holds
involving, in the aggregate, beneficial ownership or control by the
Company or any such Subsidiary of 5% or more of any class of the
issuer's voting securities or 25% or more of any class of the issuer's
securities, including a description of any such issuer and the
percentage of the issuer's voting and/or non-voting securities and, as
of the Effective Time, no additional persons would need to be included
on such a list. The Company has Previously Disclosed a list, as of the
date hereof, of all partnerships, limited liability companies, joint
ventures or similar entities, in which it owns or controls an equity,
partnership or membership interest, directly or indirectly, and the
nature and amount of each such interest, and as of the Effective Time,
no additional persons would need to be included on such a list.
(d) Corporate Power. The Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own or lease all its properties and assets. The Company
has made available to Parent a brief description of each line of business
in which the Company or any Company Subsidiary is engaged.
(e) Corporate Authority and Action.
(i) The Company has the requisite corporate power and authority,
and has taken all corporate action necessary, in order to authorize the
execution and delivery of, and the performance of its obligations
under, this Agreement and the Stock Option Agreement and, subject only
to obtaining the requisite adoption of this Agreement by the holders of
a majority of the shares of Company Common Stock entitled to vote at
the Company Stockholder Meeting (the "Company Requisite Vote"), to
adopt the plan of merger contained in this Agreement and, in accordance
therewith, to consummate the Merger. Each of this Agreement, the Stock
Option Agreement and each Employment Agreement constitutes the valid
and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception").
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(ii) The Company has taken all action necessary in order to exempt
this Agreement, the Stock Option Agreement and the Merger and the other
transactions contemplated hereby and thereby from, and this Agreement,
the Stock Option Agreement and the Merger and the other transactions
contemplated hereby and thereby are exempt from, (x) the requirements
of any "moratorium," "control share," "fair price" or other
antitakeover laws and regulations of the State of Delaware, including
Section 203 of the DGCL, and of any other State and (y) the provisions
of Article Fourteenth of the Company's certificate of incorporation
with respect to "Business Combinations" and any other applicable
provisions of the Company's Constitutive Documents.
(f) Governmental Filings; No Violations. Other than those (i) referred
to in Section 2.02, (ii) under the HSR Act, the Exchange Act and the
Securities Act, (iii) required to be made pursuant to the European
Community Merger Control Regulation, (iv) required to be made with Self-
Regulatory Organizations and Governmental Authorities regulating brokers,
dealers, investment advisors, investment companies, banks, trust companies
and insurance companies, (v) required to be made pursuant to state
insurance or banking and trust company regulations and (vi) such other
filings and/or notices set forth in the Company's Disclosure Schedule, no
notices, reports, applications or other filings are required to be made by
the Company or any of its Subsidiaries with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained
by any of them from, any Governmental Authority in connection with the
execution and delivery of, and the performance of its obligations under,
this Agreement and the Stock Option Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated hereby and thereby. Subject, in the case of clause (A) below,
to obtaining the Company Requisite Vote, and the making or obtaining of all
filings, notices, applications, consents, registrations, approvals, permits
or authorizations with or of any relevant Governmental Authority with
respect to the Merger and the other transactions contemplated hereby and by
the Stock Option Agreement, the execution, delivery and performance by the
Company of this Agreement and the Stock Option Agreement and the
consummation by the Company of the Merger and the other transactions
contemplated hereby and thereby, do not and will not (A) constitute a
breach or violation of, or a default under, or cause or allow the
acceleration or creation of a Lien (with or without the giving of notice,
passage of time or both) pursuant to, any law, rule or regulation or any
judgment, decree, order, governmental or non-governmental permit or
license, or any Contract of it or of any of its Subsidiaries or to which
the Company or any of the Company's Subsidiaries or its or their properties
is subject or bound or (B) constitute a breach or violation of, or a
default under, the Constitutive Documents of the Company or any of its
Subsidiaries or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental or non-governmental
permit or license or the consent or approval of any other party to any such
Contract.
(g) Reports. The Company and its Subsidiaries have timely filed all
reports, registrations, statements and other filings, together with any
amendments required to be made with respect thereto, that were required to
be filed since December 31, 1996 with (i) the SEC or the CFTC, (ii) any
applicable federal, state, local or foreign Governmental Authorities or
(iii) any Self-Regulatory Organization (all such reports and statements,
including the financial statements, exhibits and schedules thereto, being
collectively referred to herein as the "Reports"), including without
limitation, all reports, registrations, statements and filings required
under the Securities Laws. Each of the Reports complied with the statutes,
rules, regulations and orders enforced or promulgated by the Governmental
Authority with which they were filed and did not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(h) Company SEC Documents and Financial Statements.
(i) The Company has made available to Parent copies of each
registration statement, offering circular, report, definitive proxy
statement or information statement under the federal Securities Laws
filed, used or circulated by it or any of its Subsidiaries with respect
to periods since December 31, 1996 through the date of this Agreement
and will promptly make available each such registration
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statement, offering circular, report, definitive proxy statement or
information statement filed, used or circulated after the date hereof
(collectively, the "Company SEC Documents"), each in the form
(including exhibits and any amendments thereto) filed with the SEC (or
if not so filed, in the form used or circulated). As of their
respective dates (giving effect to any amendments or modifications if
filed on or prior to the date of this Agreement), each of the Company
SEC Documents, including the financial statements, exhibits and
schedules thereto, filed, used or circulated prior to the date hereof
complied (and each of the Company SEC Documents filed after the date of
this Agreement, will comply) as to form with applicable Securities Laws
and did not (or in the case of reports, statements, or circulars filed
after the date of this Agreement, will not) as of its date of filing or
mailing to stockholders contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(ii) Each of the Company's consolidated statements of financial
condition or balance sheets included in or incorporated by reference
into the Company SEC Documents, including the related notes and
schedules, fairly presented (or, in the case of Company SEC Documents
filed after the date of this Agreement, will fairly present) in all
material respects the consolidated financial position of the Company
and its Subsidiaries as of the date of such statement of financial
condition or balance sheet and each of the consolidated statements of
income, cash flows and stockholders' equity included in or incorporated
by reference into Company SEC Documents, including any related notes
and schedules (collectively, the foregoing financial statements and
related notes and schedules are referred to as the "Company Financial
Statements"), fairly presented (or, in the case of those contained in
Company SEC Documents filed after the date of this Agreement, will
fairly present) in all material respects the consolidated results of
opera tions, cash flows and stockholders' equity, as the case may be,
of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP consis tently
applied during the periods involved (except as may be noted therein and
except, in the case of unaudited statements, for the absence of notes).
(i) Absence of Undisclosed Liabilities. Except as disclosed in the
Company Financial Statements or the Company SEC Documents filed prior to
the date hereof, none of the Company or its Subsidiaries has any obligation
or liability (contingent or otherwise), that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect
on the Company.
(j) Absence of Certain Changes. Except as expressly contemplated by
this Agreement or the Stock Option Agreement or the transactions
contemplated hereby or thereby and except as disclosed in the Company SEC
Documents filed prior to the date hereof, since December 31, 1999, the
Company and its Subsidiaries have conducted their business only in the
ordinary and usual course consistent with past practice, and there has not
been (i) any Material Adverse Effect on the Company or, to the knowledge of
the Company, any development or combination of developments which would
reasonably be expected to have a Material Adverse Effect on the Company,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, other than regular quarterly cash dividends of
U.S. $0.22 per share on the Company's Common Stock, (iii) any split,
dividend, combination, recapitalization or similar transaction with respect
to any of the Company's capital stock or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock, except for
issuances of Company Common Stock upon the exercise of Company Options
awarded prior to the date hereof in accordance with their terms, (iv) (A)
any granting by the Company or any of its Subsidiaries to any current or
former director, executive officer or other key employee of the Company or
its Subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases in the ordinary and usual course of business
and consistent with past practice or as was required under any employment
agreement in effect as of June 30, 2000, (B) any granting by the Company or
any of its Subsidiaries to any such current or former director, executive
officer or key employee of any increase in severance or
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termination pay, except in the ordinary and usual course of business and
consistent with past practice, or (C) any entry by the Company or any of
its Subsidiaries into, or any amendments of, any Compensation and Benefit
Plan, other than in the ordinary and usual course of business and
consistent with past practice, (v) except as required by a change in GAAP,
any change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or business or (vi) any tax
election that would be material to the Company or any of its tax attributes
or any settlement or compromise of any material income tax liability.
(k) Properties; Securities. Except as specifically reserved against or
otherwise disclosed in the Company Financial Statements and except for
those properties and assets that have been sold or otherwise disposed of in
the ordinary and usual course of business consistent with past practice,
the Company and its Subsidiaries have good and marketable title, free and
clear of all Liens, to all of the properties and assets, tangible and
intangible, reflected in the Company Financial Statements as being owned by
the Company or its Subsidiaries as of the dates thereof. The Company and
its Subsidiaries do not, directly or indirectly, control any real property
not used in the ordinary and usual course of their business. All buildings
and all fixtures, equipment, and other property and assets which are held
under leases or subleases by any of the Company or its Subsidiaries are
held under valid leases or subleases enforceable in accordance with their
respective terms. Each of the Company and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any Lien, except to the extent such securities are pledged in
the ordinary and usual course of business consistent with prudent business
practices to secure obligations of the Company or any of its Subsidiaries.
Such securities are properly valued on the books of the Company or its
Subsidiaries in accordance with GAAP.
(l) Litigation; Regulatory Action. Except as disclosed in the Company
SEC Documents filed before the date of this Agreement, no litigation,
proceeding, investigation or controversy ("Litigation") before any court,
arbitrator, mediator or Governmental Authority is pending against or
involves the Company or any of its Subsidiaries, and, to the Company's
knowledge, no such Litigation has been threatened; neither the Company nor
any of its Subsidiaries or properties is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission to, any
Governmental Authority (including the SEC, the CFTC and the Federal Trade
Commission) or Self-Regulatory Organization charged with the supervision or
regulation of broker-dealers, securities underwriting or trading, stock
exchanges, commodities exchanges, investment companies, investment advisers
or insurance agents and brokers or the supervision or regulation of the
Company or any of its Subsidiaries or any of the other businesses they
conduct; and neither the Company nor any of the Company Subsidiaries has
been notified by or received another communication from any such
Governmental Authority or Self-Regulating Organization to the effect that
such Governmental Authority or Self-Regulatory Organization is
contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or similar submission. Previously
Disclosed is a true and complete list, as of the date hereof, of all
Litigation pending or, to the Company's knowledge, threatened arising out
of any state of facts relating to the sale of investment, insurance or
hedging products by the Company, the Company Subsidiaries or, to the
knowledge of the Company, any employees thereof (including, without
limitation, equity or debt securities, mutual funds, insurance contracts,
annuities, partnership and limited partnership interests, interests in real
estate, investment banking services, securities underwritings in which the
Company or any of its Subsidiaries was a manager, co-manager, syndicate
member or distributor, derivatives contracts or structured notes).
(m) Compliance with Laws. Each of the Company and its Subsidiaries,
and, to the knowledge of the Company, their respective officers and
employees:
(i) in the conduct of business, including its sales and marketing
practices, is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules,
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judgments, suitability requirements, orders or decrees applicable
thereto or to the employees conducting such businesses, and with the
applicable rules of all Self-Regulatory Organizations to which it is
subject;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made or obtained all filings, notices,
applications, consents, registrations, approvals, permits or
authorizations with, to or of all Governmental Authorities and Self-
Regulatory Organizations that are required in order to permit it to own
and operate its businesses as presently conducted; all such permits,
licenses, authorizations, orders and approvals are in full force and
effect and, to the Company's knowledge, no suspension or cancellation
of any of them is threatened or reasonably likely; and all such
filings, applications and registrations are current;
(iii) has, since December 31, 1997, received no written
notification or, to the knowledge of the Company, other communication
from any Governmental Authority or Self-Regulatory Organization (A)
asserting that it is not in compliance with any of the statutes, rules,
regulations, or ordinances which such Governmental Authority or Self-
Regulatory Organization enforces, or has otherwise engaged in any
unlawful business practice, (B) threatening to revoke any license,
franchise, permit, seat on any stock or commodities exchange, or
governmental authorization, (C) requiring it (including any of its
directors or controlling persons) to enter into any order, decree,
agreement, memorandum of understanding or similar arrangement (or
requiring the board of directors thereof to adopt any resolution or
policy) or (D) restricting or disqualifying the activities of the
Company or any of its Subsidiaries (except for restrictions generally
imposed by rule, regulation or administrative policy on brokers,
dealers or investment advisors generally);
(iv) is not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Governmental Authority or
Self-Regulatory Organization against the Company, any of its
Subsidiaries or any officer, director or employee thereof (including
any investigations, reviews or proceedings relating to sales or
marketing practices);
(v) is not, nor is any Affiliate of it, subject to a "statutory
disqualification" as defined in Section 3(a)(39) of the Exchange Act
and is not subject to a disqualification that would be a basis for
censure, limitations on the activities, functions or operations of, or
suspension or revocation of the registration of any broker-dealer
Subsidiary as a broker-dealer, municipal securities dealer, government
securities broker or government securities dealer under Section 15,
Section 15B or Section 15C of the Exchange Act, and there is no
reasonable basis for, nor has the Company been notified of, any
proceeding or investigation, whether preliminary or otherwise, that
would reasonably be expected to result in, any such censure,
limitations, suspension or revocation;
(vi) is not required to be registered as an investment company;
(vii) is not acting as the "sponsor" of a "broker-dealer
trading program", as such terms are defined in Rule 17a-23 under the
Exchange Act; and
(viii) in the conduct of its business with respect to
employee benefit plans subject to Title I of ERISA, it has not (A)
breached any applicable fiduciary duty under Part 4 of Title I of ERISA
which, individually or in the aggregate, would reasonably be expected
to subject it to material liability under Sections 405 or 409 of ERISA,
(B) engaged in a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975(c) of the Code which, individually or in
the aggregate, would reasonably be expected to subject it to material
liability or Taxes under Sections 409 or 502(i) of ERISA or Section
4975(a) of the Code or (C) engaged in any conduct that would constitute
a crime or violation listed in Section 411 of ERISA which would
reasonably be expected to preclude the Company from providing services
to any such plan.
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(n) Clients.
(i) The Company and its Subsidiaries are in compliance with the
terms of each investment advisory Contract with each Client, and each
such Contract is in full force and effect with respect to the
applicable Client. There are no material disputes pending or threatened
with any Client or with any former Client. The Company has made
available to Parent true and complete copies of all material advisory,
sub-advisory and similar agreements with any Clients.
(ii) The Company shall as promptly as practicable after the date
hereof deliver to Parent a list of each Client that is subject to
regulation as an investment company under the Investment Company Act.
(iii) Each extension of credit by the Company or any of its
Subsidiaries to any Client is in compliance with Federal Reserve Board
Regulation T or any substantially similar regulation of any
Governmental Authority.
(o) Registrations.
(i) The Company, each of its Subsidiaries and each of its or their
officers and employees who are required to be registered as a broker-
dealer, an investment adviser, a registered representative, an
insurance agent, a commodity trading advisor, a commodity pool
operator, a futures commission merchant, an introducing broker, a
transfer agent or a sales person (or in a similar capacity) under any
United States federal, state, local or foreign statutes, laws, rules or
regulations, including with the SEC, the CFTC, the securities
commission or similar authority or insurance authority of any state or
foreign jurisdiction or any Self-Regulatory Organization, are duly
registered as such and such registrations are in full force and effect.
All United States Federal, state, local and foreign registration
requirements have been complied with and such registrations as
currently filed, and all periodic reports required to be filed with
respect thereto, are accurate and complete.
(ii) The Company has made available to Parent true and correct
copies of (A) each Form G-37/G-38 filed with the MSRB since January 1,
1998 and (B) all records required to be kept by the Company under Rule
G-8(a)(xvi) of the MSRB. Except as set forth in the foregoing, since
January 1, 1998, there have been no contributions or payments, and
there is no other information, that would be required to be disclosed
by the Company or any of the Company's Subsidiaries on any such Form or
recorded by the Company or any such Subsidiary pursuant to such Rule.
(p) Environmental Matters. The Company and its Subsidiaries have
complied at all times with applicable Environmental Laws; no property
(including buildings and any other structures) currently or formerly owned
or operated (or which the Company or any of its Subsidiaries would be
deemed to have owned or operated under any Environmental Law) by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries (whether as fiduciary or otherwise) has a Lien, has been
contaminated with, or has had any release of, any Hazardous Substance in
such form or substance so as to create any liability for the Company or its
Subsidiaries; the Company is not subject to liability for any Hazardous
Substance disposal or contamination on any other third-party property;
within the last six years, the Company and its Subsidiaries have not
received any notice, demand letter, claim or request for information
alleging any violation of, or liability of the Company under, any
Environmental Law; the Company and its Subsidiaries are not subject to any
order, decree, injunction or other agreement with any Governmental
Authority or any third party relating to any Environmental Law; the Company
and its Subsidiaries are not aware of any reasonably likely liability
relating to environmental circumstances or conditions (including the
presence of asbestos, underground storage tanks, lead products or
polychlorinated biphenyls) involving the Company or one of its
Subsidiaries, any currently or formerly owned or operated property (whether
as fiduciary or otherwise), or any reasonably likely liability related to
any Lien held by the Company or one of its Subsidiaries; and the Company
has made available to Parent copies of all environmental reports, studies,
sampling data, correspondence, filings and other environmental information
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in its possession relating to the Company or one of its Subsidiaries, or
any currently or formerly owned or operated property or any property in
which the Company or one of its Subsidiaries (whether as fiduciary or
otherwise) has held a Lien.
(q) No Brokers. None of the Company or its Subsidiaries, or any of
their directors, officers or employees, has employed any broker or finder,
or incurred any broker's or finder's commissions or fees, in connection
with the Merger or the other transactions contemplated by this Agreement or
the Stock Option Agreement, except that the Company has engaged Credit
Suisse First Boston as its financial adviser, the arrangements with which
(including fees) have been previously discussed with Parent.
(r) Compensation and Benefit Plans.
(i) The Company has Previously Disclosed a complete list of all
benefit and compensation plans, contracts, policies or arrangements
covering current or former employees of the Company and its
Subsidiaries (the "Employees") and current or former directors of the
Company, including, but not limited to, "employee benefit plans" within
the meaning of Section 3(3) of ERISA, and bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, severance,
employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment or severance contracts (other
than offer letters to employees which individually provide for total
annual compensation to an employee of less than $250,000), all medical,
dental, health and life insurance plans and all other employee benefit
plans, contracts or arrangements (the "Compensation and Benefit
Plans"). True and complete copies of all Compensation and Benefit
Plans, including, but not limited to, any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all amendments
thereto have been made available to Parent.
(ii) All Compensation and Benefit Plans have been operated in
accordance with their terms and are in substantial compliance with all
applicable law. Each Compensation and Benefit Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified, under
Section 401(a) of the Code, has received a favorable determination
letter from the IRS with respect to "TRA" (as defined in Section 1 of
IRS Revenue Procedure 93-39), and the Company is not aware of any
circumstances which could reasonably be expected to result in the
revocation or denial of any such favorable determination letter. There
is no pending or, to the knowledge of the Company, threatened
litigation relating to the Compensation and Benefit Plans. Neither the
Company nor any of its Subsidiaries has engaged in a transaction with
respect to any Compensation and Benefit Plan that would subject the
Company or any of its Subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount
which would be material.
(iii) Neither the Company nor any entity which is considered
one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate") has ever maintained any plan
which has been subject to Title IV of ERISA. Neither the Company nor
any of its Subsidiaries presently contributes to a Multiemployer Plan,
nor have they contributed to such a plan within the past six calendar
years. No notice of a "reportable event", within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the past 12-month period ending on the date
hereof.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan have been timely made or have been
reflected on the Company Financial Statements. Neither any Pension Plan
nor any single-employer plan of an ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither the Company
nor any of its Subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
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(v) Neither the Company nor any of its Subsidiaries has any
obligations for post- termination health and life benefits other than
as required by Part 6 of Subtitle B of Title I of ERISA. There are no
restrictions on the rights of the Company or any of its Subsidiaries to
amend or terminate any such post-termination health and life
arrangement without incurring any liability thereunder.
(vi) Neither the execution and delivery of this Agreement or the
Stock Option Agreement nor the consummation of the transactions
contemplated hereby or thereby will (A) result in any payment
(including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any
Employee under any Compensation and Benefit Plan or otherwise from the
Company or any of its Subsidiaries, (B) increase any benefits otherwise
payable under any Compensation and Benefit Plan, (C) result in any
acceleration of the time of payment or vesting or trigger any payment
on funding (through a grantor trust or otherwise) of any Company
Option, Right or any benefit payable under any Compensation and Benefit
Plan, (D) result in any payment that would not be deductible under
Section 162(m) or Section 280G of the Code or (E) cause the Company or
any of its Subsidiaries to record additional compensation expense on
its income statement with respect to any outstanding stock option or
equity-based award.
(s) No Knowledge. The Company knows of no reason relating to the
Company or its Subsidiaries why the regulatory approvals referred to in
Section 7.01(b) should not be obtained without the imposition of any
condition of the type referred to in the proviso contained in such Section
7.01(b).
(t) Labor Relations. Each of the Company and its Subsidiaries is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
including, without limitation, the Immigration Reform and Control Act, the
Worker Adjustment and Retraining Notification Act, any such laws respecting
employment discrimination, disability rights or benefits, equal
opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and
health requirements and unemployment insurance and related matters. None of
the Company or its Subsidiaries is engaged in any unfair labor practice and
there is no unfair labor practice complaint pending or, to the knowledge of
the Company, threatened against any of the Company or its Subsidiaries
before the National Labor Relations Board. Neither the Company nor any of
its Subsidiaries is a party to, is negotiating, or is bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is the Company
or any of its Subsidiaries the subject of a proceeding asserting that the
Company or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to
compel it or such Subsidiary to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike or other labor
dispute involving the Company or any of its Subsidiaries, pending or, to
its knowledge, threatened, nor is it aware of any activity involving the
Company's or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
(u) Insurance. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices. All of the insurance policies, binders, or bonds
maintained by the Company or its Subsidiaries are in full force and effect;
the Company and its Subsidiaries are not in default thereunder; and all
claims thereunder have been filed in due and timely fashion. The Company
has made available to Parent a list of all insurance policies maintained by
or for the benefit of the Company or its Subsidiaries or their directors,
officers, employees or agents.
(v) Taxes. The Company and its Subsidiaries have filed completely and
correctly in all material respects all material Tax Returns which are
required by all applicable laws to be filed by them, and have paid, or made
adequate provision for the payment of, all Taxes which have or may become
due and payable pursuant to said Tax Returns and all other Taxes,
governmental charges and assessments received to date other than those
Taxes being contested in good faith for which provision has been made in
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accordance with GAAP on the most recent consolidated balance sheet of the
Company set forth in the Financial Statements. All Taxes which the Company
and its Subsidiaries are required by law to withhold and collect have been
duly withheld and collected, and have been paid over, in a timely manner,
to the proper taxing authorities to the extent due and payable. Each of the
Company and its Subsidiaries has complied in all material respects with all
requirements (including record retention) applicable to information
reporting. The Company and its Subsidiaries have not executed any waiver to
extend, or otherwise taken or failed to take any action that would have the
effect of extending, the applicable statute of limitations in respect of
any Tax liabilities of the Company or any of its Subsidiaries for the
taxable years prior to and including the most recent taxable year. Neither
the Company nor any of its Subsidiaries (or any predecessor thereto) is a
"consenting corporation" within the meaning of Section 341(f) of the Code.
None of the Company or any of its Subsidiaries has been a member of any
consolidated group (other than with the Company and its Subsidiaries) for
Tax purposes. The Company and its Subsidiaries are not a party to any tax
sharing agreement or arrangement (other than with the Company and its
Subsidiaries). No material liens or encumbrances for Taxes exist with
respect to any of the assets or properties of the Company or any of its
Subsidiaries, except for statutory liens for Taxes not yet due or payable
or that are being contested in good faith. All of the U.S. federal income
Tax Returns filed by or on behalf of each of the Company and its
Subsidiaries have been examined by and settled with the IRS, or the statute
of limitations with respect to the relevant Tax liability expired, for all
taxable periods ending on or before the date of this Agreement. All Taxes
due with respect to any completed and settled audit, examination or
deficiency Litigation with any taxing authority have been paid in full.
There is no audit, examination, deficiency, or refund Litigation pending
with respect to any Taxes and no taxing authority has given written notice
of the commencement of any audit, examination or deficiency Litigation with
respect to any Taxes. No closing agreements, private letter rulings,
technical advice memoranda or similar agreements or rulings have been
entered into or issued by any taxing authority with respect to the Company
or any of its Subsidiaries. There are no outstanding assessments, claims or
deficiencies for any Taxes of the Company or any of its Subsidiaries that
have been proposed, asserted or assessed in writing. There is no
outstanding written claim by a taxing authority that the Company or any of
its Subsidiaries may be subject to taxation or required to file a Tax
Return in a jurisdiction where it does not file Tax Returns and none of the
Company or any of their Subsidiaries is aware of any jurisdiction that
could properly make such a claim. Each of the Company and its Subsidiaries
that is required to be registered for the purposes of sales tax, transfer
taxes, value added taxes or any similar Tax has been so registered, and it
has complied in all material respects with all statutory requirements,
orders, provisions, directions or conditions relating to such Taxes. The
Company has not been requested to and has not agreed to include in a
taxable period ending after the Effective Time any taxable income
attributable to income that economically accrued in a prior taxable period
as a result of Section 481 of the Code, the installment method of
accounting or any comparable provision of state or local Tax law. None of
the Company or any of its Subsidiaries has been a "distributing
corporation" or a "controlled corporation" in any distribution occurring
during the last 3 years in which the parties to such distribution treated
the distribution as one to which Section 355 of the Code applied. No Tax is
required to be withheld pursuant to Section 1445 of the Code as a result of
the Merger. All Tax Returns of the Company and each of its Subsidiaries and
all closing agreements, private letter rulings, technical advice memoranda
or similar agreements or rulings (if any) entered into with or issued by
any taxing authority, by or with respect to the Company or any of its
Subsidiaries that were delivered by the Company pursuant to Parent's due
diligence request are true copies of such documents.
(w) Derivatives. All exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract or any other
similar arrangement, whether entered into for the Company's account, or for
the account of one or more of the Company's Subsidiaries or their
customers, were entered into (i) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (ii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of the Company or any of its Subsidiaries, enforceable
in accordance with its terms (except as enforceability may be limited by
the Bankruptcy and
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Equity Exception), and are in full force and effect. Neither the Company
nor any of its Subsidiaries, nor to the Company's knowledge any other party
thereto, is in breach of any of its obligations under any such agreement or
arrangement. The Company SEC Documents disclose the value of such
agreements and arrangements on a mark-to-market basis in accordance with
GAAP, as modified to give effect to Statement of Financial Accounting
Standards No. 133, and, since December 31, 1999, there has not been a
material change in such value.
(x) Accounting Controls. Each of the Company and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient
to provide reasonable assurances, in the judgment of the Board of Directors
of the Company, that (i) all material transactions are executed in
accordance with management's general or specific authorization; (ii) all
material transactions are recorded as necessary to permit the preparation
of financial statements in conformity with GAAP consistently applied with
respect to broker-dealers or any other criteria applicable to such
statements, (iii) access to the material property and assets of the Company
and its Subsidiaries is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
items is compared with the actual levels at reasonable intervals and
appropriate action is taken with respect to any differences.
(y) Intellectual Property.
(i) The Company and its Subsidiaries own or have the right to use
all material Intellectual Property Rights (as defined below) necessary
or required for the operation of their business as currently conducted
(collectively, "Company IP Rights"), and have the right to use,
license, sublicense or assign the same without material liability to,
or any requirement of consent from, any other person or party. Such
Company IP Rights constitute all Intellectual Property Rights necessary
for the conduct of their businesses in the manner conducted immediately
prior to the Effective Time. All Company IP Rights are either owned by
the Company or its Subsidiaries free and clear of all Liens or are used
pursuant to a license agreement; each such license agreement is valid
and enforceable and in full force and effect; neither the Company nor
any of its Subsidiaries is in material default thereunder; and to the
knowledge of the Company, no corresponding licensor is in material
default thereunder. None of the Company IP Rights infringes or
otherwise conflicts with any Intellectual Property Rights or other
right of any person; there is no pending or, to the knowledge of the
Company, threatened litigation, adversarial proceeding, administrative
action or other challenge or claim relating to any Company IP Rights;
there is no outstanding order relating to any Company IP Rights; to the
knowledge of the Company, there is currently no infringement by any
person of any Company IP Rights; and the Company IP Rights owned, used
or possessed by the Company and its Subsidiaries is sufficient and
adequate to conduct the business of the Company and its Subsidiaries to
the full extent as such business is currently conducted.
(ii) To the knowledge of the Company, no employee of the Company
or any of its Subsidiaries is in violation of any term of any
employment contract, patent disclosure agreement or any other contract
or agreement relating to the relationship of any such employee with the
Company or such Subsidiary or any other party because of the nature of
the business conducted by the Company or its Subsidiaries or proposed
to be conducted by the Company or its Subsidiaries.
(iii) As used herein, the term "Intellectual Property Rights"
shall mean all worldwide industrial and intellectual property rights,
including, without limitation, patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyright, copyright applications,
franchises, licenses, inventories, know-how, trade secrets, customer
lists, proprietary processes and formulae, all source and object code,
algorithms, architecture, structure, display screens, layouts,
inventions, development tools, Software, Databases and all
documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda and records.
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(z) Investment Advisory Activities.
(i) Certain of the Company's Subsidiaries provide investment
management, investment advisory, sub-advisory, administration,
distribution or certain other services to the Investment Companies.
Each of the Investment Companies (or the trust or corporation of which
it is a series) is duly organized and existing in good standing under
the laws of the jurisdiction under which it is organized. Each of the
Investment Companies (or the trust or corporation of which it is a
series) that is registered or required to be registered under the
Investment Company Act ("Registered Funds") is governed by a board of
trustees or directors (each a "Fund Board" and, collectively, the "Fund
Boards") consisting of at least 50% of trustees or directors who are
not "interested persons" (as defined in the Investment Company Act) of
the Registered Funds or the Company. The Fund Boards operate in all
material respects in conformity with the requirements and restrictions
of Sections 10 and 16 of the Investment Company Act, to the extent
applicable.
(ii) Each of the Investment Companies is in compliance with all
applicable foreign, United States Federal and state laws, rules and
regulations of the SEC, the CFTC, the IRS, and any Self-Regulatory
Organization having jurisdiction over such Investment Company. The
Company has made available to Parent true and complete copies of all
the Constitutive Documents and related advisory agreements of all of
the Investment Companies managed or advised by the Company or any of
its Subsidiaries.
(iii) Except for the entities identified as such in the
Company's Disclosure Schedule, none of the Company or its Subsidiaries
is or has been during the past five years an "investment adviser"
within the meaning of the Investment Advisers Act, required to be
registered, licensed or qualified as an investment advisor under the
Investment Advisers Act or subject to any liability or disability by
reason of any failure to be so registered, licensed or qualified.
(iv) Each Investment Company has been operated in compliance
with its respective objectives, policies and restrictions, including
without limitation, those set forth in the applicable prospectus and
registration statement for that Investment Company or governing
instruments for a Client. The Company and its Subsidiaries have
operated the investment accounts with respect to which they provide
discretionary investment advisor services in accordance with the
investment objectives and guidelines in effect for such investment
accounts.
(v) Each Registered Fund has duly adopted procedures pursuant to
Rules 17a-7, 17e-1 and 10f-3 under the Investment Company Act, to the
extent applicable.
(vi) Neither the Company, nor any "affiliated person" (as
defined in the Investment Company Act) thereof, is ineligible pursuant
to Section 9 of the Investment Company Act to serve as an investment
advisor (or in any other capacity contemplated by the Investment
Company Act) to an Investment Company; neither the Company, nor any
"associated person" (as defined in the Investment Advisors Act)
thereof, is ineligible pursuant to Section 203 of the Investment
Advisors Act to serve as an investment advisor or as an associated
person to a registered investment advisor.
(aa) Financial Opinion. The Board of Directors of the Company has
received the opinion of Credit Suisse First Boston, dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration is
fair from a financial point of view to holders of shares of Company Common
Stock.
(bb) Certain Contracts. Except as set forth in the Company SEC Documents
filed prior to the date hereof, neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or any
other agreement or obligation (i) which limits or purports to limit in any
respect the manner in which, or the localities in which, any business of
the Company or its Subsidiaries is or could be conducted or the types of
business that the Company or its Subsidiaries conducts or may conduct or
(ii) which would reasonably be understood to limit or purport to limit in
any respect the manner in which, or the localities in which, any business
of the Parent or its Subsidiaries is or could be conducted or the types of
business that the Parent or its Subsidiaries conducts or may conduct.
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(cc) Rights Plan.
(i) The Company has amended the Rights Agreement to provide that
Parent shall not be deemed an Acquiring Person (as defined in the
Rights Agreement) and that the Rights (as defined in the Rights
Agreement) will not separate from the shares of Company Common Stock as
a result of entering into this Agreement or the Stock Option Agreement
or consummating the Merger or the other transactions contemplated by
this Agreement or the Stock Option Agreement.
(ii) The Company has taken all necessary action with respect to
all of the outstanding Rights (as defined in the Rights Agreement) so
that, as of immediately prior to the Effective Time, as a result of
this Agreement, the Stock Option Agreement and the transactions
contemplated by this Agreement and the Stock Option Agreement, (A)
neither the Company nor Parent will have any obligations under the
Rights (as defined in the Rights Agreement) or the Rights Agreement and
(B) the holders of the Rights (as defined in the Rights Agreement) will
have no rights under the Rights (as defined in the Rights Agreement) or
the Rights Agreement.
5.04 Representations and Warranties of Parent. Except as Previously
Disclosed in a section of its Disclosure Schedule corresponding to the relevant
paragraph below, Parent hereby represents and warrants to the Company as
follows:
(a) Organization, Standing and Authority. Parent and the Merger
Subsidiary each has been duly incorporated and is an existing corporation
in good standing under the laws of the jurisdiction of its incorporation.
Parent and the Merger Subsidiary each is duly qualified to do business and
is in good standing in the States of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified. Each of Parent and its
Subsidiaries has in effect all United States Federal, state, local and
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted.
(b) Corporate Authority. Parent and the Merger Subsidiary each has the
requisite corporate power and authority, and has taken all corporate action
necessary, in order to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement and, in the case of
Parent, the Stock Option Agreement, and to adopt the plan of merger
contained in this Agreement and, in accordance therewith, to consummate the
Merger. Each of this Agreement and, in the case of Parent, the Stock Option
Agreement, is the valid and binding agreement of Parent and the Merger
Subsidiary, as the case may be, enforceable against it in accordance with
its terms subject to the Bankruptcy and Equity Exception.
(c) Governmental Filings; No Violations. Other than the filings and/or
notices (i) referred to in Section 2.02, (ii) under the HSR Act, the
Exchange Act and the Securities Act, (iii) required to be made pursuant to
the European Community Merger Control Regulation and the Bank Act [Canada],
(iv) required to be made pursuant to state insurance or banking
regulations, (v) required to be made with the NYSE and other Self-
Regulatory Organizations and (vi) such other filings and/or notices set
forth in Parent's Disclosure Schedule, no notices, reports, applications or
other filings are required to be made by Parent or any of its Subsidiaries
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by any of them from, any
Governmental Authority in connection with the execution and delivery of
this Agreement and the Stock Option Agreement by Parent, the execution and
delivery of this Agreement by the Merger Subsidiary and the consummation by
Parent and the Merger Subsidiary of the Merger and the other transactions
contemplated hereby and thereby. Subject to the making or obtaining of all
filings, notices, applications, consents, registrations, approvals, permits
or authorizations with or of any relevant Governmental Authority with
respect to the Merger and the other transactions contemplated hereby and by
the Stock Option Agreement, the execution, delivery and performance of this
Agreement and the Stock Option Agreement, and the consummation of the
Merger and other transactions contemplated hereby and thereby, does not and
will not (A) constitute a breach or violation of, or a default under, or
cause or allow the acceleration or creation of a Lien (with or without the
giving of notice, passage of time or both) pursuant to, any law, rule or
regulation or any judgment, decree, order, governmental or non-governmental
permit or license, or any Contract of it or of any of its
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Subsidiaries or to which Parent or any of Parent's Subsidiaries or its or
their properties is subject or bound, (B) constitute a breach or violation
of, or a default under, the Constitutive Documents of Parent or any of its
Subsidiaries, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
or the consent or approval of any other party to any such Contract.
(d) No Knowledge. As of the date hereof, Parent knows of no reason
relating to Parent or its Subsidiaries why the regulatory approvals
referred to in Section 7.01(b) should not be obtained without the
imposition of any condition of the type referred to in the proviso
contained in such Section 7.01(b).
(e) Funds. At the Effective Time, Parent will have the funds necessary
to consummate the Merger and pay the Merger Consideration in accordance
with the terms of this Agreement.
(f) Interim Operations of the Merger Subsidiary. The Merger Subsidiary
was formed solely for the purpose of engaging in the transactions
contemplated hereby and has engaged in no business other than in connection
with the transactions contemplated by this Agreement. The Merger Subsidiary
is a wholly owned subsidiary of Parent.
(g) No Brokers. None of Parent or its Subsidiaries, or any of their
directors, officers or employees, has employed any broker or finder, or
incurred any broker's or finder's commissions or fees, in connection with
the Merger or the other transactions contemplated by this Agreement or the
Stock Option Agreement, except that Parent has engaged Lazard Freres & Co.
as its financial advisor.
(h) Legal Proceedings. As of the date hereof, none of the Parent or any
of its Subsidiaries is a party to any, and there are not pending or, to the
knowledge of Parent, threatened, material legal, administrative, arbitral
or other proceedings, claims, actions or governmental or regulatory
investigations of any nature challenging the validity or propriety of the
transactions contemplated by this Agreement or that would impair the
ability of Parent to perform its obligations hereunder.
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each of the Company and Parent agrees to use its reasonable
best efforts in good faith to take, or cause to be taken (including causing any
of its Subsidiaries to take), all actions, and to do, or cause to be done, all
things necessary, proper or desirable, or advisable under applicable laws, so
as to permit consummation of the Merger as promptly as reasonably practicable
and otherwise to enable consummation of the transactions contemplated hereby
and shall cooperate fully with the other party hereto to that end.
(b) Without limiting the generality of Section 6.01(a), the Company
agrees to use its reasonable best efforts to obtain (i) any consents of
Clients (including in the case of Registered Funds, the boards of directors
or trustees and the stockholders of such Registered Funds) necessary under
any Advisory Agreement or the Investment Company Act in connection with any
deemed assignment of any such Advisory Agreement upon consummation of the
Merger and (ii) the consent or approval of all persons party to a Contract
with the Company or any of its Subsidiaries, to the extent such consent or
approval is required in order to consummate the Merger or for the Surviving
Corporation to receive the benefits of such Contract; provided that in no
event shall the Company be deemed to have failed to satisfy the condition
set forth in 7.03(b) solely on the basis that such consents on approvals
have not been obtained as of the Closing Date.
6.02 Proxy Statement. (a) The Company will as promptly as practicable
prepare and file with the SEC a Proxy Statement to be sent to the Company's
Stockholders (the "Company Proxy Statement") and shall use its reasonable best
efforts to have the Company Proxy Statement cleared by the SEC promptly. The
Company will cause the Company Proxy Statement to comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. The Company will advise Parent
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promptly of the time when the Company Proxy Statement and any amendment or
supplement to the Company Proxy Statement has been filed, or any request by the
SEC for amendment of the Company Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. Each of
the Company and Parent agrees to use its reasonable best efforts, after
consultation with the other, to respond promptly to all such comments of and
requests by the SEC.
(b) The Company agrees, as to itself and its Subsidiaries, that none of
the information (except with respect to information supplied by or on
behalf of Parent or Merger Subsidiary for inclusion therein) included or
incorporated by reference in the Company Proxy Statement and any amendment
or supplement thereto will, at the date of mailing to stockholders and at
the time or times of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If
at any time prior to the date of the Company Stockholders Meeting any
information relating to the Company or any of its Affiliates, officers, or
directors, should be discovered by the Company and which should be set
forth in an amendment or supplement to the Company Proxy Statement, so that
such document would not include any misstatement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, the Company shall promptly notify Parent and, to
the extent required by law, an appropriate amendment or supplement
describing such information shall be promptly filed by the Company with the
SEC and, to the extent required by law, disseminated by the Company to the
stockholders of the Company.
(c) The Company will use its reasonable best efforts to cause the
definitive Company Proxy Statement and all required amendments and
supplements thereto to be mailed to its stockholders as promptly as
practicable after the date hereof.
6.03 Company Stockholders Meeting. The Company will take, in accordance with
applicable law and its Constitutive Documents, all action necessary to convene
a special meeting of the holders of the Company's Common Stock at which the
holders of the Company's Common Stock will consider the adoption of this
Agreement (including any adjournments or postponements thereof, the "Company
Stockholders Meeting") as promptly as practicable after the date hereof.
Subject to the terms of this Agreement and subject to its fiduciary obligations
under applicable law, the Board of Directors of the Company shall recommend to
its stockholders the adoption of this Agreement and shall use best reasonable
efforts to solicit such adoption. In the event that subsequent to the date
hereof, the Board of Directors of the Company determines that this Agreement is
no longer advisable and either makes no recommendation or recommends that its
stockholders reject it, the Company shall nevertheless submit this Agreement to
the holders of the Company Common Stock for adoption at the Company
Stockholders Meeting unless this Agreement shall have been terminated in
accordance with its terms prior to the Company Stockholders Meeting.
6.04 Press Releases. The initial press release concerning the Merger and the
other transactions contemplated by this Agreement and the Stock Option
Agreement shall be a joint press release in such form agreed to by the parties
and thereafter the Company and Parent each shall consult with the other and
provide each other the opportunity to review, comment upon and use reasonable
best efforts to agree on, any press release or other public announcements with
respect to the Merger and the other transactions contemplated by this Agreement
and the Stock Option Agreement prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement and
neither party shall issue any press release or otherwise make any public
announcements with respect thereto without the other's prior consent, except as
may be required by law or court process or by obligations pursuant to any
listing agreement with or rules of any applicable securities exchange.
6.05 Access; Information. (a) The Company agrees that upon reasonable notice
and subject to applicable laws relating to the exchange of information it shall
afford Parent and its Representatives, such
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access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and
Representatives of the Company and to such other information as Parent may
reasonably request and, during such period, it shall furnish promptly to such
other party (i) a copy of each material report, schedule and other document
filed by it pursuant to the requirements of the Securities Laws or banking or
insurance laws, and (ii) all other information concerning the business,
properties and personnel of it as the other may reasonably request.
(b) Parent agrees that any information obtained pursuant to this
Section 6.05 shall be kept confidential in accordance with the letter
agreement, dated July 19, 2000 (the "Confidentiality Agreement"), between
Parent and the Company. No investigation by Parent of the business and
affairs of the Company and its Subsidiaries shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Agreement or the conditions to consummation of the Merger contained in
Article VII.
6.06 Acquisition Proposals. The Company agrees that it shall not, and shall
use its reasonable best efforts to cause its officers, directors, agents,
advisors and Affiliates not to, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any tender or exchange offer, proposal for a merger, consolidation or other
business combination involving the Company or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the assets or operations of, the Company or any of its
Subsidiaries (any of the foregoing, an "Acquisition Proposal"), other than the
transactions contemplated by this Agreement or the Stock Option Agreement;
provided, that nothing contained in this Agreement shall prevent the Company's
Board of Directors from (i) making any disclosure to its stockholders if, in
the good faith judgment of its Board of Directors, failure so to disclose would
be inconsistent with its obligations under applicable law; (ii) providing (or
authorizing the provision of) information to, or engaging in (or authorizing)
such discussions or negotiations with, any person who has made a bona fide
written Acquisition Proposal received after the date hereof which did not
result from a breach of this Section 6.06; (iii) recommending such an
Acquisition Proposal to its stockholders (and in connection therewith
withdrawing its favorable recommendation to stockholders of this Agreement), if
and only to the extent that, in the case of actions referred to in clause (ii)
or (iii), (x) such Acquisition Proposal is a Superior Proposal, (y) the
Company's Board of Directors, after having consulted with and considered the
advice of outside counsel to such Board, determines in good faith that
providing such information or engaging in such negotiations or discussions, or
making such recommendation, is required in order to discharge the directors'
fiduciary duties in accordance with the DGCL and (z) the Company receives from
such person a confidentiality agreement substantially in the form of the
Confidentiality Agreement. For purposes of this Agreement, a "Superior
Proposal" means any Acquisition Proposal by a third party on terms which the
Company's Board of Directors determines in its good faith judgment, after
consultation with its financial advisors (whose advice shall be communicated to
Parent), to be more favorable from a financial point of view to its
stockholders than the Merger and the other transactions contemplated hereby,
after taking into account the likelihood of consummation of such transaction on
the terms set forth therein, taking into account all legal, financial
(including the financing terms of any such proposal), regulatory and other
aspects of such proposal and any other relevant factors permitted under
applicable law, after giving Parent at least five Business Days to respond to
such third-party Acquisition Proposal once the Board has notified Parent that
in the absence of any further action by Parent it would consider such
Acquisition Proposal to be a Superior Proposal, and then taking into account
any amendment or modification to this Agreement proposed by Parent. The Company
also agrees immediately to cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than Parent, with respect to any of the foregoing. The
Company shall promptly (within 24 hours) advise Parent following the receipt by
it of any Acquisition Proposal and the material terms thereof (including the
identity of the person making such Acquisition Proposal), and advise Parent of
any developments (including any change in such terms) with respect to such
Acquisition Proposal promptly upon the occurrence thereof.
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Nothing contained in this Section 6.06 or any other provision of this
Agreement will prohibit the Company or the Company's Board of Directors from
notifying any third party that contacts the Company on an unsolicited basis
after the date hereof concerning an Acquisition Proposal of the Company's
obligations under this Section 6.06.
6.07 No Rights Triggered. The Company shall take all reasonable steps
necessary to ensure that the entering into of this Agreement and the Stock
Option Agreement and the consummation of the transactions contemplated hereby
and thereby and any other action or combination of actions, or any other
transactions contemplated hereby and thereby, do not and will not result in the
grant of any Rights to any person (a) under the Constitutive Documents of the
Company or any of its Subsidiaries or (b) under any Contract to which the
Company or any of its Subsidiaries is a party except, in each case, as
expressly contemplated by the Agreement and the Stock Option Agreement.
6.08 Regulatory Applications. (a) Parent, the Company and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts
to prepare all documentation, to effect all filings, notices, applications,
consents, registrations, approvals, permits and authorizations with, to, or of
all third parties and Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement as promptly as reasonably
practicable. Parent shall have the right to review in advance, and to the
extent practicable to consult with the Company, subject to applicable laws
relating to the exchange of information, with respect to, all material written
information submitted to any third party or any Governmental Authority in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, Parent agrees to act reasonably and as promptly as
practicable. Each of Parent and the Company agrees that it will consult with
the other party hereto with respect to the obtaining of all material consents,
registrations, approvals, permits and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other party
apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Subject to applicable laws governing the exchange of information,
each of Parent and the Company will, upon request, furnish the other party
with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any filing, notice or application
made by or on behalf of such other party or any of its Subsidiaries to any
third party or Governmental Authority.
(c) The Company will cooperate with Parent to ensure that, to the
extent reasonably practicable, on the Closing Date the activities and
assets of the Company and its Subsidiaries are permitted to be conducted or
held by Parent (as a foreign bank qualified as a financial holding company)
and its Subsidiaries under the Bank Holding Company Act of 1956, as amended
or the Bank Act (Canada), if applicable. As of the date hereof, Parent has
no knowledge of any reason why such activities or assets would not be so
permitted.
6.09 Employee Matters. (a) Parent will honor or will cause the Surviving
Corporation to honor, in accordance with their terms, all benefit obligations
to Employees accrued as of the Effective Time and all employee severance
obligations under plans and policies in existence on the date of this
Agreement.
(b) For one year after the Effective Time, Parent shall provide, or
shall cause to be provided, to the Employees, employee benefits that, in
the aggregate, are substantially comparable to those provided to such
Employees immediately prior to the Effective Time. To ensure that the
Company will have the benefit of continuity of employment the Company shall
cooperate with Parent between the date hereof and the Effective Time to
establish compensation practices applicable after the Effective Time
comparable to those currently applied by the Company, and it is the
intention of the parties that such practices may be amended from time to
time to ensure that the Company remains competitive in its ability to
attract talented personnel and to meet business needs. For all purposes
under the employee benefit and compensation plans of Parent and its
Affiliates providing benefits to any Employees after the Effective Time
(the "New Plans"), each Employee shall be credited with his or her years of
service with the Company and its
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Affiliates before the Effective Time, other than for purposes of benefit
accrual under any defined benefit pension plan, and except to the extent
such credit would result in a duplication of benefits in respect of such
period. In addition, and without limiting the generality of the foregoing,
for purposes of each New Plan providing medical, dental, pharmaceutical,
vision and/or disability benefits to any Employee, Parent shall cause all
pre-existing condition exclusions and actively-at-work requirements of such
New Plan to be waived for such Employee and his or her covered dependents
to the extent such exclusion or limitation was waived under the comparable
Compensation and Benefit Plan, and Parent shall cause any eligible expenses
incurred by such Employee and his or her covered dependents during the
portion of the plan year of the comparable Compensation and Benefit Plan
ending as of the date such Employee's participation in the corresponding
New Plan begins to be taken into account under such New Plan for purposes
of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such Employee and his or her covered dependents
for the applicable plan year as if such amounts had been paid in accordance
with such New Plan.
(c) Parent shall or shall cause the Surviving Corporation to take all
actions necessary to effectuate the items set forth in Section 6.09(c) of
the Company Disclosure Schedule with respect to the establishment of a
retention bonus plan for the employees of the Company.
6.10 Notification of Certain Matters. (a) Each of the Company and the Parent
shall give prompt notice to the other of any fact, event or circumstance known
to it that could reasonably be expected, individually or taken together with
all other facts, events and circumstances known to it, to result in a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
(b) The Company shall promptly notify Parent of:
(i) Any written notice or other bona fide communication from any
person alleging that the consent of such person is or may be required
as a condition to the Merger;
(ii) Any notice or other written communications from any Client
(A) terminating or threatening to terminate any material Contract with
the Company relating to the rendering of services to such client or (B)
relating to any material dispute with such Client; or
(iii) Any written notice or other material communication from
any Governmental Authority or Self-Regulatory Organization in
connection with the transactions contemplated by this Agreement.
(c) The Company and its Subsidiaries shall, prior to the Closing Date,
use its reasonable best efforts to notify its insurers in writing of all
known incidents, events and circumstances which could reasonably be
expected to give rise to a claim against the Company or its Subsidiaries.
6.11 Indemnification; Directors' and Officers' Insurance. (a) From and after
the Effective Time, Parent agrees to cause the Surviving Corporation to
indemnify and hold harmless each present and former director and officer of the
Company, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any actual or threatened claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company would have been permitted under
Delaware law and its Constitutive Documents in effect on the date hereof to
indemnify such person (and Parent shall also cause the Surviving Corporation to
advance expenses as incurred to the fullest extent permitted under applicable
law provided the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is not
entitled to indemnification); provided that any determination required to be
made with respect to whether such an officer's or director's conduct complies
with the standards set forth under Delaware law and the Company's Constitutive
Documents shall be made by independent counsel reasonably acceptable to both
the Indemnified Party and the Surviving Corporation.
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(b) Any Indemnified Party wishing to claim indemnification under
Section 6.11(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify the Surviving Corporation thereof,
but the failure to so notify shall not relieve the Surviving Corporation of
any liability it may have to such Indemnified Party if such failure does
not materially prejudice the Surviving Corporation. In the event of any
such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Surviving Corporation shall
have the right to assume the defense thereof and the Surviving Corporation
shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
the Surviving Corporation elects not to assume such defense or independent
counsel reasonably acceptable to both the Indemnified Party and the
Surviving Corporation advises that there are issues which raise conflicts
of interest between the Surviving Corporation and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and the
Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that the Surviving Corporation shall be
obligated pursuant to this Section 6.11 to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction, (ii) the Indemnified
Parties will cooperate reasonably in the defense of any such matter and
(iii) the Surviving Corporation shall not be liable for any settlement
effected without its prior written consent; and provided further that the
Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
(c) For a period of six years from the Effective Time, Parent shall use
its reasonable best efforts to cause the Surviving Corporation to provide
director's and officer's liability insurance to the present and former
officers and directors of the Company or any of the Company's Subsidiaries
(determined as of the Effective Time) with respect to claims against such
directors and officers arising from facts or events which occurred before
the Effective Time, which insurance shall contain at least the same
coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by the Company; provided;
however, that in no event shall the Surviving Corporation be required to
expend more than 200 percent of the current amount expended by the
Surviving Corporation (such product, the "Insurance Amount") to maintain or
procure such directors and officers insurance coverage; provided, further,
that if the Surviving Corporation is unable to maintain or obtain the
insurance called for by this Section 6.11(c), Parent shall use its
reasonable best efforts to cause the Surviving Corporation to obtain as
much comparable insurance as is available for the Insurance Amount; and
provided, further, that officers and directors of the Company or any
Company Subsidiary may be required to make application and provide
reasonable and customary representations and warranties to the Surviving
Corporation's insurance carrier for the purpose of obtaining such
insurance.
6.12 Section 15 of the Investment Company Act. If the Merger and the
transactions contemplated hereby constitute a deemed "assignment" (as defined
in the Investment Company Act and the Investment Advisors Act) of the advisory
agreement with any Registered Fund or any other Client:
(a) The Company will use its reasonable best efforts to obtain as
promptly as practicable, (i) if required by the Investment Company Act or
by the terms of the advisory agreement with any Registered Fund, the
approval of the Board of Directors and the stockholders of each such
Registered Fund, pursuant to the provisions of Section 15 of the Investment
Company Act applicable thereto, of a new investment company advisory
agreement for such Registered Fund with the applicable Subsidiary of the
Company no less favorable to the Company or its Subsidiaries to that in
effect immediately prior to the Closing, and (ii) a consent to assignment
(which may be in the form of a "negative consent") from each other Client
to whom it or any of its Subsidiaries is providing investment advisory
services;
(b) Parent will use its reasonable best efforts to assure, prior to the
Closing, the satisfaction of the conditions set forth in Section 15(f) of
the Investment Company Act with respect to each Registered Fund; and
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(c) Parent agrees to use its reasonable best efforts to assure
compliance with the conditions of Section 15(f) of the Investment Company
Act with respect to the Registered Funds;
provided that in no event shall the conditions set forth in Sections 7.01(c),
7.02(b) and 7.03(b) be deemed not to have been satisfied solely on the basis
that such consents or approvals have not been obtained, or the conditions
described in (b) or (c) above have not been satisfied or complied with, at the
Effective Time.
6.13 ERISA Clients. As soon as reasonably practicable after the date Parent
delivers to the Company the schedule referred to below, the Company shall
deliver to Parent a schedule identifying each Client that is (i) an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I
of ERISA; (ii) a person acting on behalf of such a plan; or (iii) an entity
whose assets include the assets of such a plan, within the meaning of ERISA and
applicable regulations (hereinafter referred to as an "ERISA Client"); and
listing each contract or agreement, if any, and all amendments thereto, in
effect on the date hereof, entered into by the Company or any of its
Subsidiaries with respect to or on behalf of any ERISA Client, pursuant to
which any of the entities identified in a schedule to be delivered by Parent to
the Company as soon as reasonably practicable after the date hereof (including
any entity that, to the knowledge of the Company, is an affiliate of any of the
entities identified in such schedule) has agreed to (x) execute securities
transactions; (y) provide any other goods or services; or (z) purchase, sell,
exchange or swap securities or any other economic interest therein or
derivative thereof, including rights to receive or obligations to pay interest
or principal under any debt obligation, or rights to receive or obligations to
pay interest or principal denominated in a particular currency.
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Parent, the Merger Subsidiary and the Company
to consummate the Merger is subject to the fulfillment or written waiver by
Parent and the Company prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been duly adopted
by the stockholders of the Company by the Company Requisite Vote.
(b) Governmental and Regulatory Consents. All approvals, consents and
authorizations of, filings and registrations with, and applications and
notifications to all Governmental Authorities required for the consummation
of the Merger or for the prevention of any termination of any right,
privilege, license or agreement of either Parent and its Subsidiaries or
the Company and its Subsidiaries shall have been obtained or made and shall
be in full force and effect and all waiting periods required by law shall
have expired; provided, however, that none of the preceding shall be deemed
obtained or made if it shall be subject to any condition or restriction the
effect of which, together with any other such conditions or restrictions,
would be reasonably expected to have a Material Adverse Effect on the
Surviving Corporation or Parent after the Effective Time.
(c) Third Party Consents. All consents or approvals of all persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement and the consummation
of the Merger shall have been obtained and shall be in full force and
effect, unless the failure to obtain any such consent or approval would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Surviving Corporation.
(d) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and restrains,
enjoins or otherwise prohibits consummation of the Merger or the other
transactions contemplated by this Agreement.
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7.02 Conditions to Obligation of the Company. The obligation of the Company
to consummate the Merger is also subject to the fulfillment or written waiver
by the Company prior to the Closing of each of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 5.02, the representations and warranties of Parent set forth in
this Agreement shall be true and correct (or, in the case of any such
representation and warranty of Parent set forth in Section 5.04(b), true
and correct in all material respects) as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date (except
that representations and warranties that by their terms speak as of the
date of this Agreement or some other date shall be true and correct only as
of such date), and the Company shall have received a certificate, dated the
Closing Date, signed on behalf of Parent by a senior executive officer to
such effect.
(b) Performance of Obligations of Parent. Parent and the Merger
Subsidiary shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate, dated the
Closing Date, signed on behalf of Parent by a senior executive officer to
such effect.
7.03 Conditions to Obligation of Parent and the Merger Subsidiary. The
obligation of each of Parent and the Merger Subsidiary to consummate the
Merger is also subject to the fulfillment or written waiver by Parent prior to
the Closing of each of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth
in Section 5.02, the representations and warranties of the Company set
forth in this Agreement shall be true and correct (or in the case of any
such representation and warranty of the Company described in the first
parenthetical of Section 5.02, true and correct in all material respects)
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other
date shall be true and correct only as of such date) and Parent shall have
received a certificate, dated the Closing Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate, dated the Closing Date, signed on behalf
of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to such effect.
(c) Employment Agreements. The Employment Agreements of (i) each
individual comprising Group A as set forth in Annex B and (ii) the three
individuals comprising Group B as set forth in Annex B shall be in full
force and effect and, in each case, such individual shall still be employed
by the Company and shall not have committed an act or omission that would
permit their termination for "cause" thereunder; provided, however, that
this condition shall not be deemed unsatisfied as a result of the death or
disability of one of the individuals named in Group A as set forth in Annex
B or any or all of the individuals named in Group B as set forth in Annex
B.
ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated, and the Merger may be
abandoned at any time prior to the Effective Time:
(a) Mutual Consent. By the mutual consent of Parent, the Merger
Subsidiary and the Company.
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(b) Breach. By Parent and the Merger Subsidiary, on the one hand, or
the Company, on the other hand, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein, which
breach cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party of such breach; or (ii) a breach by
the other party of any of the covenants or agreements contained herein,
which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach and, in each
case (i) and (ii), which breach, individually or in the aggregate with
other such breaches, would cause the conditions set forth in Section
7.03(a) or (b), in the case of a breach by the Company, or Section 7.02(a)
or (b), in the case of a breach by Parent or the Merger Subsidiary, not to
be satisfied or would reasonably be expected to prevent, materially delay
or materially impair the ability of the Company, the Merger Subsidiary or
Parent to consummate the Merger and the other transactions contemplated by
this Agreement.
(c) Delay. By Parent or the Company in the event that the Effective
Time has failed to occur on or before March 31, 2001, except to the extent
that such failure arises out of or results from the knowing action or
inaction of the party seeking to terminate pursuant to this Section
8.01(c).
(d) No Regulatory Approval. By the Company or Parent, if the approval
of any Governmental Authority required for consummation of the Merger and
the other transactions contemplated by this Agreement shall have been
denied by final nonappealable action of such Governmental Authority, or
such Governmental Authority shall have requested the permanent withdrawal
of any application therefor, or any such approval shall have become final
and unappealable and be made subject to any condition or restriction
described in the proviso to Section 7.01(b).
(e) No Stockholder Approval. By Parent, if the Company Requisite Vote
is not obtained at the Company Stockholders Meeting called to obtain the
Company Requisite Vote.
(f) Failure to Recommend, Etc. By Parent, if at any time prior to the
Company Stockholders Meeting, the Company's Board of Directors shall have
failed to make its recommendation referred to in Section 6.03, withdrawn
such recommendation or modified or changed such recommendation in a manner
adverse to the interests of Parent.
(g) Acquisition Proposal. By Parent, if the Board of Directors of the
Company shall take any of the actions described in clause (ii) or (iii) of
the proviso to Section 6.06.
8.02 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to
any other party hereunder except (a) as set forth in Sections 8.03 and 9.01
hereof, (b) that the Stock Option Agreement shall be governed by its own terms
as to termination and (c) that termination will not relieve a breaching party
from liability for any knowing or willful breach of this Agreement.
8.03 Termination Fee. (a) In addition to any other rights that Parent has
under this Agreement, the Stock Option Agreement and/or otherwise, if this
Agreement is terminated by Parent pursuant to Section 8.01(f) or 8.01(g), then
the Company shall pay to Parent U.S. $14 million.
(b) Any payment required to be made under paragraph (a) above shall be
payable, without setoff, by wire transfer in immediately available funds,
to an account specified by Parent, within three Business Days following
such termination.
(c) The Company acknowledges that the agreements contained in this
Section 8.03 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails promptly to pay any
amount due pursuant to this Section 8.03, and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the
Company for the payment set forth in this Section 8.03, the Company shall
pay to Parent's costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on any amount due
pursuant to this Section 8.03 from the date such amount becomes payable
until the date of such payment at the prime rate of Citibank N.A. in effect
on the date such payment was required to be made plus two (2) percent.
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ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time or termination of
this Agreement; provided, however, that (a) the agreements of the parties
contained in Article III and 6.05(b), and in this Article IX shall survive the
Effective Time and (b) if this Agreement is terminated prior to the Effective
Time, the agreements of the parties contained in Sections 8.02 and 8.03 and in
this Article IX shall survive such termination.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision in a
writing signed by such person, or (b) amended or modified at any time, by an
agreement in writing between the parties hereto and executed in the same manner
as this Agreement, except that, after adoption of the Agreement by the
stockholders of the Company, no amendment may be made which under applicable
law requires further approval of such stockholders without obtaining such
required further approval.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law and Venue. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed entirely within such State. The parties
hereby irrevocably submit to the jurisdiction of the Federal courts of the
United States of America and the state courts of the State of Delaware, in each
case located in the State of Delaware, solely in respect of the interpretation
and enforcement of the provisions of this Agreement and the Stock Option
Agreement and of the documents referred to in this Agreement and the Stock
Option Agreement, and in respect of the transactions contemplated hereby and
thereby, and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or thereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or the Stock
Option Agreement or any such document may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a Delaware Federal
or state court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 9.06 or in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.
9.05 Expenses. Whether or not the Merger is consummated, each party hereto
will bear all expenses incurred by it in connection with this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby.
9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given (a) on the date of
delivery, if personally delivered or telecopied (with confirmation), (b) on the
first Business Day following the date of dispatch, if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date
of mailing, if mailed by registered or certified mail (return receipt
requested), in each case to such party at its address or telecopy number set
forth below or such other address or numbers as such party may specify by
notice to the parties hereto.
If to the Company, to:
Dain Rauscher Incorporated
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Carla Smith
Facsimile: (612) 371-7203
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With a copy to:
Dorsey and Whitney
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: William B. Payne
Facsimile: (612) 340-8738
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy
Facsimile: (212) 403-2000
If to Parent or the Merger Subsidiary, to:
Royal Bank of Canada
200 Bay Street
Royal Bank Plaza
Toronto, Ontario
Canada M5J 2J5
Attention: Sandra Jorgenson
Facsimile: (416) 955-3590
With a copy to:
Donald J. Toumey, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile: (212) 558-3588
9.07 Entire Understanding; No Third-Party Beneficiaries. This Agreement and
the Stock Option Agreement and the documents referred to herein and therein
represent the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and thereby and such agreements supersede any
and all other oral or written agreements heretofore made, including the
Confidentiality Agreement (except as set forth in Section 6.05(b) of this
Agreement). Except for Section 6.11, which shall inure to the benefit of and be
enforceable by the Indemnified Parties named therein and their heirs and legal
representatives, nothing in this Agreement, expressed or implied, is intended
to confer upon any person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.08 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned or delegated, in whole or in part
(except by operation of law), by any of the parties hereto without the prior
written consent of each other party hereto, except that Parent and the Merger
Subsidiary may assign or delegate in their sole discretion any or all of their
rights, interests or obligations under this Agreement to any direct or
indirect, wholly owned subsidiary of Parent, but no such assignment shall
relieve Parent of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns.
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9.09 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their terms or were otherwise breached. It is accordingly
agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
DAIN RAUSCHER CORPORATION
/s/ Irving Weiser
By: _________________________________
Name: Irving Weiser
Title: Chairman, President
andChief Executive Officer
ROYAL BANK OF CANADA
/s/ W. Reay Mackay
By: _________________________________
Name: W. Reay Mackay
Title: Vice Chairman
/s/ Gordon Nixon
By: _________________________________
Name: Gordon Nixon
Title: Deputy Chairman and CEO RBC
Dominion Securities, Inc.
VIKING MERGER SUBSIDIARY, INC.
/s/ Robert Horton
By: _________________________________
Name: Robert Horton
Title: President
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<PAGE>
APPENDIX B
EXECUTION COPY
STOCK OPTION AGREEMENT, dated as of September 28, 2000 (this "Agreement"),
between Royal Bank of Canada, a Canadian chartered bank ("Grantee"), and Dain
Rauscher Corporation, a Delaware corporation ("Issuer").
RECITALS
A. Merger Agreement. Grantee and Issuer have entered into an Agreement and
Plan of Merger, dated as of September 28, 2000 (the "Merger Agreement"), which
agreement was executed and delivered on the date of this Stock Option
Agreement, pursuant to which Issuer is to merge with and into Grantee (the
"Merger"); and
B. Option. As a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option
(as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. Grant of Option. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 2,571,451 fully paid and nonassessable shares of the common
stock, par value $0.125 per share, of Issuer ("Common Stock") at a price per
share equal to U.S. $79.88; provided, however, that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the
issued and outstanding shares of Common Stock. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5 hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer to issue shares in breach of any provision of the Merger
Agreement.
2. Exercise. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within 90 days following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time (as defined in the Merger Agreement)
of the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
8.01(b) of the Merger Agreement (unless the breach by Issuer giving rise to
such right of termination is non-volitional) (a "Listed Termination"); or
(iii) the passage of eighteen (18) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed
Termination. The term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, the Option may not
be exercised at any time when Grantee shall be in material breach of any of its
covenants or agreements contained in the Merger Agreement such that Issuer
shall be entitled to terminate the Merger Agreement pursuant to Section 8.01(b)
thereof.
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(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in Rule 1-
02 of Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")) (the "Issuer Subsidiaries"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary"), or
the Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary, provided, however, that in no
event shall any merger, consolidation or similar transaction involving only
the Issuer and one or more of its Subsidiaries or involving only any two or
more of such Subsidiaries, if such transaction is not in violation of the
terms of the Merger Agreement, be deemed to be an Acquisition Transaction,
(y) a purchase, lease or other acquisition of all or any substantial part
of the assets or business operations of Issuer or any Issuer Subsidiary, or
(z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10%
or more of the voting power of Issuer or any Issuer Subsidiary and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934
Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iii) The stockholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held or shall have been canceled prior to termination
of the Merger Agreement if, prior to such meeting (or if such meeting shall
not have been held or shall have been canceled, prior to such termination),
it shall have been publicly announced that any person (other than Grantee
or any of its Subsidiaries) shall have made, or disclosed an intention to
make, a bona fide proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn, modified or qualified (or
publicly announced its intention to withdraw, modify or qualify) in any
manner adverse in any respect to Grantee its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement in anticipation of engaging in an Acquisition Transaction, or
Issuer shall have authorized, recommended, proposed (or publicly announced
its intention to authorize, recommend or propose) an agreement to engage in
an Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its stockholders to approve the
issuance of shares to be offered in such an exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement after an overture is made by a third
party to Issuer or its stockholders to engage in an Acquisition
Transaction, and (a) following such breach Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both) and (b) such breach shall not have been
cured prior to the Notice Date (as defined in Section 2(e)); or
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(vii) Any person other than Grantee or any Grantee Subsidiary, without
Grantee's prior written consent, shall have filed an application or notice
with any regulatory or antitrust authority regarding an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in clause
(i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the Option
(or any portion thereof), it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of any United States or
foreign regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have
been obtained and any requisite waiting period or periods shall have passed.
Any exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and
(ii) present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the
Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not
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require the retention of such reference in the opinion of counsel to the
Holder, in form and substance reasonably satisfactory to the Issuer; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Covenants of Issuer. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event prior approval of or
notice to any state or other United States federal or foreign regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to such state or other United States federal or foreign regulatory
authority as they may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) promptly to take all action provided herein to protect the
rights of the Holder against dilution.
4. Exchange. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall at
any time be enforceable by anyone.
5. Certain Adjustments. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In the
event of any change in Common Stock by reason of a stock dividend, stock split,
split-up, recapitalization, stock combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Option Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Grantee shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee would have received in
respect of Common Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable. If any additional
shares of Common Stock are issued after the date of this Agreement (other than
pursuant to an event described in the
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first sentence of this Section 5), the number of shares of Common Stock subject
to the Option shall be adjusted so that, after such issuance, it, together with
any shares of Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Common Stock then issued and outstanding.
6. Registration Rights. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within twelve (12) months (or such later period as
provided in Section 10) of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof)
or any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a registration statement under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and
remain current in order to permit the sale or other disposition of any shares
of Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to demand two
such registrations. The Issuer shall bear the costs of such registrations
(including, but not limited to, Issuer's attorneys' fees, printing costs and
filing fees, except for underwriting discounts or commissions, brokers' fees
and the fees and disbursements of Grantee's counsel related thereto). The
foregoing notwithstanding, if, at the time of any request by Grantee for
registration of Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering by Issuer of shares of Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the
number of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction, the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 33% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration and
the twelve (12) month period referred to in the first sentence of this section
shall be increased to twenty-four (24) months. Each such Holder shall provide
all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such Holder
in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. Repurchase. (a) At any time after the occurrence of a Repurchase Event
(as defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
Issuer (or any successor thereto) shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase
such number of the Option Shares from the Owner as the Owner shall designate at
a price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common
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Stock at which a tender or exchange offer therefor has been made, (ii) the
price per share of Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or any substantial part of Issuer's assets or
business operations, the sum of the net price paid in such sale for such assets
or business operations and the current market value of the remaining assets or
business operations of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to Issuer, divided by the number of shares of
Common Stock of Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
a copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the
Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or the Option Shares in accordance with the provisions of this Section 7.
The Owner shall also represent and warrant that it has sole record and
beneficial ownership of such Option Shares and that such Option Shares are then
free and clear of all liens. As promptly as practicable, and in any event
within five (5) business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 25%.
8. Substitute Option. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or a Grantee Subsidiary, or engage in a
plan of exchange with any person, other than Grantee or a Grantee Subsidiary
and Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company, or
(iii) to sell or otherwise transfer all or a substantial part of its or any
Issuer Subsidiary's assets or business operations to any person, other than
Grantee or a Grantee Subsidiary, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is
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acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person and (iv) the transferee
of all or a substantial part of Issuer's assets or business operations (or
the assets or business operations of any Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for six months immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect
for such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. Repurchase of Substitute Option. (a) At the request of the holder of the
Substitute Option (the "Substitute Option Holder"), the Substitute Option
Issuer shall repurchase the Substitute Option from the Substitute Option Holder
at a price (the "Substitute Option Repurchase Price") equal to the amount by
which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the
exercise price of the Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then be exercised,
and at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to the Highest Closing Price multiplied by the number
of Substitute Shares so designated. The term "Highest Closing Price" shall mean
the highest closing price for shares of Substitute Common Stock within the six-
month period immediately preceding the date the Substitute Option Holder gives
notice of the required repurchase of the Substitute Option or the Substitute
Share Owner gives notice of the required repurchase of the Substitute Shares,
as applicable.
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(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute
Option (or, in the absence of such an agreement, a copy of this Agreement)
and/or certificates for Substitute Shares accompanied by a written notice or
notices stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable and in any
event within five (5) business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
10. Extension of Periods Under Certain Circumstances. The periods for
exercise of certain rights under Sections 2, 6, 7, 9 and 14 shall be extended:
(i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise; and (iii) when there exists an injunction, order or judgment that
prohibits or delays exercise of such right.
11. Representations and Warranties. (a) Issuer hereby represents and
warrants to Grantee as follows:
(i) Issuer has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on
the part of Issuer are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
(b) Grantee hereby represents and warrants to Issuer as follows: Grantee
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board of
Directors of Grantee and no other corporate proceedings on the part of the
Grantee are necessary to authorize this Agreement or for Grantee to perform
its obligations hereunder. This Agreement has been duly and validly executed
and delivered by Grantee.
(c) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or
otherwise disposed or except in a transaction registered or exempt from
registration under the 1933 Act.
12. Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event an Initial Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder.
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13. Filings, Etc. Each of Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.
14. Surrender of Option. (a) Grantee may, at any time following a Repurchase
Event and prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), relinquish the Option (together with
any Option Shares issued to and then owned by Grantee) to Issuer in exchange
for a cash fee equal to the Surrender Price. The "Surrender Price" shall be
equal to U.S. $43 million (i) plus, if applicable, Grantee's purchase price
with respect to any Option Shares, (ii) minus, if applicable, the excess of (A)
the net price, if any, received by Grantee or a Grantee Subsidiary pursuant to
the sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares and (iii) minus, if applicable,
the amount paid by Issuer to Grantee pursuant to Section 8.03(a) of the Merger
Agreement.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
15. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. In connection
therewith, both parties waive the posting of any bond or similar requirement.
16. Severability. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section l(a) hereof (as adjusted pursuant to Section
l(b) or Section 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
17. Notices. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Entire Agreement; Third-Party Rights. Except as otherwise expressly
provided herein or in the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
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thereof, written or oral. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assignees. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger
Agreement.
23. Notional Total Profit. (a) Notwithstanding any other provision of this
Agreement, this Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit (as defined below)
of more than U.S. $50 million; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(b) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise
assuming for such purposes that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
7, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7, less (y) Grantee's purchase price for such
Option Shares, (iii) (x) the net cash amounts received by Grantee pursuant to
the sale of Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price of such Option Shares, (iv) the net cash amounts
received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated party, (v) any amount equivalent to the foregoing clauses (i)
through (iv) with respect to the Substitute Option and (vi) the amount paid by
Issuer to Grantee pursuant to Section 8.03(a) of the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ROYAL BANK OF CANADA
/s/ W. Reay Mackay
By __________________________________
Name: W. Reay Mackay
Title: Vice Chairman
/s/ Peter Currie
By __________________________________
Name: Peter Currie
Title: Vice Chairman and Chief
Financial Officer
DAIN RAUSCHER CORPORATION
/s/ Irving Weiser
By __________________________________
Name: Irving Weiser
Title: Chairman, President and
Chief Executive Officer
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APPENDIX C
FAIRNESS OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION
September 27, 2000
Board of Directors
Dain Rauscher Corporation
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402-4422
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of common stock, par value $0.125 per share ("Company Common Stock"), of Dain
Rauscher Corporation (the "Company") other than Royal Bank of Canada (the
"Acquiror") and its affiliates, from a financial point of view of the Cash
Consideration (as defined below) to be received by such stockholders pursuant
to the terms of a draft of the Agreement and Plan of Merger (the "Merger
Agreement"), among the Company, the Acquiror and Viking Merger Subsidiary,
Inc., a wholly owned subsidiary of the Acquiror (the "Sub"). The Merger
Agreement provides for, among other things, the merger of Sub with the Company
(the "Merger") pursuant to which each outstanding share of Company Common Stock
will be converted into the right to receive $95.00 per share in cash (the "Cash
Consideration"), and the Company will become a wholly owned subsidiary of the
Acquiror.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as a draft
of the Merger Agreement. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and have met with
the Company's management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company, and we have considered, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected or
announced. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. We
have also assumed that the definitive merger agreement will conform in all
respects material to our analysis to the draft reviewed by us. In addition, we
have not been requested to make, and have not made, an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of the
Company, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. A portion of our fee is
payable upon delivery of this opinion. In the past we and our affiliates have
provided financial advice and services to both the Company and the Acquiror in
connection with matters unrelated to the Merger for which we and our affiliates
have received compensation.
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In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Acquiror for
our and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Company's
Board of Directors in connection with its consideration of the Merger and does
not constitute a recommendation to any holder of Company Common Stock as to how
such stockholder should vote or act on any matter relating to the proposed
Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Cash Consideration to be received by the holders of Company
Common Stock in the Merger is fair to such holders other than the Acquiror and
its affiliates from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ CREDIT SUISSE FIRST BOSTON
CORPORATION
By: ______________________________________
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APPENDIX D
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS . (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S) 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264
of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to (S)(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228
or (S) 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
D-2
<PAGE>
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of
D-3
<PAGE>
uncertificated stock forthwith, and the case of holders of shares represented
by certificates upon the surrender to the corporation of the certificates
representing such stock. The Court's decree may be enforced as other decrees in
the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
DAIN RAUSCHER CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
January 10, 2001
9:00 a.m. local time
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Dain Rauscher Corporation
60 South Sixth Street, Minneapolis, Minnesota 55402-4422 proxy
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This proxy is solicited on behalf of the Board of Directors
The undersigned appoints Irving Weiser and John C. Appel proxies (each with the
power to act alone and with the power of substitution and revocation) to
represent the undersigned and to vote, as designated below, all shares which the
undersigned is entitled to vote at the Special Meeting of Stockholders of Dain
Rauscher Corporation to be held at the 12th Floor Auditorium, Dain Rauscher
Plaza, 60 South Sixth Street, Minneapolis, Minnesota, at 9:00 a.m., on January
10, 2001, and any adjournment thereof, as specified below on the matters
referred to and in their discretion upon any other matters which may be brought
before the meeting.
If no choice is specified, the proxy will be voted "FOR" Items 1 and 2.
See reverse for voting instructions.
<PAGE>
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COMPANY #
CONTROL #
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There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Proxies to vote your shares in
the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12 p.m. (noon) ET on January 10, 2001.
o You will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which are located above.
o Follow the simple instructions the Voice provides for you.
VOTE BY INTERNET - http://www.eproxy.com/drc/
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12 p.m. (noon) CT on January 10, 2001.
o You will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which are located above to obtain your records
and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Dain Rauscher Corporation, c/o Shareholder
Services(TM), P.O. Box 64873, St. Paul, MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card
| |
| Please detach here |
\|/ \|/
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The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.
<TABLE>
<CAPTION>
<S> <C>
1. To adopt the Agreement and Plan of Merger, dated as of September 28, 2000 [ ] For [ ] Against [ ] Abstain
(the "Merger Agreement"), by and among Royal Bank of Canada, Viking Merger
Subsidiary, Inc. (the "Merger Subsidiary") and Dain Rauscher Corporation
(the "Company"), providing for the merger (the "Merger") of the Merger
Subsidiary with and into the Company, and to authorize the Merger and other
transactions contemplated thereby.
2. To vote to adjourn the Special Meeting to solicit additional proxies in the [ ] For [ ] Against [ ] Abstain
event that the number of proxies sufficient to approve the Merger Agreement
has not been received by the date of the Special Meeting.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting of Stockholders.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR EACH ITEM.
Address Change? Mark Box [ ] Indicate changes below:
Dated:______________________________________
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Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.
