SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report (Date of earliest event reported): September 16,
1997
THE QUICK & REILLY GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8517 13-3082841
------------------------ ------------ ------------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
230 South County Road, Palm Beach, Florida 33480
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(Address of principal executive offices) (Zip Code)
(561) 655-8000
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(Registrant's telephone number, including area code)<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On September 16, 1997, the Board of Directors of The
Quick & Reilly Group, Inc. (the "Company") approved, and the
Company entered into, an Agreement and Plan of Merger (the
"Merger Agreement"), with Fleet Financial Group, Inc. ("Fleet")
and its wholly owned subsidiary, Fleet Securities, Inc. ("Fleet
Securities"). Pursuant to the Merger Agreement, the Company
will be merged (the "Merger") with and into Fleet Securities.
Pursuant to the Merger Agreement, each share of com-
mon stock, par value $0.10 per share, of the Company ("Company
Common Stock"), other than shares held by the Company, Fleet or
any of their respective subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously con-
tracted, will be converted into 0.578 shares of common stock,
par value $0.01 per share, of Fleet ("Fleet Common Stock").
The Merger is intended to constitute a tax-free reor-
ganization under the Internal Revenue Code of 1986, as amended,
and to be accounted for as a pooling of interests.
Consummation of the Merger is subject to various con-
ditions, including: (i) receipt of approval by the sharehold-
ers of the Company of appropriate matters relating to the
Merger Agreement and the Merger; (ii) receipt of requisite reg-
ulatory approvals from the Board of Governors of the Federal
Reserve System and other federal and state regulatory authori-
ties as necessary; (iii) receipt by each of the Company and
Fleet of an opinion of counsel in reasonably satisfactory form
as to the tax treatment of certain aspects of the Merger; (iv)
registration of the shares of Fleet Common Stock to be issued
in the Merger under the Securities Act of 1933, as amended (the
"1933 Act"), and all applicable state securities laws; and (v)
satisfaction of certain other conditions. Certain shareholders
of the Company, who in the aggregate have voting power over ap-
proximately 40% of the outstanding shares of Company Common
Stock, based upon 38,664,015 shares of Company Common Stock
outstanding as of September 16, 1997, have agreed with Fleet to
vote all such shares of Company Common Stock to approve the
Merger and not to sell any of such shares, other than pursuant
to the Merger, without Fleet's consent.
The Merger Agreement and the transactions contem-
plated thereby will be submitted for approval at a meeting of
the shareholders of the Company. Prior to such meeting, Fleet
will file a registration statement with the Securities and Ex-
change Commission registering under the 1933 Act the Fleet
stock to be issued in the Merger. Such shares of Fleet stock
will be offered to the Company's shareholders pursuant to a
prospectus that will also serve as a proxy statement for the
shareholders' meeting.<PAGE>
The preceding description of the Merger Agreement is
qualified in its entirety by reference to the copy of the
Merger Agreement included as Exhibit 2.1 hereto and which is
hereby incorporated herein by reference.
In connection with the Merger Agreement, the Company
and Fleet entered into a Stock Option Agreement, dated Septem-
ber 16, 1997 (the "Stock Option Agreement"), pursuant to which
the Company granted to Fleet an irrevocable option to purchase,
under certain circumstances, up to 7,688,421 authorized and
unissued shares of Company Common Stock at a price, subject to
certain adjustments, of $35.04 per share (the "Option"). The
Option, if exercised, would equal, before giving effect to the
exercise of the Option, 19.9% of the total number of shares of
Company Common Stock outstanding. The Option was granted by
the Company as a condition and inducement to Fleet's willing-
ness to enter into the Merger Agreement. Under certain circum-
stances, the Company may be required to repurchase the Option
or the shares acquired pursuant to the exercise of the Option.
The preceding description of the Stock Option Agree-
ment is qualified in its entirety by reference to the copy of
the Stock Option Agreement included as Exhibit 2.2 hereto and
which is hereby incorporated herein by reference.
A copy of the joint press release issued announcing
the signing of the Merger Agreement is attached hereto as Ex-
hibit 99.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Merger,
dated as of September 16, 1997,
by and among The Quick & Reilly
Group, Inc., Fleet Financial
Group, Inc. and Fleet Securities,
Inc.
2.2 Stock Option Agreement, dated
September 16, 1997, by and be-
tween The Quick & Reilly Group,
Inc., as issuer, and Fleet Finan-
cial Group, Inc., as grantee
99 Text of joint press release,
dated September 17, 1997, issued
by The Quick & Reilly Group, Inc.
and Fleet Financial Group, Inc.<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly autho-
rized.
THE QUICK & REILLY GROUP, INC.
(Registrant)
By: /s/ Thomas C. Quick
-----------------------
Name: Thomas C. Quick
Title: President and Chief
Operating Officer
Dated: September 22, 1997<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of
September 16, 1997, by and among The Quick
& Reilly Group, Inc., Fleet Financial
Group, Inc. and Fleet Securities, Inc.
2.2 Stock Option Agreement, dated September 16,
1997, by and between The Quick & Reilly
Group, Inc., as issuer, and Fleet Financial
Group, Inc., as grantee
99 Text of joint press release, dated Septem-
ber 17, 1997, issued by The Quick & Reilly
Group, Inc. and Fleet Financial Group, Inc.
===============================================================
AGREEMENT AND PLAN OF MERGER
dated as of September 16, 1997
by and among
THE QUICK & REILLY GROUP, INC.,
FLEET FINANCIAL GROUP, INC.
and
FLEET SECURITIES, INC.
===============================================================<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.............................. 2
1.1. Definitions................................... 2
ARTICLE II. THE MERGER............................... 7
2.1. The Merger.................................... 7
(a) The Merger............................... 7
(b) Effectiveness of the Merger.............. 7
(c) Articles of Incorporation and By-Laws.... 7
(d) Directors and Officers of the
Surviving Corporation.................. 8
2.2. Effective Date and Effective Time............. 8
2.3. Operations of Business........................ 8
ARTICLE III. CONSIDERATION; EXCHANGE PROCEDURES;
RETENTION PROGRAM...................... 9
3.1. Merger Consideration.......................... 9
(a) Outstanding Company Common Shares........ 9
(b) Outstanding Capital Stock................ 9
(c) Treasury Shares.......................... 9
3.2. Rights as Stockholders; Stock Transfers....... 10
3.3. Fractional Shares............................. 10
3.4. Exchange Procedures........................... 10
3.5. Anti-Dilution Provisions...................... 11
3.6. Options....................................... 12
3.7. Directors..................................... 12
3.8. Retention Program............................. 12
ARTICLE IV. ACTIONS PENDING ACQUISITION.............. 12
4.1. Forbearances of the Company................... 12
(a) Ordinary Course.......................... 13
(b) Capital Stock............................ 13
(c) Dividends, Etc........................... 13
(d) Compensation; Employment
Agreements; Etc........................ 13
(e) Benefit Plans............................ 14
(f) Dispositions............................. 14
(g) Acquisitions............................. 14
(h) Governing Documents...................... 15
(i) Accounting Methods....................... 15
(j) Contracts................................ 15
(k) Claims................................... 15
(l) Adverse Actions.......................... 15
(m) Risk Management.......................... 15
(n) Indebtedness............................. 16
(o) Commitments.............................. 16
4.2. Forbearances of Buyer......................... 16
(a) Extraordinary Dividends.................. 16
(b) Adverse Actions.......................... 16
ARTICLE V. REPRESENTATIONS AND WARRANTIES........... 17
5.1. Disclosure Schedules.......................... 17
5.2. Standard...................................... 17
5.3. Representations and Warranties
of the Company.............................. 17
(a) Organization, Standing and Authority..... 17
(b) Company Common Shares.................... 18
(c) Subsidiaries............................. 18
(d) Corporate Power.......................... 19
(e) Corporate Authority...................... 19
(f) Regulatory Approvals; No Defaults........ 20
(g) Financial Reports and SEC Documents...... 21
(h) Litigation............................... 22
(i) Regulatory Matters....................... 22
(j) Compliance with Laws..................... 23
(k) Material Contracts; Defaults............. 24
(l) No Brokers............................... 24
(m) Investment Securities.................... 25
(n) Employee Benefit Plans................... 25
(o) Labor Matters............................ 27
(p) Takeover Laws............................ 28
(q) Environmental Matters.................... 28
(r) Tax Matters.............................. 28
(s) Risk Management Instruments.............. 30
(t) Books and Records........................ 30
(u) Insurance................................ 30
(v) Pooling of Interests..................... 31
(w) Registration Matters..................... 31
5.4. Representations and Warranties of the Buyer... 32
(a) Organization, Standing and Authority..... 32
(b) Buyer Stock.............................. 33
(c) Subsidiaries............................. 33
(d) Corporate Power.......................... 34
(e) Corporate Authority...................... 34
(f) Regulatory Approvals; No Defaults........ 34
(g) Financial Reports and SEC Documents;
Material Adverse Effect................ 35
(h) Litigation; Regulatory Action............ 36
(i) Compliance with Laws..................... 36
(j) No Brokers............................... 36
(k) Tax Matters.............................. 37
(l) Pooling of Interests..................... 38
ARTICLE VI. COVENANTS................................ 38
6.1. Reasonable Best Efforts....................... 38
6.2. Stockholder Approval.......................... 38
6.3. Registration Statement........................ 39
6.4. Press Releases................................ 40
6.5. Access; Information........................... 40
6.6. Acquisition Proposals......................... 41
6.7. Affiliate Agreements.......................... 42
6.8. NYSE Listing.................................. 42
6.9. Regulatory Applications....................... 42
6.10. Indemnification............................... 43
6.11. Benefit Plans................................. 44
6.12. Notification of Certain Matters............... 45
6.13. Employment Agreements......................... 45
6.14. The Company's Name............................ 45
6.15. Dividends..................................... 46
ARTICLE VII. CONDITIONS TO CONSUMMATION
OF THE MERGERS......................... 46
7.1. Conditions to Each Party's Obligation
to Effect the Mergers....................... 46
(a) Stockholder Approval..................... 46
(b) Regulatory Approvals..................... 46
(c) No Injunction............................ 46
(d) Registration Statement................... 47
(e) "Blue Sky" Approvals..................... 47
(f) Listing.................................. 47
(g) Pooling of Interests..................... 47
(h) Retention Program........................ 47
7.2. Conditions to Obligation of the Company....... 47
(a) Representations and Warranties........... 47
(b) Performance of Obligations of the Buyer.. 48
(c) Opinion of the Company's Counsel......... 48
7.3. Conditions to Obligation of the
Buyer and Merger Sub........................ 49
(a) Representations and Warranties........... 49
(b) Performance of Obligations of
the Company............................ 49
(c) Certain Employment Arrangements.......... 49
(d) Opinion of the Buyer's Counsel........... 49
(e) No Material Adverse Change............... 50
ARTICLE VIII. TERMINATION.............................. 50
8.1. Termination................................... 50
(a) Mutual Consent........................... 50
(b) Breach................................... 50
(c) Delay.................................... 51
(d) No Approval.............................. 51
8.2. Effect of Termination and Abandonment......... 51
ARTICLE IX. MISCELLANEOUS............................ 52
9.1. Survival...................................... 52
9.2. Waiver; Amendment............................. 52
9.3. Counterparts.................................. 52
9.4. Governing Law................................. 52
9.5. Expenses...................................... 52
9.6. Notices....................................... 52
9.7. Entire Understanding; No Third-Party
Beneficiaries............................... 54
9.8. Interpretation; Effect........................ 54
9.9. Severability.................................. 54
9.10. Assignment.................................... 54
EXHIBIT A - Stock Option Agreement
EXHIBIT B - Form of Support Agreement
EXHIBIT C - Form of the Company's Affiliate's Letter
ANNEX A List of Employment Agreements
ANNEX B Form of Employment Agreement
for Senior Executives
ANNEX C Form of Employment Agreement for Executives
i<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 16th
day of September, 1997 (this "Agreement"), by and among The
Quick & Reilly Group, Inc., a Delaware corporation (the
"Company"), Fleet Financial Group, Inc., a Rhode Island
corporation (the "Buyer"), and Fleet Securities, Inc. ("Merger
Sub"), a New York corporation.
WHEREAS, the Company is a Delaware corporation,
having its principal place of business in Palm Beach, Florida.
WHEREAS, the Buyer is a Rhode Island corporation,
having its principal place of business in Boston,
Massachusetts.
WHEREAS, Merger Sub is a New York corporation and a
wholly-owned subsidiary of the Buyer.
WHEREAS, as a condition to, and immediately after the
execution of this Agreement, the Company will enter into a
Stock Option Agreement with the Buyer attached as Exhibit A.
WHEREAS, it is the intention of the parties to this
Agreement that the business combination contemplated hereby be
treated as a "reorganization" under Section 368 of the United
States Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code").
WHEREAS, the respective Boards of Directors of each
of the Company, the Buyer and Merger Sub have determined that
it is in the best interests of their respective companies and
their stockholders to consummate the strategic business
combination transaction provided for herein.
WHEREAS, as a condition to, and immediately after the
execution of this Agreement, certain stockholders of the
Company will enter into Support Agreements in the form of
Exhibit B.
WHEREAS, in connection with the Merger, certain
employees of the Company identified on Annex A hereto have
entered or will enter into employment agreements with the
Company and the Buyer in the forms of Annex B and Annex C
hereto.
WHEREAS, the parties have agreed, in connection with
the Merger, to establish a retention program on substantially
the terms described herein, the purpose of which is to retain
the services of certain employees of the Company following the
Merger.
-1-<PAGE>
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.
DEFINITIONS
1.1. Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"1940 Act" means the Investment Company Act of 1940,
as amended.
"Acquisition Proposal" means 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 deposits of, the Company or any
of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Agreement" has the meaning set forth in the
Preamble, as amended or modified from time to time in
accordance with Section 9.2.
"Broker-Dealer Subsidiaries" has the meaning set
forth in Section 5.3(g)(iv).
"Buyer" has the meaning set forth in the Preamble.
"Buyer Board" means the Board of Directors of the
Buyer.
"Buyer Common Shares" means shares of the common
stock, par value $0.01 per share, of the Buyer, including
the associated Buyer Rights.
"Buyer Rights" means the Buyer's preferred share
purchase rights issued pursuant to the Buyer Rights
Agreement.
"Buyer Rights Agreement" means the Corporation's
Rights Agreement dated as of November 21, 1990, as amended
March 28, 1991 and as further amended on July 12, 1991 and
February 20, 1995, between Buyer and Fleet National Bank,
as rights agent.
"Code" has the meaning set forth in the Preamble.
-2-<PAGE>
"Company" shall mean, prior to the Effective Time,
The Quick & Reilly Group, Inc., and, from and after the
Effective Time, the surviving corporation in the Merger.
"Company Affiliate" has the meaning set forth in
Section 6.7(a).
"Company Board" means the Board of Directors of the
Company.
"Company By-Laws" has the meaning set forth in
Section 2.1(c).
"Company Certificate of Incorporation" has the
meaning set forth in Section 2.1(c).
"Company Common Shares" means shares of common stock,
par value $.10 per share, of the Company.
"Company ERISA Affiliate" has the meaning set forth
in Section 5.3(n).
"Company Meeting" has the meaning set forth in
Section 6.2.
"Company Preferred Shares" has the meaning set forth
in Section 5.3(b).
"Company Regulatory Agreement" has the meaning set
forth in Section 5.3(i)(ii).
"Company Stock Options" has the meaning set forth in
Section 3.6.
"Compensation and Benefit Plans" has the meaning set
forth in Section 5.3(n)(i).
"Costs" has the meaning set forth in Section 6.10(a).
"Covered Employees" has the meaning set forth in
Section 6.11(a).
"DGCL" means the Delaware General Corporation Law.
"Delaware Secretary of State" has the meaning set
forth in Section 2.1(b).
"Disclosure Schedule" has the meaning set forth in
Section 5.1.
-3-<PAGE>
"Effective Date" has the meaning set forth in Section
2.2.
"Effective Time" has the meaning set forth in Section
2.2.
"Employment Agreements" has the meaning set forth in
Section 6.13.
"Environmental Laws" means all applicable United
States federal, local and state environmental, health and
safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation,
and Liability Act, the Clean Water Act, the Federal Clean
Air Act and the Occupational Safety and Health Act, each
as amended, regulations thereunder, and state
counterparts.
"ERISA" has the meaning set forth in Section
5.3(n)(i).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder.
"Exchange Agent" has the meaning set forth in Section
3.4(a).
"Exchange Ratio" has the meaning set forth in Section
3.1(a).
"GAAP" means generally accepted accounting
principles.
"Governmental Authority" means any court,
administrative agency or commission or other United
States, federal, state, local or foreign governmental
authority or instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations thereunder.
"Indemnified Party" has the meaning set forth in
Section 6.10a).
"Insurance Policies" has the meaning set forth in
Section 5.3(u).
"IRS" means the United States Internal Revenue
Service.
"Liens" means any charge, mortgage, pledge, security
interest, restriction, claim, lien or encumbrance.
-4-<PAGE>
"Material Adverse Effect" means, with respect to the
Company or Buyer, as applicable, any effect that (a) is
material and adverse to the financial position, results of
operations, business or operations of the Buyer and its
Subsidiaries taken as a whole or the Company and its
Subsidiaries taken as a whole, respectively, or (b) would
materially impair the ability of either the Buyer or the
Company to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions
contemplated by this Agreement; provided, however, that
Material Adverse Effect shall not be deemed to include the
impact of (i) changes in laws, regulations or
interpretations thereof by Governmental Authorities that
affect in general the respective businesses in which the
Company and its Subsidiaries or the Buyer and its
Subsidiaries, respectively, are engaged, (ii) changes in
GAAP or regulatory accounting requirements applicable to
broker-dealers generally, (iii) events or conditions
generally affecting the securities industry or arising
from changes in general business or economic conditions,
including general changes in market prices or interest
rates, and (iv) any actions or omissions to act required
by this Agreement or taken with the prior written consent
of the other party.
"Merger" has the meaning set forth in Section 2.1(a).
"Merger Sub" has the meaning set forth in the
Preamble.
"New Certificate" has the meaning set forth in
Section 3.4(a).
"New York Department of State" has the meaning set
forth in Section 2.1(b).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning set forth in
Section 3.4(a).
"PBGC" means the Pension Benefit Guaranty
Corporation.
"Person" means any individual, bank, corporation,
partnership, association, joint-stock company, business
trust or unincorporated organization.
"Previously Disclosed" by a party shall mean
information set forth in its Disclosure Schedule.
"Proxy Statement" has the meaning set forth in
Section 6.3(a).
-5-<PAGE>
"Registration Statement" has the meaning set forth in
Section 6.3(a).
"Regulatory Agencies" has the meaning set forth in
Section 5.3(i)(i).
"Replacement Option" has the meaning set forth in
Section 3.6.
"Rights" means, with respect to any Person,
securities or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to
subscribe for or acquire, or any options, calls or
commitments relating to, or any stock 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.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Documents" has the meaning set forth in Section
5.3(g)(i).
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"SRO" has the meaning set forth in Section 5.3(f)(i).
"Subsidiary" and "Significant Subsidiary" have the
meanings ascribed to them in Rule 1-02 of Regulation S-X
of the SEC.
"Surviving Corporation" has the meaning set forth in
Section 2.1(a).
"Takeover Laws" has the meaning set forth in Section
5.3(p).
"Tax" and "Taxes" means all United States federal,
state or local, or foreign taxes, charges, fees, levies or
other assessments, however denominated, including, without
limitation, all net income, gross income, gains, gross
receipts, sales, use, ad valorem, goods and services,
capital, production, transfer, franchise, windfall
profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance,
stamp, occupation, property, environmental, unemployment
or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest
and any penalties, additions to
-6-<PAGE>
tax or additional amounts imposed by any taxing authority
whether arising before, on or after the Effective Date.
"Tax Returns" means, with respect to any Person, any
return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates
and information returns and including any Form 1099 or
other document or report required to be provided by such
Person to third parties) required to be filed with respect
to any Tax.
"Treasury Stock" shall mean Company Common Shares
held by the Company or any of its Subsidiaries or by the
Buyer or any of its Subsidiaries, in each case, other than
in a fiduciary (including custodial or agency) capacity or
as a result of debts previously contracted.
ARTICLE II.
THE MERGER
2.1. The Merger.
(a) The Merger. At the Effective Time, the Company shall
merge with and into Merger Sub (the "Merger"), the separate
corporate existence of the Company shall cease, and Merger Sub
shall survive and continue to exist as a New York corporation
(Merger Sub, as the surviving corporation in the Merger,
sometimes being referred to herein as the "Surviving
Corporation").
(b) Effectiveness of the Merger. Subject to the
satisfaction or waiver of the conditions set forth in Article
VII, the Merger shall become effective upon the occurrence of
the filing in the offices of the Department of State of the
State of New York (the "New York Department of State") and the
Secretary of State of the State of Delaware (the "Delaware
Secretary of State") of certificates of merger in accordance
with Section 907 of the New York Business Corporation Law and
Section 103 of the DGCL or such later date and time as may be
set forth in such certificates. The Merger shall have the
effects prescribed in the New York Business Corporation Law and
the DGCL.
(c) Articles of Incorporation and By-Laws. The
certificate of incorporation (the "Merger Sub Certificate of
Incorporation") and by-laws of Merger Sub (the "Merger Sub By-
Laws") immediately after the Merger shall be those of the
Surviving Corporation as in effect immediately prior to the
Effective Time.
(d) Directors and Officers of the Surviving Corporation.
The directors and officers of Merger Sub immediately after the
-7-<PAGE>
Merger shall be the directors and officers of the Surviving
Corporation immediately prior to the Effective Time, until such
time as their successors shall be duly elected and qualified.
2.2. Effective Date and Effective Time. Subject to the
satisfaction or waiver of the conditions set forth in Article
VII, the parties shall cause the effective date of the Merger
(the "Effective Date") to occur on or before (a) the fifth
business day to occur after the last of the conditions set
forth in Article VII shall have been satisfied or waived in
accordance with the terms of this Agreement or (b) such other
date to which the parties may agree in writing. The time on
the Effective Date when the Merger shall become effective is
referred to as the "Effective Time."
2.3. Operations of Business. (a) Subject to applicable
law, the parties agree to cooperate and take all reasonable
additional action prior to or following the Effective Time to
merge or otherwise consolidate or reorganize any of their
respective legal entities or business units, assets or
operations to the extent determined by the Buyer to be
desirable for regulatory or other reasons, and further agree
that Buyer may at any time change the method of effecting the
Merger, including by merging the Company with and into the
Buyer, by merging the Company with and into a direct or
indirect wholly owned subsidiary of the Buyer other than Merger
Sub or by merging any such subsidiary with and into the
Company, and the Company shall cooperate in such efforts,
including by entering into an appropriate amendment to this
Agreement; provided, however, that any such actions shall not
(a) alter or change the amount or kind of consideration to be
issued to holders of Company Common Stock as provided for in
this Agreement (the "Merger Consideration"), (b) adversely
affect the proposed accounting treatment for the Merger or the
tax treatment to the Company's stockholders as a result of
receiving the Merger Consideration, or (iii) materially delay
the receipt of any approval referred to in Section 7.1(b) or
the consummation of the transactions contemplated by this
Agreement.
(b) The operations of the business conducted by the
Company prior to the Effective Time will be conducted as a
separate division of the Buyer after the Effective Time.
Subject to applicable legal and regulatory limitations, the
division will be operated autonomously and be headquartered in
Palm Beach, Florida. The division will conduct the discount
brokerage business of the Buyer.
(c) Aggregate and individual compensation levels for the
employees of the Quick & Reilly division of the Buyer will be
determined by an executive management committee of the Quick &
Reilly division consisting initially of the members of
Executive
-8-<PAGE>
Management Committee of the Company immediately prior to the
Effective Time and two representatives named by the Buyer.
ARTICLE III.
CONSIDERATION; EXCHANGE PROCEDURES; RETENTION PROGRAM
3.1. Merger Consideration. Subject to the provisions of
this Agreement, at the Effective Time, automatically by virtue
of the Merger and without any action on the part of any Person:
(a) Outstanding Company Common Shares. Each Company
Common Share, excluding Treasury Stock, issued and outstanding
immediately prior to the Effective Time, shall, by virtue of
the Merger, automatically and without any action on the part of
the holder thereof, become and be converted into the right to
receive 0.578 Buyer Common Shares (the "Exchange Ratio").
(b) Outstanding Capital Stock. Each share of capital
stock of Merger Sub, issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding and
unaffected by the Merger.
(c) Treasury Shares. Each Company Common Share held as
Treasury Stock immediately prior to the Effective Time, shall
be canceled and retired at the Effective Time, and no
consideration shall be issued in exchange therefor. All Buyer
Common Shares owned by the Company or any of its Subsidiaries
(other than Treasury Stock) shall become Treasury Stock of the
Buyer.
3.2. Rights as Stockholders; Stock Transfers. At the
Effective Time, holders of Company Common Shares shall cease to
be, and shall have no rights as, stockholders of the Company,
other than to receive any dividend or other distribution with
respect to such Company Common Share with a record date
occurring prior to the Effective Time and the consideration
provided under this Article III. After the Effective Time,
there shall be no transfers on the stock transfer books of the
Company or the Surviving Corporation of Company Common Shares.
3.3. Fractional Shares. Notwithstanding any other
provision hereof, no fractional Buyer Common Shares and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be issued in the Merger; instead, the Buyer shall
pay to each holder of Company Common Shares who would otherwise
be entitled to a fractional Buyer Common Share (after taking
into account all Old Certificates delivered by such holder) an
amount in cash (without interest) determined by multiplying
such fraction by the average of the closing sale prices of a
Buyer Common
-9-<PAGE>
Share, as reported by the NYSE for the five NYSE trading days
immediately preceding the Effective Date.
3.4. Exchange Procedures.
(a) As promptly as practicable after the Effective Date,
the Buyer shall send or cause to be sent to each former holder
of record of Company Common Shares immediately prior to the
Effective Time transmittal materials for use in exchanging such
stockholder's certificates formerly representing Company Common
Shares (the "Old Certificates") for the consideration set forth
in this Article III. Buyer shall cause the certificates
representing Buyer Common Shares (the "New Certificates") and/
or any check in respect of any fractional share interests or
dividends or distributions which such Person shall be entitled
to receive to be delivered to such stockholder upon delivery to
First Chicago Trust Company of New York, as exchange agent (the
"Exchange Agent"), of Old Certificates representing such
Company Common Shares (or indemnity reasonably satisfactory to
the Buyer and the Exchange Agent, if any of such certificates
are lost, stolen or destroyed) owned by such stockholder,
together with a properly completed letter of transmittal, duly
executed. No interest will be paid on any such cash to be paid
in lieu of fractional share interests or in respect of
dividends or distributions which any such Person shall be
entitled to receive pursuant to this Article III upon such
delivery.
(b) After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the shares of
Company Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be
canceled and exchanged for certificates representing shares of
Company Common Stock and cash in lieu of fractional shares, if
any, as provided in this Article III.
(c) Any portion of the Buyer Common Shares and cash in
lieu of fractional shares that remains unclaimed by the
stockholders of the Company for 12 months after the Effective
Time shall be paid to the Buyer. Any stockholders of the
Company who have not complied with this Article III shall
thereafter look only to the Buyer for payment of the shares of
Buyer Common Stock and cash in lieu of any fractional shares,
if any, and any unpaid dividends and distributions on the Buyer
Common Stock deliverable in respect of each share of Company
Common Stock such stockholder holds as determined pursuant to
this Agreement, without any interest thereon. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to any former holder of Company Common Shares
for any amount properly delivered
-10-<PAGE>
to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) At the election of the Buyer, no dividends or other
distributions with respect to Buyer Common Shares with a record
date occurring after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate representing
Company Common Shares converted in the Merger into the right to
receive such Buyer Common Shares until the holder thereof shall
be entitled to receive New Certificates in exchange therefor in
accordance with the procedures set forth in this Section 3.4.
After becoming so entitled in accordance with this Section 3.4,
the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to the Buyer
Common Shares such holder had the right to receive upon
surrender of the Old Certificate.
3.5. Anti-Dilution Provisions. In the event the Buyer
changes (or establishes a record date for changing) the number
of Buyer Common Shares issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend,
recapitalization or similar transaction with respect to the
outstanding Buyer Common Shares and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall
be proportionately adjusted.
3.6. Options. At the Effective Time, each outstanding
option to purchase Company Common Shares under the Compensation
and Benefit Plans (each, a "Company Stock Option"), whether
vested or unvested, shall be converted into an option to
acquire, either by assumption of the Company's obligations
under the Compensation and Benefit Plans with respect to the
Replacement Options (as defined below) or pursuant to a
replacement plan to be adopted by the Buyer, but on the same
terms and conditions as were applicable under such Company
Stock Option, the number of Buyer Common Shares equal to (a)
the number of Company Common Shares subject to the Company
Stock Option, multiplied by (b) the Exchange Ratio (such
product rounded down to the nearest whole number) (a
"Replacement Option"), at an exercise price per share (rounded
up to the nearest whole cent) equal to the exercise price per
share for the Company Common Shares which were purchasable
pursuant to such Company Stock Option divided by the Exchange
Ratio. Notwithstanding the foregoing, each Company Stock
Option which is intended to be an "incentive stock option" (as
defined in Section 422 of the Code), if any, shall be adjusted
in accordance with the requirements of Section 424 of the Code.
At or prior to the Effective Time, the Company shall take all
action, if any, necessary with respect to the Compensation and
Benefit Plans to permit
-11-<PAGE>
the replacement of the outstanding Company Stock Options by the
Buyer pursuant to this Section 3.6.
3.7. Directors. The Buyer agrees to cause one member of
the Company Board on the date hereof (selected by the Buyer
after consultation with the Company), who is still a member of
the Company Board immediately prior to the Effective Time and
willing and eligible to serve, to be elected or appointed as a
director of the Buyer Board as promptly as practicable after
the Effective Time.
3.8. Retention Program. At the Effective Time, the Buyer
will establish a retention program as described in Schedule 3.8
of the Company's disclosure schedule.
ARTICLE IV.
ACTIONS PENDING ACQUISITION
4.1. Forbearances of the Company. From the date hereof
until the Effective Time, except as expressly contemplated by
this Agreement or as Previously Disclosed, without the prior
written consent of the Buyer, 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 or fail to use reasonable best efforts to preserve
intact their business organizations and assets and maintain
their rights, franchises and existing relations with customers,
suppliers, employees and business associates, or take any
action reasonably likely to have an adverse affect upon the
Company's ability to perform any of its material obligations
under this Agreement or to adversely affect or delay the
ability of the Buyer or Merger Sub to obtain any necessary
approvals of any regulatory agency or governmental body
required for the transaction contemplated hereby.
(b) Capital Stock. Other than pursuant to Rights
Previously Disclosed and outstanding on the date hereof, (i)
issue, sell or otherwise permit to become outstanding
(including pursuant to any stock split, stock dividend,
recapitalization or similar transaction or pursuant to any
Compensation and Benefit Plan qualified under Section 401(k) of
the Code to the extent such Compensation and Benefit Plan
offers Company Common Shares as an investment option), or
authorize the creation of, any capital stock, including any
additional Company Common Shares or any Rights, (ii) enter into
any agreement, understanding or arrangement with respect to the
voting of its capital stock, (iii) enter
-12-<PAGE>
into any agreement with respect to the foregoing, or (iv)
permit any additional Company Common Shares to become subject
to new grants of employee or director stock options, other
Rights or similar stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside
for payment any dividend (other than (A) subject to Section
6.15, quarterly cash dividends on Company Common Shares in an
amount not to exceed $0.06 per share with record and payment
dates consistent with past practice and (B) dividends from
wholly owned Subsidiaries to the Company or another wholly-
owned Subsidiary of the Company) on or in respect of, or
declare or make any distribution on, any Company Common Shares,
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. (i) Enter
into or amend or renew any material employment, consulting,
severance or similar agreements or arrangements with any
director, officer or employee of the Company or its
Subsidiaries, or (ii) grant any salary or wage increase or
increase any employee benefit (including incentive or bonus
payments), except, in the case of (ii), (A) for normal
individual increases in compensation to employees in the
ordinary course of business consistent with past practice, (B)
for other changes that are required by applicable law, (C) to
satisfy Previously Disclosed contractual obligations existing
as of the date hereof, or (D) for employment arrangements for,
or grants of awards to, newly hired employees consistent with
past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend
(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
its Subsidiaries, or take any action to accelerate the vesting
or exercisability of stock options, restricted stock or other
compensation or benefits, or increase the compensation or
benefits, payable thereunder.
(f) Dispositions. Except as Previously Disclosed, sell,
transfer, mortgage, encumber or otherwise dispose of or
discontinue any of its material assets (including any capital
stock of its Subsidiaries), business or properties except in
the ordinary course of business consistent with past practice
and in a transaction that individually or in the aggregate with
all such other
-13-<PAGE>
dispositions or discontinuances is not material to it and its
Subsidiaries taken as a whole.
(g) Acquisitions. Except as Previously Disclosed,
acquire (other than by way of foreclosures or acquisitions of
control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case, in the
ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, or
properties of any other entity, or make any material investment
in, whether by purchase of stock or securities of, or
contributions to capital, loans or advances or the transfer of
property to, any other Person, except in the ordinary course of
business consistent with past practice and in a transaction
that individually or in the aggregate with all such other
acquisitions and investments is not material to it and its
Subsidiaries taken as a whole.
(h) Governing Documents. Amend the Company Certificate
of Incorporation, the Company By-laws or the certificate of
incorporation or by-laws (or similar governing documents) of
any of the Company's Significant Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in
its accounting principles, practices or methods, other than as
may be required by GAAP as concurred with by Arthur Andersen
LLP, its independent accountants, or change any of its methods
of reporting income and deductions for Federal income tax
purposes from those employed in the preparation of the Federal
income tax returns of the Company for the taxable years ending
February 28, 1997 and February 29, 1996, except as required by
changes in law or regulation.
(j) Contracts. Except in the ordinary course of business
consistent with past practice, enter into or terminate any
material contract (as defined in Section 5.3(k)(i)) or amend or
modify in any material respect or extend any of its existing
material contracts.
(k) Claims. Settle any material claim, action or
proceeding, except for any material claim, action or proceeding
involving solely money damages in an amount, individually or in
the aggregate for all such settlements, that is not material to
the Company and its Subsidiaries, taken as a whole.
(l) Adverse Actions. (i) Take any action that would, or
is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368 of the Code or for pooling of interest accounting
treatment; or (ii) take any action that is intended or is
reasonably likely to result in (A) any of its representations
and warranties set forth
-14-<PAGE>
in this Agreement being or becoming untrue at any time at or
prior to the Effective Time (subject to the standard set forth
in Section 5.2), (B) any of the conditions to the Merger set
forth in Article VII not being satisfied or (C) a material
violation of any provision set forth in this Article IV except,
in each case, as may be required by applicable law or
regulation.
(m) Risk Management. Except as required by applicable
law or regulation, (i) implement or adopt any change in its
risk management policies, procedures or practices, which,
individually or in the aggregate with all such other changes,
would be material, (ii) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure
to risk from the general United States securities markets or
(iii) materially restructure or materially change its
investment securities portfolio, through purchases, sales or
otherwise, or the manner in which the portfolio is classified
or reported.
(n) Indebtedness. Other than in the ordinary course of
business consistent with past practice, (i) incur any
indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance existing short-term
indebtedness, and indebtedness of the Company or any of its
Subsidiaries to the Company or any of its Subsidiaries, and
indebtedness under existing lines of credit), (ii) assume,
guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, (iii) make
any loan or advance or (iv) incur any capital expenditures,
obligations or liabilities.
(o) Commitments. Agree or commit to do any of the
foregoing.
4.2. Forbearances of Buyer. From the date hereof until
the Effective Time, except as expressly contemplated by this
Agreement, without the prior written consent of the Company,
the Buyer will not, and will cause each of its Subsidiaries not
to:
(a) Extraordinary Dividends. Make, declare, pay or set
aside for payment any extraordinary dividend; provided,
however, the foregoing shall not apply to (i) increases in the
quarterly dividend rate payable on Buyer Common Shares in the
ordinary course of business consistent with past practices or
(ii) any dividend paid in the ordinary course of business by
any Subsidiary.
(b) Adverse Actions. (i) Take any action that would, or
is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368 of the Code or for pooling of interest accounting
treatment; or (ii) take any action that is intended or is
reasonably likely to re-
-15-<PAGE>
sult in (A) any of its representations and warranties set forth
in this Agreement being or becoming untrue at any time at or
prior to the Effective Time (subject to the standard set forth
in Section 5.2), (B) any of the conditions to the Merger set
forth in Article VII not being satisfied or (C) a material
violation of any provision of this Article IV except, in each
case, as may be required by applicable law or regulation;
provided, however, that nothing contained herein shall limit
the ability of the Buyer to exercise its rights under the Stock
Option Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
5.1. Disclosure Schedules. On or prior to the date
hereof, the Buyer has delivered to the Company a schedule and
the Company has delivered to the Buyer a schedule
(respectively, its "Disclosure Schedule") setting forth, among
other things, items the disclosure of which is necessary or
appropriate either (a) in response to an express disclosure
requirement contained in a provision hereof or (b) as an
exception to one or more representations or warranties
contained in Section 5.3 or 5.4 or to one or more of its
covenants contained in Article IV or VI; 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 a party that such item represents a material
exception or fact, event or circumstance or that such item is
reasonably likely to result in a Material Adverse Effect.
5.2. Standard. No representation or warranty of the
Company or the Buyer contained in Section 5.3 or 5.4 shall be
deemed untrue or incorrect, and no party hereto shall be deemed
to have breached a representation or warranty, as a consequence
of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together
with all other facts, events or circumstances inconsistent with
any representation or warranty contained in Section 5.3 or 5.4
has had or is reasonably likely to have a Material Adverse
Effect on the party making such representation or warranty;
provided that the representations and warranties set forth in
paragraphs (b), (c)(i) and (ii), (d) and (e) of Section 5.3 and
paragraphs (b)(ii), (d) and (e) of Section 5.4 shall not be
subject to the materiality standard provided for in this
Section 5.2.
5.3. Representations and Warranties of the Company.
Subject to Sections 5.1 and 5.2 and except as Previously
Disclosed in a paragraph of its Disclosure Schedule
corresponding to the relevant paragraph below, the Company
hereby represents and warrants to the Buyer:
-16-<PAGE>
(a) Organization, Standing and Authority. The Company is
a corporation duly organized, validly existing and 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 any foreign jurisdictions where
its ownership or leasing of property or assets or the conduct
of its business requires it to be so qualified.
(b) Company Common Shares. The authorized capital stock
of the Company consists solely of (i) 60,000,000 Company Common
Shares, of which no more than 38,664,015 shares were
outstanding as of August 29, 1997, and (ii) 1,000,000 shares of
preferred stock, $.01 par value per share, of the Company
("Company Preferred Shares"), of which no shares are
outstanding. Since July 31, 1997, the Company has not (i)
issued any shares of its capital stock or any Rights (including
pursuant to any stock split, stock dividend, recapitalization
or similar transaction), other than shares of Company Common
Stock issued upon the exercise or conversion of Rights as
described in Section 5.3(b) of the Company's Disclosure
Schedule or (ii) taken any actions which would cause an
antidilution adjustment under any outstanding Rights. As of
the date hereof, 29,636 Company Common Shares and no Company
Preferred Shares were held in treasury by the Company or
otherwise owned by the Company or its Subsidiaries. The
outstanding Company Common Shares have been duly authorized and
are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were
not issued in violation of any preemptive rights), with no
personal liability attaching to the ownership thereof. As of
the date hereof, there are no Company Common Shares or Company
Preferred Shares authorized and reserved for issuance, the
Company does not have any Rights issued or outstanding with
respect to Company Common Shares or Company Preferred Shares,
the Company does not have any commitment to authorize, issue or
sell any Company Common Shares, Company Preferred Shares or
Rights, except pursuant to this Agreement and there are no
outstanding contractual obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock or Rights of the Company.
(c) Subsidiaries.
(i) (A) The Company has Previously Disclosed a list
of all of its Subsidiaries together with the jurisdiction of
organization and principal business of each such Subsidiary,
(B) except as Previously Disclosed, the Company owns, directly
or indirectly, all the issued and outstanding equity securities
of each of its Subsidiaries, (C) no equity securities of any of
the Company's Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by
reason of any Right or otherwise, (D) there are no contracts,
commitments,
-17-<PAGE>
understandings or arrangements by which the Company or any of
such Subsidiaries is or may be bound to sell or otherwise
transfer any equity securities of any such Subsidiaries (other
than to it or its wholly-owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements
relating to the Company's rights to vote or to dispose of such
securities and (F) all the equity securities of each Subsidiary
held by the Company or its Subsidiaries are validly issued,
fully paid and nonassessable and are owned by the Company or
its wholly owned Subsidiaries free and clear of any Liens.
(ii) Except as set forth in the Disclosure Schedule, the
Company does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any
interest in a partnership or joint venture of any kind, other
than its Subsidiaries. The Company has provided or made
available to Buyer a true and complete copy of all partnership,
joint venture or similar agreements to which the Company or any
of its Subsidiaries is a party. The Company does not have
outstanding any capital commitments with respect to the
partnership, joint venture and similar investments of the
Company or any of its Subsidiaries.
(iii) Each of the Company's Subsidiaries has been duly
organized and is validly existing in good standing under the
laws of the jurisdiction of its organization, and is duly
qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified.
(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; and the Company has the
corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(e) Corporate Authority. Subject to receipt of the
requisite approval of this Agreement by the holders of more
than a majority of the outstanding Company Common Shares
entitled to vote thereon (which is the only shareholder vote
required thereon), this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary
corporate action of the Company. This Agreement is a valid and
legally binding obligation of the Company, enforceable in
accordance with its terms.
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any
third party
-18-<PAGE>
are required to be made or obtained by the Company or any of
its Subsidiaries in connection with the execution, delivery or
performance by the Company of this Agreement or to consummate
the Merger except for (A) filings of applications and notices
with the SEC and United States state securities authorities,
(B) compliance with any applicable requirements of the HSR Act,
(C) the approval of this Agreement by the stockholders of the
Company, (D) any consent, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable
provisions of United States federal and state, and foreign laws
(including, without limitation, securities and insurance laws)
relating to the regulation of broker-dealers, investment
advisers and insurance agencies and any applicable domestic or
foreign industry self-regulatory organization ("SRO"), and the
rules of the NYSE, and (E) the filing of a certificate of
merger with the Delaware Secretary of State and the New York
Department of State. As of the date hereof, the Company is not
aware of any reason why the approvals set forth in Section
7.1(b) will not be received without the imposition of a
condition, restriction or requirement of the type described in
Section 7.1(b).
(ii) Subject to receipt of the regulatory approvals
referred to in the preceding paragraph, and expiration of
related waiting periods, and required filings under United
States federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby and thereby do not and
will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation
or any judgment, decree, order, governmental, SRO rule,
regulation or membership agreement or other permit or license,
or agreement, indenture or instrument of the Company or of any
of its Subsidiaries or to which the Company or any of its
Subsidiaries or properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the Company's
Certificate of Incorporation or the Company's By-Laws, or (C)
require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental, SRO rule,
regulation or membership agreement or other permit or license,
agreement, indenture or instrument.
(g) Financial Reports and SEC Documents.
(i) The Company's Annual Reports on Form 10-K for
the fiscal years ended February 28, 1995, 1996 and 1997, and
all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it
or any of its Subsidiaries subsequent to February 28, 1995
under the Securities Act, or under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed or to be filed
with the SEC
-19-<PAGE>
(collectively, "SEC Documents"), as of the date filed, (A)
complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act, as
the case may be, and (B) did not and will not 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 therein, in the light of the circumstances under
which they were made, not misleading; and each of the balance
sheets contained in or incorporated by reference into any of
the Company's SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
financial position of the Company and its Subsidiaries as of
its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in
the Company's SEC Documents (including any related notes and
schedules thereto) fairly presents, or will fairly present, the
results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the Company and
its Subsidiaries for the periods to which they relate, in each
case, in compliance with applicable accounting requirements and
with the published rules of the SEC with respect thereto and in
accordance with GAAP consistently applied during the periods
involved, except, in each case, as may be noted therein,
subject to normal year-end audit adjustments in the case of
unaudited statements.
(ii) Since February 28, 1997, the Company and its
Subsidiaries have not incurred any material liability other
than in the ordinary course of business consistent with past
practice.
(iii) Since February 28, 1997, (A) the Company and
its Subsidiaries have conducted their respective businesses in
the ordinary and usual course consistent with past practice
(excluding the incurrence of expenses related to this Agreement
and the transactions contemplated hereby), (B) no event has
occurred or fact or circumstance arisen that, individually or
taken together with all other facts, circumstances and events
(described in any paragraph of this Section 5.3 or otherwise),
has had or is reasonably likely to have an adverse effect with
respect to the Company and (C) none of the Company nor any of
its Subsidiaries has taken any action or suffered any event
that if taken or suffered after the date hereof would violate
Section 4.1 of this Agreement.
(iv) The Company has delivered to Buyer true and
complete copies of the FOCUS Reports filed on Form X-17A-5 (the
"FOCUS Reports") as of March 31, 1997 and June 30, 1997 by each
Subsidiary that is a "broker" or "dealer", as such terms are
defined in Sections 2(a)(4) and 2(a)(5) of the Exchange Act
(collectively, the "Broker-Dealer Subsidiaries"). Each FOCUS
Report delivered complied (and with respect to FOCUS Reports
filed
-20-<PAGE>
after the date hereof and prior to the Effective Time, will
comply) at the date thereof in all material respects with the
rules and regulations of the SEC relating thereto and fairly
present the information required to be presented therein
pursuant to Rule 17a-5 under the Exchange Act.
(h) Litigation. No material litigation, claim,
arbitration, investigation or other proceeding before any court
or governmental agency is pending against the Company or any of
its Subsidiaries, and, to the Company's knowledge, no such
litigation, claim, arbitration, investigation or other
proceeding has been threatened.
(i) Regulatory Matters.
(i) The Company and each of its Subsidiaries have
filed all reports, registrations, applications and statements,
together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 1994
with (A) the SEC, (B) any SRO and (C) any Governmental
Authority (collectively with the SEC and the SROs, "Regulatory
Agencies"), and all other reports and statements required to be
filed by them since January 1, 1994, including, without
limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United
States, any United States state or any Regulatory Agency, and
have paid all fees and assessments due and payable in
connection therewith. Each of such reports, registrations,
applications and statements complied (and with respect to such
reports, registrations, applications and statements filed after
the date hereof and prior to the Effective Time, will comply)
at the date thereof in all material respects with the rules and
regulations of the Regulatory Agencies relating thereto and
fairly present the information required to be presented
therein. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of the
Company and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the knowledge of the Company,
investigation into the business or operations of the Company or
any of its Subsidiaries since January 1, 1995. There is no
unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries.
(ii) As of the date of this Agreement, neither the
Company nor any of its Subsidiaries or properties is subject to
any cease-and-desist or other order issued by, or is a party to
any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive
by, or is a recipient of any supervisory letter from or has
adopted any board
-21-<PAGE>
resolutions at the request of any Regulatory Agency or other
Governmental Authority that restricts the conduct of its
business or that, in any manner, relates to its capital
adequacy, its credit policies, its management or its business
(each, whether or not set forth in the Company's Disclosure
Schedule, a "Company Regulatory Agreement"), nor has the
Company or any of its Subsidiaries (A) been advised since
January 1, 1995 by any Regulatory Agency or other Governmental
Authority that it is considering issuing or requesting any such
Company Regulatory Agreement or (B) have knowledge of any
pending or threatened regulatory investigation.
(j) Compliance with Laws. The Company and each of its
Subsidiaries:
(i) is in compliance with all applicable United
States federal, state and local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such
businesses;
(ii) has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications
and registrations with, all Regulatory Agencies that are
required in order to permit them to own or lease their
properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of
authority, 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; has ownership of, or the right to
use, all of its intellectual property, including its names,
without infringing upon the intellectual property rights of any
third party; and
(iii) has received, since December 31, 1995, no
notification or communication from any Regulatory Agency (A)
asserting that the Company or any of its Subsidiaries is not in
compliance with any statutes, regulations, ordinances or rules
or (B) threatening to revoke any license, franchise, permit,
membership privilege or governmental authorization.
(k) Material Contracts; Defaults. Except for those
agreements and other documents filed as exhibits to its SEC
Documents, neither it nor any of its Subsidiaries is a party
to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors,
executive officers, key employees or consultants, (ii) which is
a "material contract" within the meaning of Item 601(b)(10) of
the SEC's Regulation S-K (without giving effect to the
"ordinary course" exception set forth therein), (iii) which
limits the ability of it or any Subsidiary to compete in any
line of business or with any Person, or involves any re-
-22-<PAGE>
striction of geographical area in which, or method by which, it
or any Subsidiary may carry on its business, including any
contract which would require exclusive referrals of business
(other than as may be required by law or any applicable
Governmental Authority), (iv) any of the benefits of which will
be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or (v) which would
prohibit or materially delay the consummation of the Merger or
any of the transactions contemplated by this Agreement (all
such agreements, contracts, arrangements, commitments and
understandings referred to in clauses i-v being herein referred
to as "material contracts"). The Company has previously made
available to Buyer true and complete copies of all employment
and deferred compensation agreements with executive officers,
key employees or material consultants which are in writing and
to which the Company or any of its Subsidiaries is a party.
Neither it nor any of its Subsidiaries is in default under any
contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party, by which its
respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business,
or operations receives benefits, and there has not occurred any
event that, with the lapse of time or the giving of notice or
both, would constitute such a default.
(l) No Brokers. No action has been taken by the Company
that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or other like
payment with respect to the transactions contemplated by this
Agreement, excluding fees to payable to Gleacher NatWest, Inc.
and Goldman, Sachs & Co.
(m) Investment Securities. 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 course of business consistent with prudent
business practices to secure obligations of the Company or any
of its Subsidiaries. Such securities are valued on the books
of the Company in accordance with GAAP.
(n) Employee Benefit Plans.
(i) Section 5.3(n)(i) of the Company's Disclosure
Schedule sets forth a true and complete list as of the date
hereof of each employee benefit plan, arrangement or agreement
that is maintained as of the date of this Agreement, including
all such bonus
-23-<PAGE>
plans, other incentive compensation, profit sharing,
termination, severance, stock option, stock appreciation right,
restricted stock, pension, retirement, deferred compensation,
employment, retiree medical and retiree life insurance, welfare
and other employee benefit plans, arrangements or agreements
relating to directors, officers, key employees, employees or
former employees and material consultants of the Company and
its material Subsidiaries (the "Compensation and Benefit
Plans") by the Company or any of its Subsidiaries or by any
trade or business, whether or not incorporated (a "Company
ERISA Affiliate"), all of which together with the Company would
be deemed a "single employer" within the meaning of Section
4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Schedule 5.3(n)(i) of the Company's
Disclosure Schedule sets forth a list of all outstanding loans
to any director, executive officer, key employee or material
consultant, other than margin loans entered into in the ordi-
nary course of the Company's business.
(ii) The Company has heretofore delivered or made
available to the Buyer true and complete copies of each of the
Compensation and Benefit Plans and certain related documents,
including, but not limited to, (i) all plan documents and
amendments thereto, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles, (ii) the three
most recent Annual Reports (Form 5500 series) and accompanying
schedules, if any, (iii) the current summary plan description,
if any, (iv) the most recent annual financial report, if any,
and (v) the most recent determination letter from the IRS (if
applicable) for such Compensation and Benefit Plan. Except as
set forth in Section 5.3(n)(iii) of the Company's Disclosure
Schedule, (i) each Compensation and Benefit Plan covers only
employees who are actively employed with the Company or its
Subsidiaries, retired employees with retirement accounts in
Compensation and Benefit Plans or former employees entitled to
receive group health benefits pursuant to Section 4980B of the
Code or Part 6 of Title I of ERISA, (ii) no Compensation and
Benefit Plan covers or is required to provide coverage to any
persons classified by the Company or its Subsidiaries as
independent contractors, (iii) neither the Company nor its
Subsidiaries has communicated to employees or other persons any
additional Compensation and Benefit Plan not set forth in
Schedule 5.3(n)(i) of the Company's Disclosure Schedules or any
change in or termination of any existing Compensation and
Benefit Plans, and (iv) substantially adequate and complete
records have been maintained with respect to each Compensation
and Benefit Plan and are in the custody of the Company or the
respective plan administrator.
(iii) Except as set forth in Schedule 5.3.(n)(iii) of the
Company's Disclosure Schedule, each of the Compensation and
Benefit Plans has been operated and administered in accordance
with applicable laws, including, but not limited to, ERISA and
the Code, (ii) except as set forth in Schedule 5.3(n)(iii) of
the Company's Disclosure Schedule, each of the Compensation and
Bene-
-24-<PAGE>
fit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service which
determination letter covers any amendments to such plans that
were required to be adopted under the Tax Reform Act of 1986
and legislation enacted thereafter for which plan amendments
are required to have been adopted as of the Effective Date, and
there are no circumstances that are reasonably likely to result
in the revocation of such favorable determination letter, (iii)
none of the Compensation and Benefit Plans is subject to Title
IV of ERISA nor does any Company ERISA Affiliate contribute or
have an obligation to contribute to an employee benefit plan
subject to Title IV of ERISA, (iv) except as set forth in
Section 5.3.(n)(iii) of the Company's Disclosure Schedule, no
material Compensation and Benefit Plan provides benefits,
including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former
employees of the Company, its Subsidiaries or any Company ERISA
Affiliate beyond their retirement or other termination of
service, other than (A) coverage mandated by Section 4980B of
the Code, Part 6 of Title I of ERISA or other applicable
Federal or state law, (B) death benefits or retirement benefits
under any "employee pension plan" (as such term is defined in
Section 3(2) of ERISA), (C) deferred compensation benefits ac-
crued as liabilities on the books of the Company, its Sub-
sidiaries or the Company ERISA Affiliates or (D) benefits the
full cost of which is borne by the current or former employee
(or his beneficiary), (v) no material liability under Title IV
of ERISA has been incurred by the Company, its Subsidiaries or
any Company ERISA Affiliate that has not been satisfied in
full, and, to the knowledge of the Company, no condition exists
that presents a material risk to the Company, its Subsidiaries
or any Company ERISA Affiliate of incurring a material
liability thereunder, (vi) no Compensation and Benefit Plan is
a "multiemployer pension plan" (as such term is defined in Sec-
tion 3(37) of ERISA) ("Multiemployer Plan") or a plan that has
two or more contributing sponsors at least two of whom are not
under common control within the meaning of Section 4063 of
ERISA ("Multiple Employer Plan"), nor has the Company or any
Company ERISA Affiliate at any time since September 2, 1974
contributed to or had been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan, (vii) all con-
tributions or other amounts payable by the Company or its
Subsidiaries as of the Effective Time with respect to each
Compensation and Benefit Plan in respect of current or prior
plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither the Company, its
Subsidiaries nor any Company ERISA Affiliate has engaged in a
transaction in connection with which the Company, its
Subsidiaries or any Company ERISA Affiliate reasonably could be
expected to become subject to either a material civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a
material tax imposed pursuant to Section 4975 or 4976 of the
Code, and (ix) except as set forth in Section 5.3(n)(iii) of
the Company's Disclosure Schedule, there are no claims pending,
or threatened in writing or to the knowledge of the Company
anticipated (other than routine claims for benefits)
-25-<PAGE>
lawsuits, investigations by governmental authorities,
termination proceedings or arbitrations which have been
asserted or instituted or, to the knowledge of the Company,
threatened or anticipated, by, on behalf of or against any of
the Compensation and Benefit Plans or any trusts related
thereto.
(iv) All contributions required to be made to any
Compensation and Benefit Plan by applicable law or regulation
or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies
funding any Compensation and Benefit Plan, for any period
through the date hereof have been timely made or paid in full
or, to the extent not required to be made or paid on or before
the date hereof, have been fully reflected on the Company's
financial statements.
(v) Except as set forth in Section 5.3(n)(v) of the
Company's Disclosure Schedule, neither the execution and deliv-
ery of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or in conjunction with
any other event) (i) result in any payment (including, without
limitation, severance, unemployment compensation, "excess
parachute payment" within the meaning of Section 280G of the
Code, forgiveness of indebtedness or otherwise) becoming due to
any director or any employee of the Company or any of its af-
filiates from the Company or any of its affiliates under any
Compensation and Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any Compensation and Benefit
Plan or (iii) result in any acceleration of the time of payment
or vesting of any such benefits.
(o) Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to 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 it or any such Subsidiary has
committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel the Company
or any such Subsidiary to bargain with any labor organization
as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its
Subsidiaries pending or, to the Company's knowledge,
threatened, nor is the Company aware of any activity involving
its or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in other organizational
activity.
(p) Takeover Laws. The Company has taken all action re-
quired to be taken by it in order to exempt, to the extent
applicable, this Agreement and the transactions contemplated
hereby from Section 203 of the DGCL.
-26-<PAGE>
(q) Environmental Matters. Neither the conduct nor
operation of the Company or its Subsidiaries nor any condition
of any property presently or previously owned, leased or
operated by any of them (including, without limitation, in a
fiduciary or agency capacity), or on which any of them holds a
Lien, violates or violated Environmental Laws and no condition
has existed or event has occurred with respect to any of them
or any such property that, with notice or the passage of time,
or both, has resulted or is reasonably likely to result in
liability under Environmental Laws. Neither the Company nor
any of its Subsidiaries has received any notice from any Person
that the Company or its Subsidiaries or the operation or
condition of any property ever owned, leased, operated, or held
as collateral or in a fiduciary capacity by any of them are or
were in violation of or otherwise are alleged to have liability
under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or
originating from any such property.
(r) Tax Matters. Except as provided in Schedule 5.3(r)
of the Company's Disclosure Schedule, each of the Company and
its Subsidiaries has duly filed all federal, state, county,
foreign and local information returns and tax returns required
to be filed by it on or prior to the date of this Agreement
(all such returns being accurate and complete) and has duly
paid or made provision for (in accordance with GAAP) the
payment of all Taxes and other governmental charges which have
been incurred or are due or claimed to be due from it by
federal, state, county, foreign or local taxing authorities on
or prior to the date of this Agreement (including, without
limitation, if and to the extent applicable, those due in re-
spect of its properties, income, business, capital stock, de-
posits, franchises, licenses, sales and payrolls) other than
Taxes which (i) are not yet delinquent or (ii) are being
contested in good faith, have not been finally determined and
are adequately reserved against (in accordance with GAAP). The
consolidated federal income tax returns of the Company and its
Subsidiaries for each taxable year through March 31, 1993 have
been examined by the IRS, and either no deficiencies were as-
serted as a result of such examination for which the Company
does not have adequate reserves (in accordance with GAAP) or
all such deficiencies were satisfied. There are no disputes
pending, or claims asserted in writing for, Taxes or assess-
ments upon the Company or any of its Subsidiaries, nor has the
Company or any of its Subsidiaries been requested to give any
currently effective waivers extending the statutory period of
limitation applicable to any federal, state, county or local
income tax return for any period. In addition, (i) proper and
accurate amounts have been withheld by the Company and its Sub-
sidiaries from their employees for all prior periods in compli-
ance with the tax withholding provisions of applicable federal,
state and local laws, (ii) federal, state, county and local
returns which are ac-
-27-<PAGE>
curate and complete have been filed by the Company and its
Subsidiaries for all periods for which returns were due with
respect to income tax withholding, Social Security and
unemployment taxes, (iii) the amounts shown on such federal,
state, local or county returns to be due and payable have been
paid in full or adequate provision therefor (in accordance with
GAAP) has been included by the Company in its consolidated fi-
nancial statements as of February 28, 1997, and (iv) there are
no Tax liens upon any property or assets of the Company or its
Subsidiaries except liens for current taxes not yet due. Nei-
ther the Company nor any of its Subsidiaries has been required
to include in income any adjustment pursuant to Section 481 of
the Code by reason of a voluntary change in accounting method
initiated by the Company or any of its Subsidiaries, and the
IRS has not initiated or proposed any such adjustment or change
in accounting method. Except as set forth in Section 5.3(r) of
the Company's Disclosure Schedule, neither the Company nor any
of its Subsidiaries (other than Subsidiaries that are not
currently members of the affiliated group (within the meaning
of Section 1504(a)(1) of the Code) of which the Company is a
common parent) (i) has been a member of an affiliated group
filing a consolidated federal income tax return (other than a
group the common parent of which was the Company), (ii) is a
party to a Tax allocation or Tax sharing agreement (other than
an agreement solely among members of a group the common parent
of which is the Company) or (iii) has any liability for the
Taxes of any person (other than any of the Company or its Sub-
sidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a trans-
feree or successor, by contract, or otherwise. Except as set
forth in the financial statements described in Section 5.3(g),
neither the Company nor any of its Subsidiaries has entered
into a transaction which is being accounted for under the
installment method of Section 453 of the Code, which is rea-
sonably likely to have an adverse effect on the Company. The
Company is not a party to any contract, agreement or
arrangement that would result, separately or in the aggregate,
in the payment of remuneration to any employee that would not
be deductible pursuant to Section 162(m) of the Code.
(s) Risk Management Instruments. All interest rate
swaps, caps, floors, option agreements, futures and forward
contracts, and other similar risk management arrangements,
whether entered into for the Company's own account, or for the
account of one or more of the Company's Subsidiaries or their
customers (all of which are listed on the Company's Disclosure
Schedule), were entered into in the ordinary course of business
(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 one of its Subsidiaries,
enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudu-
-28-<PAGE>
lent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither the
Company nor 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.
(t) Books and Records. The books and records of the Com-
pany and its Subsidiaries have been fully, properly and accu-
rately maintained in accordance with GAAP and any other
applicable legal and accounting requirements, and there are no
material inaccuracies or discrepancies of any kind contained or
reflected therein, and they fairly present the financial
position of the Company and its Subsidiaries.
(u) Insurance. The Company's Disclosure Schedule sets
forth all of the insurance policies, binders, or bonds
maintained by the Company or its Subsidiaries ("Insurance
Policies"). The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as is
prudent in accordance with industry practices. All the
Insurance Policies 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.
(v) Pooling of Interests. Neither the Company nor, to
the Company's knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Buyer from
accounting for the transactions to be effected pursuant to this
Agreement as a "pooling of interests" in accordance with GAAP
and applicable SEC regulations. As of the date of this
Agreement, the Company has no reason to believe that the Merger
will not qualify as a "pooling of interests" for accounting
purposes.
(w) Registration Matters.
(i) Each Broker-Dealer Subsidiary is, and at the
Effective Time will be, duly registered under the Exchange Act
as a broker-dealer with the SEC, and is, and at the Effective
Time will be, in compliance with the applicable provisions of
the Exchange Act and the applicable rules and regulations
thereunder, including, but not limited to the net capital
requirements thereof. Each Broker-Dealer Subsidiary is, and at
the Effective Time will be, a member in good standing with all
required SROs and in compliance with all applicable rules and
regulations of the SROs. Each Broker-Dealer Subsidiary is, and
at the Effective Time will be, duly registered as a broker-
dealer under, and in compliance with, the applicable laws,
rules and regulations of all jurisdictions in which it is
required to be so registered.
-29-<PAGE>
(ii) The Company has delivered to Buyer true,
correct and complete copies of each Broker-Dealer Subsidiary's
Uniform Application for Broker-Dealer Registration on Form BD
(the "Form BD"), reflecting all amendments thereto filed with
the SEC to the date hereof. The Forms BD of the Broker-Dealer
Subsidiaries are in compliance with the applicable requirements
of the Exchange Act and the rules and regulations thereunder
and do not 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 therein, in light of the
circumstances under which they were made, not misleading. Each
director, officer, agent and employee of each Broker-Dealer
Subsidiary who is required to be registered as a
representative, principal or agent with the securities
commission of any state or with any SRO is duly registered as
such and such registration is in full force and effect. Each
registered representative and principal of each Broker-Dealer
Subsidiary has at least the minimum series license for the
activities which such registered representative or principal
performs for such Broker-Dealer Subsidiary.
(iii) The net capital, as such term is defined in
Rule 15c3-1 under the Exchange Act, of each Broker-Dealer
Subsidiary satisfies, and since their inception has satisfied,
the minimum net capital requirements of the Exchange Act and of
the laws of any jurisdiction in which the Broker-Dealer
Subsidiary conducts business, and has been sufficient to permit
each Broker-Dealer Subsidiary to operate without restriction on
its ability to expand its business under NASD Conduct Rule 3130
or NYSE Rule 326.
(iv) None of the Broker-Dealer Subsidiaries nor any
"associated person" thereof (a) is subject to a "statutory
disqualification" as such terms are defined in the Exchange
Act, or (b) is 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 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, or
proceeding or investigation, whether formal or informal, or
whether preliminary or otherwise, that is reasonably likely to
result in, any such censure, limitations, suspension or
revocation.
(v) Neither the Company nor its Subsidiaries is
required to be registered as an investment company, investment
adviser, commodity trading advisor, commodity pool operator,
futures commission merchant, introducing broker, insurance
agent, or transfer agent under any United States federal,
state, local or foreign statutes, laws, rules or regulations.
No Broker-Dealer Subsidiary acts as the "sponsor" of a "broker-
dealer trad-
-30-<PAGE>
ing program", as such terms are defined in Rule 17a-23 under
the Exchange Act.
5.4. Representations and Warranties of the Buyer.
Subject to Sections 5.1 and 5.2 and except as Previously Dis-
closed in a paragraph of its Disclosure Schedule corresponding
to the relevant paragraph below, each of the Buyer and Merger
Sub hereby represents and warrants to the Company as follows:
(a) Organization, Standing and Authority. The Buyer is
duly organized, validly existing and in good standing under the
laws of the State of Rhode Island. The Buyer 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 assets or the conduct of its business
requires it to be so qualified. The Buyer 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.
(b) Buyer Stock.
(i) As of the date hereof, the authorized capital
stock of the Buyer consists solely of (A) 600,000,000 Buyer
Common Shares, of which no more than 265,000,000 shares were
outstanding or held in treasury as of September 10, 1997, (B)
16,000,000 shares of preferred stock, par value $1.00 per
share, of the Buyer ("Buyer Preferred Shares"), of which, as of
September 10, 1997, (i) 575,000 shares of 9.30% Cumulative
Preferred Stock having a liquidation value of $250 per share,
plus accrued and unpaid dividends, were designated and 575,000
were outstanding (all of which were called for redemption on
October 15, 1997), (ii) 500,000 shares of 9.35% Cumulative
Preferred Stock, having a liquidation value of $250 per share,
plus accrued and unpaid dividends, were designated and 500,000
were outstanding, (iii) 1,265,000 shares of Series V 7.25%
Perpetual Preferred Stock, having a liquidation value of $250
per share, plus accrued and unpaid dividends, were designated
and 764,989 were issued and outstanding, (iv) 690,000 shares of
Series VI 6.75% Perpetual Preferred Stock (the "Series VI
Preferred"), having a liquidation value of $250 per share, plus
accrued and unpaid dividends, were designated and 600,000 were
issued and outstanding, (v) 805,000 shares of Series VII Fixed/
Adjustable Rate Cumulative Preferred Stock, having a
liquidation value of $250 per share, plus accrued and unpaid
dividends, were designated and 700,000 shares were issued and
outstanding, (vi) 200,000 shares of Series VIII Fixed/
Adjustable Rate Noncumulative Preferred Stock, having a
liquidation value of $250 per share, plus accrued and unpaid
dividends, were designated and 200,000 were issued and
outstanding and (vii) 3,000,000 shares of Cumulative
Participating Junior
-31-<PAGE>
Preferred Stock issuable upon exercise of the Buyer Rights,
were designated, of which no shares were issued and outstanding
as of such date.
(ii) Buyer Common Shares to be issued in exchange
for Company Common Shares in the Merger, when issued in
accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
(c) Subsidiaries. Merger Sub and each of the Buyer's
Significant Subsidiaries have been duly organized and is
validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business
requires it to be so qualified and the Buyer owns, directly or
indirectly, all the issued and outstanding equity securities of
Merger Sub and each of the Buyer's Significant Subsidiaries.
(d) Corporate Power. The Buyer, each of the Buyer's
Significant Subsidiaries and Merger Sub have 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;
and each of the Buyer and Merger Sub has the corporate power
and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority. This Agreement and the transac-
tions contemplated hereby have been authorized by all necessary
corporate action of each of the Buyer and Merger Sub. This
Agreement is a valid and legally binding agreement of each of
the Buyer and Merger Sub enforceable in accordance with its
terms.
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any
third party are required to be made or obtained by the Buyer or
any of its Subsidiaries in connection with the execution, de-
livery or performance by the Buyer of this Agreement or to con-
summate the Merger except for (A) the filing of applications
and notices, as applicable, with United States federal and
state securities authorities, (B) approval of the listing on
the NYSE of Buyer Common Shares to be issued in the Merger, (C)
the filing and declaration of effectiveness of the Registration
Statement, (D) the filing of a certificate of merger with the
Delaware Secretary of State and the New York Department of
State, (E) such filings as are required to be made or approvals
as are required to be obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of
Buyer Common Shares in the
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Merger, (F) compliance with any applicable requirements of the
HSR Act, (G) any consent, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable
provisions of United States federal and state securities laws
relating to the regulation of broker-dealers and of any
applicable SRO, and the rules of the NYSE, and approval of the
Board of Governors of the Federal Reserve System. As of the
date hereof, the Buyer is not aware of any reason why the
approvals set forth in Section 7.1(b) will not be received.
(ii) Subject to receipt of the regulatory approvals
referred to in the preceding paragraph and expiration of the
related waiting periods, and required filings under United
States federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby do not and will not (A)
constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Buyer or of any of
its Subsidiaries or to which the Buyer or any of its
Subsidiaries or properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the articles of
incorporation or by-laws (or similar governing documents) of
the Buyer 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, agree-
ment, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse
Effect.
(i) The Buyer's SEC Documents, as of the date filed,
(A) complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act, as
the case may be, and (B) did not and will not 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 therein, in the light of the circumstances under
which they were made, not misleading; and each of the balance
sheets contained in or incorporated by reference into any of
the Buyer's SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
financial position of the Buyer and its Subsidiaries as of its
date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in
such of the Buyer's SEC Documents (including any related notes
and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the Buyer and its
Subsidiaries for the periods to
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which they relate, in each case, in compliance with applicable
accounting requirements and with the published rules of the SEC
with respect thereto and in accordance with GAAP consistently
applied during the periods involved, except, in each case, as
may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(ii) Since December 31, 1996, no event has occurred
or fact or circumstance arisen that, individually or taken
together with all other facts, circumstances and events
(described in any paragraph of this Section 5.4 or otherwise),
is reasonably likely to have an adverse effect with respect to
it.
(h) Litigation; Regulatory Action.
(i) Other than as set forth in its SEC Documents
filed on or before the date hereof, no litigation, claim,
arbitration, investigation or other proceeding before any
Governmental Authority is pending against the Buyer or any of
its Subsidiaries, and, to the best of the Buyer's knowledge, no
such litigation, claim, arbitration, investigation or other
proceeding has been threatened.
(ii) Neither the Buyer 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, or
extraordinary supervisory letter from a Governmental Authority,
nor has the Buyer or any of its Subsidiaries been advised by a
Governmental Authority that such Governmental Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(i) Compliance with Laws. The Buyer and each of its
Subsidiaries:
(i) in the conduct of its business, is in compliance
with all applicable United States federal, state and local, and
foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the
employees conducting such businesses; and
(ii) has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities that are
required in order to permit them to conduct their businesses
substantially as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are
in full force and effect
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and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened.
(j) No Brokers. No action has been taken by the Buyer
that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or other like
payment with respect to the transactions contemplated by this
Agreement, excluding a fee to be paid to UBS Securities, Inc.
(k) Tax Matters. Each of the Buyer and its Subsidiaries
has duly filed all federal, state, county, foreign and material
local information returns and tax returns required to be filed
by it on or prior to the date of this Agreement (all such
returns being accurate and complete) and has duly paid or made
provision for (in accordance with GAAP) the payment of all
Taxes and other governmental charges which have been incurred
or are due or claimed to be due from it by federal, state,
county, foreign or local taxing authorities on or prior to the
date of this Agreement (including, without limitation, if and
to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits,
franchises, licenses, sales and payrolls) other than Taxes
which (i) are not yet delinquent or (ii) are being contested in
good faith, have not been finally determined and are adequately
reserved against (in accordance with GAAP). The consolidated
federal income tax returns of the Buyer and its Subsidiaries
for each taxable year through December 31, 1990 have been
examined by the IRS, and either no deficiencies were asserted
as a result of such examination for which the Buyer does not
have adequate reserves (in accordance with GAAP) or all such
deficiencies were satisfied. Except as set forth in Section
5.4(k) of the Buyer's Disclosure Schedule, there are no
disputes pending, or claims asserted in writing for, Taxes or
assessments in writing upon the Buyer or any of its Sub-
sidiaries, nor has the Buyer or any of its Subsidiaries been
requested to give any currently effective waivers extending the
statutory period of limitation applicable to any federal,
state, county or local income tax return for any period. In
addition, (i) proper and accurate amounts have been withheld by
the Buyer and its Subsidiaries from their employees for all
prior periods in compliance with the tax withholding provisions
of applicable federal, state and local laws, (ii) federal,
state, county and local returns which are accurate and complete
have been filed by the Buyer and its Subsidiaries for all
periods for which returns were due with respect to income tax
withholding, Social Security and unemployment taxes, (iii) the
amounts shown on such federal, state, local or county returns
to be due and payable have been paid in full or adequate pro-
vision therefor (in accordance with GAAP) has been included by
the Buyer in its consolidated financial statements as of Decem-
ber 31, 1996, and (iv) there are no Tax liens upon any property
or assets of the Buyer or its Subsidiaries except liens for
current taxes not yet due. Neither the Buyer nor any of its
Subsidiaries has been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in ac-
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counting method initiated by the Buyer or any of its Subsidiar-
ies, and the IRS has not initiated or proposed any such adjust-
ment or change in accounting method. Neither the Buyer nor any
of its Subsidiaries (other than Subsidiaries that are not
currently members of the affiliated group (within the meaning
of Section 1504(a)(1) of the Code) of which the Buyer is the
common parent) (i) has been a member of an affiliated group
filing a consolidated federal income tax return (other than a
group the common parent of which was the Buyer), (ii) is a
party to a Tax allocation or Tax sharing agreement (other than
an agreement solely among members of a group the common parent
of which is the Buyer) or (iii) has any liability for the Taxes
of any person (other than any of the Buyer or its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise. Neither the Buyer nor
any of its Subsidiaries has entered into a transaction which is
being accounted for under the installment method of Section 453
of the Code.
(l) Pooling of Interests. Neither the Buyer nor, to the
Buyer's best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Buyer from
accounting for the transactions to be effected pursuant to this
Agreement as a "pooling of interests" in accordance with GAAP
and applicable SEC regulations. As of the date of this
Agreement, the Buyer has no reason to believe that the Merger
will not qualify as a "pooling of interests" for accounting
purposes.
ARTICLE VI.
COVENANTS
6.1. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each of the Company and the Buyer
agrees to use its reasonable best efforts in good faith to
take, or cause to be taken, 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 practicable and otherwise to
enable consummation of the transactions contemplated hereby,
and shall cooperate fully with the other party hereto to that
end.
6.2. Stockholder Approval. The Company agrees to take,
in accordance with applicable law, NYSE rules and the Company
Certificate of incorporation and the Company By-Laws, all
action necessary to convene an appropriate meeting of its
stockholders to consider and vote upon the approval and
adoption of this Agreement and any other matters required to be
approved by the Company's stockholders for consummation of the
Merger (including any adjournment or postponement thereof, the
"Company Meeting"),
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as promptly as practicable after the Registration Statement is
declared effective. The Company Board shall recommend such
approval, and the Company shall take all reasonable, lawful
action to solicit such approval by its stockholders.
6.3. Registration Statement.
(a) The Buyer agrees to prepare a registration statement
on Form S-4 or other applicable form to be filed by the Buyer
with the SEC in connection with the issuance of Buyer Common
Shares in the Merger (including the proxy statement and
prospectus and other proxy solicitation materials of the Buyer
and the Company constituting a part thereof (the "Proxy
Statement") and all related documents) (the "Registration
Statement"). The Company agrees to cooperate, and to cause its
Subsidiaries to cooperate, with the Buyer, its counsel and its
accountants, in preparation of the Registration Statement and
the Proxy Statement; and provided that the Company and its
Subsidiaries have cooperated as required above, the Buyer
agrees to file the Proxy Statement in preliminary form with the
SEC as promptly as reasonably practicable, and to file the
Registration Statement with the SEC as soon as reasonably
practicable after any SEC comments with respect to the
preliminary Proxy Statement are resolved. Each of the Buyer
and the Company agrees to use all reasonable efforts to cause
the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after
filing thereof. The Buyer also agrees to use all reasonable
efforts to obtain all necessary United States state securities
law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement. The Company
agrees to furnish to the Buyer all information concerning the
Company, its Subsidiaries, officers, directors and stockholders
as may be reasonably requested in connection with the
foregoing.
(b) Each of the Company and the Buyer agrees, as to
itself and its Subsidiaries, that none of the information
supplied or to be supplied by it for inclusion or incorporation
by reference in (i) the Registration Statement will, at the
time the Registration Statement and each amendment or
supplement thereto, if any, becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (ii) the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders
and at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading or any statement which, in
the light of the circumstances under which such statement is
made, will be false or misleading with respect to any material
fact, or
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which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in
the Proxy Statement or any amendment or supplement thereto.
Each of the Company and the Buyer further agrees that, if it
shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the
statements in the Proxy Statement to be false or misleading
with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not
false or misleading, to promptly inform the other party thereof
and to take the necessary steps to correct the Proxy Statement.
(c) The Buyer agrees to advise the Company, promptly
after the Buyer receives notice thereof, of the time when the
Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Buyer Common Shares
for offering or sale in any jurisdiction, of the initiation or
threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.4. Press Releases. Each of the Company and the Buyer
agrees that it will not, without the prior approval of the
other party, which consent will not be unreasonably withheld or
delayed, issue any press release or written statement for
general circulation relating to the transactions contemplated
hereby, except as otherwise required by applicable law or
regulation or NYSE rules.
6.5. Access; Information.
(a) Each of the Company and the Buyer agrees that, upon
reasonable notice and subject to applicable laws relating to
the exchange of information, it shall, and shall cause each of
its Subsidiaries to, afford the other party and the other
party's officers, employees, counsel, accountants and other
authorized representatives, such 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
to such other information as any party may reasonably request,
and, during such period, it shall, and shall cause each of its
Subsidiaries to, furnish promptly to such other party (i) a
copy of each material report, schedule, registration statement,
application and other document filed by it pursuant to the
requirements of United States federal or state securities or
banking laws or received by it from any Regulatory Agency, and
(ii) all other information concerning the business, properties
and personnel of it as the
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other may reasonably request. Neither party nor any of its
respective Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure
would violate or prejudice the rights of such party's or its
respective Subsidiaries' customers, jeopardize the attorney-
client privilege of the institution in possession or control of
such information or contravene any law, rule, regulation,
order, judgment, decree, or binding agreement entered into
prior to the date of this Agreement. The parties hereto will
make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding
sentence apply.
(b) Each of the Company and the Buyer agrees that it will
not, and will cause its representatives not to, use any
information obtained pursuant to this Section 6.5 (as well as
any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any
purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of
law, each party will keep confidential, and will cause its
representatives to keep confidential, all information and
documents obtained pursuant to this Section 6.5 (as well as any
other information obtained prior to the date hereof in
connection with the entering into of this Agreement) unless
such information (i) was already known to such party, (ii)
becomes available to such party from other sources not known by
such party to be bound by a confidentiality obligation, (iii)
is disclosed with the prior written approval of the party to
which such information pertains or (iv) is or becomes readily
ascertainable from published information or trade sources. In
the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data
as to another party hereto to be returned to the party which
furnished the same.
(c) No investigation by either party of the business and
affairs of the other shall affect or be deemed to modify or
waive any representation, warranty, covenant or agreement in
this Agreement, or the conditions to either party's obligation
to consummate the transactions contemplated by this Agreement.
6.6. Acquisition Proposals. The Company agrees that it
shall not, and shall cause its Subsidiaries and the Company's
and its Subsidiaries' 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. It shall immediately cease and cause to be
terminated any activities, discus-
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sions or negotiations conducted prior to the date of this
Agreement with any parties other than the Buyer with respect to
any of the foregoing, and shall use its reasonable best efforts
to enforce any confidentiality or similar agreement relating to
an Acquisition Proposal. The Company shall promptly (and in
any event, within 24 hours) advise the Buyer following the
receipt by the Company of any Acquisition Proposal and the
substance thereof (including the identity of the Person making
such Acquisition Proposal), and advise the Buyer of any
developments with respect to such Acquisition Proposal
immediately upon the occurrence thereof.
6.7. Affiliate Agreements.
(a) Not later than the 15th day prior to the mailing of
the Proxy Statement, (i) the Company shall deliver to the Buyer
a schedule of each Person that, to the best of its knowledge,
is or is reasonably likely to be, as of the date of the Company
Meeting, deemed to be an "affiliate" of the Company (each, a
"Company Affiliate") as that term is used in Rule 145 under the
Securities Act or SEC Accounting Series Releases 130 and 135.
(b) The Company shall use its reasonable best efforts to
cause each Person who may be deemed to be a Company Affiliate
to execute and deliver to the Buyer, on or before the date of
mailing of the Proxy Statement, an agreement in the form
attached hereto as Exhibit C.
(c) The Buyer shall use its reasonable best efforts to
publish no later than 90 days after the end of the first month
after the Effective Time in which there are at least 30 days of
post-Merger combined operations (which month may be the month
in which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with the
terms of SEC Accounting Series Release No. 135.
6.8. NYSE Listing. The Buyer agrees to use its
reasonable best efforts to list, prior to the Effective Date,
on the NYSE, subject to official notice of issuance, Buyer
Common Shares to be issued to the holders of Company Common
Shares.
6.9. Regulatory Applications.
(a) The Buyer and the Company and their respective
Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect
all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental
Authorities necessary to consummate the transactions
contemplated by this Agreement. Each of the Buyer and the
Company shall have the right to review in ad-
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vance, and, to the extent practicable, each will consult with
the other, in each case, 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, each of the parties hereto agrees to act reasonably and
as promptly as practicable. Each party hereto agrees that it
will consult with the other party hereto with respect to the
obtaining of all material permits, consents, approvals 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 appraised of the status of material
matters relating to completion of the transactions contemplated
hereby. The parties shall cooperate to ensure that any
application or notice to the Federal Reserve Board of Governors
shall be filed within 60 days of the date of this Agreement.
(b) Each party agrees, upon request, to 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.
6.10. Indemnification.
(a) Following the Effective Date and for a period of six
years thereafter, the Buyer shall indemnify, defend and hold
harmless the present directors and officers of the Company and
its Subsidiaries (each, an "Indemnified Party") against all
costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of
actions or omissions occurring at or prior to the Effective
Time (including, without limitation, the transactions
contemplated by this Agreement) to the fullest extent that the
Company is permitted to indemnify (and advance expenses to) its
directors and officers under the laws of the State of Delaware,
the Company Certificate of Incorporation and the Company
By-Laws as in effect on the date hereof.
(b) Any Indemnified Party wishing to claim
indemnification under Section 6.10(a), upon learning of any
claim, action, suit, proceeding or investigation described
above, shall promptly notify the Buyer thereof; provided that
the failure so to notify shall not affect the obligations of
the Buyer under Section
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6.10(a) unless and to the extent that the Buyer is actually
prejudiced as a result of such failure.
(c) If the Buyer or any of its successors or assigns
shall consolidate with or merge into any other entity and shall
not be the continuing or surviving entity of such consolidation
or merger or shall transfer all or substantially all of its
assets to any other entity, then and in each case, proper
provision shall be made so that the successors and assigns of
the Buyer shall assume the obligations set forth in this
Section 6.10.
6.11. Benefit Plans.
(a) For a period of two (2) years from and after the
Effective Time, unless otherwise mutually determined by the
Buyer or the Company and the senior management of the Company,
in their reasonable discretion and in accordance with
applicable law, the benefits to be provided to employees of the
Company as of the Effective Time (other than those employees
who are parties to the Employment Agreements) ("Covered
Employees") shall be the benefit plans and programs as were
provided by the Company to the Covered Employees immediately
before the Effective Time, including, without limitation, the
Company's Retirement Trust pension and profit-sharing plans and
quarterly pre-tax profit bonus plan pursuant to the terms of
the Compensation and Benefit Plans set forth in the Company's
Disclosure Schedule, and to the extent consistent with
applicable law, shall honor all employee benefit obligations to
current and former employees of the Company under such plans
for such two-year period. Notwithstanding the foregoing, in
the event that during the two (2) years following the Effective
Time the Buyer or the Company, in consultation with the senior
management of the Company, determines that the Covered
Employees shall participate or be required to participate in
the Buyer's employee benefit plans and programs, then in no
event shall the benefit plans and programs provided to Covered
Employees during such two-year period be less favorable to the
Covered Employees in the aggregate than the benefits provided
to the Covered Employees immediately before the Effective Time.
For purposes of all employee benefit plans, programs or
arrangements maintained or contributed to by the Buyer, in
which the Covered Employees shall be eligible to participate,
the Buyer shall cause each such plan, program or arrangement to
treat the prior service with the Company of each Covered
Employee as service rendered to the Buyer for purposes of all
eligibility periods and vesting thereunder (but not for
purposes of benefit accruals). The Buyer shall cause any and
all pre-existing condition limitations and eligibility waiting
periods under any health plans to be waived with respect to
Covered Employees and their eligible dependents who,
immediately prior to the date of conversion from the Company's
health plans, participated in a health plan.
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(b) Following the Effective Time, the Buyer shall cause
the Company to perform, and shall guarantee the performance by
the Company of, their respective obligations under each of the
Employment Agreements.
(c) No provisions of this Agreement shall be construed to
constitute a guarantee of continued employment for any Covered
Employee, or to interfere with the right of the Buyer or the
Company to terminate the employment of any Covered Employee.
(d) Following the Effective Time, the Buyer shall
continue to pay quarterly bonuses to the Company's employees
based on the Company's quarterly pre-tax profits, if any, in
accordance with the Company's practice prior to the Effective
Time.
(e) Following the Effective Time, the Buyer shall cause
the Company to pay, and shall guarantee the payment by the
Company of, the annual premiums for the split-dollar life
insurance policies in effect for the benefit of each of Mary
Quick Peterson, Nancy Quick Gibson and Patricia Quick, on the
same basis as was provided immediately prior to the Effective
Time.
6.12. Notification of Certain Matters. Each of the
Company and the Buyer shall give prompt notice to the other of
any fact, event or circumstance known to it that (a) is
reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in
any Material Adverse Effect with respect to it or (b) would
cause or constitute a material breach of any of its
representations, warranties, covenants or agreements contained
herein.
6.13. Employment Agreements. The Buyer or Merger Sub
shall offer employment to each of the employees identified on
Annex A pursuant to an employment agreement in the form of
Annex B or Annex C, as applicable (the "Employment
Agreements").
6.14. The Company's Name. The Buyer acknowledges that
the name "Quick & Reilly" has great integrity and has
significant value. The Buyer recognizes the value to the
Company's business of preserving such integrity. The Buyer
agrees that from and after the Effective Time, the Buyer shall,
and shall cause its subsidiaries to, continue the use of the
name "Quick & Reilly" in connection with the Company's ongoing
business activities and shall maintain the Company's standard
of business integrity and quality related thereto.
6.15. Dividends. After the date of this Agreement, each
of the Buyer and the Company shall coordinate with the other
the declaration of any dividends in respect of Buyer Common
Shares and Company Common Shares and the record dates and
payment dates
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relating thereto, it being the intention of the parties hereto
that holders of Buyer Common Shares or Company Common Shares
shall not receive two dividends, or fail to receive one
dividend, for any quarter with respect to their shares of Buyer
Common Shares and/or Company Common Shares and any shares of
Buyer Common Shares any such holder receives in exchange
therefor in the Merger.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGERS
7.1. Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligation of each of the Buyer and
the Company to consummate the Merger is subject to the
fulfillment or written waiver by the Buyer and the Company
prior to the Effective Time of each of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger
shall have been duly adopted by the requisite vote of the
stockholders of the Company.
(b) Regulatory Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby
shall have been obtained and shall remain, in full force and
effect, all statutory waiting periods in respect thereof shall
have expired and no such approvals shall contain any conditions
or restrictions which would reasonably be expected to result in
a Material Adverse Effect on the Buyer or the Company.
(c) 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 prohibits or
materially restricts or makes illegal consummation of the
transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement
shall have become effective under the Securities Act, and no
stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
(e) "Blue Sky" Approvals. All permits and other
authorizations under United States state securities laws
necessary to consummate the transactions contemplated hereby
and to issue Buyer Common Shares to be issued in the Merger
shall have been received and be in full force and effect and no
such approvals shall con-
-44-<PAGE>
tain any conditions or restrictions which would reasonably be
expected to result in a Material Adverse Effect on the Buyer,
the Company, the Surviving Corporation or any of their
Subsidiaries.
(f) Listing. Buyer Common Shares to be issued in the
Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) Pooling of Interests. The parties shall have
received a letter KPMG Peat Marwick LLP in form and substance
satisfactory to Buyer to the effect that the Merger will
qualify for "pooling of interests" accounting treatment. Such
accountants shall have received a letter from the Company's
accountants to the effect that all conditions necessary to
qualify for pooling of interest accounting treatment to the
extent such conditions pertain to the Company have been
satisfied.
(h) Retention Program. The Retention Program referred to
in Section 3.8 shall have been established.
7.2. 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 Effective Time of each of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of the Buyer set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of
the Effective Date as though made on and as of the Effective
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 as of such date), and the Company
shall have received a certificate, dated the Effective Date,
signed on behalf of the Buyer by any Vice Chairman of the
Buyer, to such effect.
(b) Performance of Obligations of the Buyer. The Buyer
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior
to the Effective Time, and the Company shall have received a
certificate, dated the Effective Date, signed on behalf of the
Buyer by any Vice Chairman of the Buyer, to such effect.
(c) Opinion of the Company's Counsel. (i) The Company
shall have received an opinion of Wachtell, Lipton, Rosen &
Katz, special counsel to the Company, dated the Effective Date,
to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (A) the Merger
constitutes a reorganization within the meaning of Section 368
of the Code and (B) no gain or loss will be recognized by
stockholders of the
-45-<PAGE>
Company who receive Buyer Common Shares in exchange for Company
Common Shares, except with respect to cash received in lieu of
fractional share interests. In rendering its opinion,
Wachtell, Lipton, Rosen & Katz, may require and rely upon
representations contained in letters from the Company, the
Buyer, Merger Sub and stockholders of the Company.
(ii) The Company shall have received an opinion of
Edwards & Angell, counsel to the Buyer and Merger Sub, dated
the Effective Date, to the effect that (A) each of the Buyer
and Merger Sub is duly organized, validly existing and in good
standing under the laws of the state of its jurisdiction or
incorporation, with the corporate power and authority to carry
on its business as it is now being conducted and to execute,
deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; (B) this
Agreement and the transactions contemplated hereby have been
duly authorized by all necessary corporate action of each of
the Buyer and Merger Sub and (C)all consents or approvals of,
or filing or registrations with, any Governmental Authority or
with any third party required to be made or obtained by the
Buyer or Merger Sub in connection with the execution, delivery
or performance by the Buyer or Merger Sub of this Agreement or
to consummate the Merger have been obtained or made, and all
applicable waiting periods have expired.
7.3. Conditions to Obligation of the Buyer and Merger
Sub. The obligation of the Buyer and Merger Sub to consummate
the Merger is also subject to the fulfillment or written waiver
by the Buyer prior to the Effective Time of each of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of
the Effective Date as though made on and as of the Effective
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 as of such date) and the Buyer shall
have received a certificate, dated the Effective 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 Effective Time, and the Buyer shall have
received a certificate, dated the Effective Date, signed on
behalf of the Company by the Chief Executive Officer and the
Chief Financial Officer of the Company, to such effect.
-46-<PAGE>
(c) Certain Employment Arrangements. Messrs. Leslie C.
Quick, Jr., Leslie C. Quick, III, Thomas C. Quick, Peter Quick,
Christopher C. Quick and Pascal J. Mercurio shall have (i)
entered into an Employment Agreement in the form of Annex B,
and (ii) not engaged in conduct constituting "cause" for
termination thereunder as of the Effective Date; and the
Employment Agreements entered into with such individuals shall
remain in effect (in each case, other than as a consequence of
death or disability).
(d) Opinion of the Buyer's Counsel. (i) The Buyer shall
have received an opinion of Edwards & Angell, counsel to the
Buyer, dated the Effective Date, to the effect that, on the
basis of facts, representations and assumptions set forth in
such opinion, the Merger constitutes a reorganization under
Section 368 of the Code. In rendering its opinion, Edwards &
Angell may require and rely upon representations contained in
letters from the Company, the Buyer, Merger Sub and
stockholders of the Company.
(ii) The Buyer shall have received an opinion of counsel
to the Company, which counsel shall be reasonably satisfactory
to the Buyer, dated the Effective Date, to the effect that (A)
each of the Company and its Significant Subsidiaries is duly
organized, validly existing and in good standing under the laws
of the state of its jurisdiction of incorporation, with the
corporate power and authority to carry on its business as it is
now being conducted and, with respect to the Company, to
execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated
hereby; (B) this Agreement and the transactions contemplated
hereby have been duly authorized by all necessary corporate
action of the Company and its shareholders and (C) all consents
or approvals of, or filings or registrations with, any
Governmental Authority or with any third party required to be
made or obtained by the Company or any of its Subsidiaries in
connection with the execution, delivery or performance by the
Company of this Agreement or to consummate the Merger have been
obtained or made, and all applicable waiting periods have
expired.
(e) No Material Adverse Change. Since the date of this
Agreement, no event has occurred or fact or circumstance arisen
that, individually or taken together with all other facts,
circumstances and events, has had a Material Adverse Effect
with respect to the Company and its Subsidiaries, taken as a
whole.
-47-<PAGE>
ARTICLE VIII.
TERMINATION
8.1. Termination. This Agreement may be terminated, and
the Merger may be abandoned:
(a) Mutual Consent. At any time prior to the Effective
Time, by the mutual written consent of the Buyer and the
Company, if the Board of Directors of each so determines by
vote of a majority of the members of its entire Board of
Directors.
(b) Breach. At any time prior to the Effective Time, by
the Buyer or the Company, if its Board of Directors so
determines by vote of a majority of the members of its entire
Board of Directors, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein
(subject to the standard set forth in Section 5.2), 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 or conditions 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.
(c) Delay. At any time prior to the Effective Time, by
the Buyer or the Company, if its Board of Directors so
determines by vote of a majority of the members of its entire
Board of Directors, in the event that the Merger is not
consummated by June 30, 1998, except to the extent that the
failure of the Merger then to be consummated arises out of or
results from the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of
such party set forth herein.
(d) No Approval. By the Company or the Buyer, if its
Board of Directors so determines by a vote of a majority of the
members of its entire Board of Directors, in the event (i) 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 any
Governmental Authority of competent jurisdiction shall have
issued a final nonappealable injunction permanently enjoining
or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement or (ii) any stockholder approval
required by Section 7.1(a) herein is not obtained at the
Company Meeting.
8.2. 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
-48-<PAGE>
shall have any liability or further obligation to any other
party hereunder except (a) as set forth in Section 9.1 and (b)
that termination will not relieve a breaching party from
liability for any willful breach of this Agreement giving rise
to such termination.
ARTICLE IX.
MISCELLANEOUS
9.1. Survival. No representations, warranties,
agreements and covenants contained in this Agreement shall
survive the Effective Time (other than Section 6.10 which shall
survive the Effective Time) or the termination of this
Agreement if this Agreement is terminated prior to the
Effective Time (other than Sections 6.5(b) and 8.2, and this
Article IX, which shall survive such termination).
9.2. Waiver; Amendment. Prior to the Effective Time, any
provision of this Agreement may be (a) waived by the party
benefited by the provision, or (b) amended or modified at any
time, by an agreement in writing between the parties hereto
executed in the same manner as this Agreement, except that,
after the Company Meeting, this Agreement may not be amended
without further approval of the stockholders of the Company if
it would violate the DGCL or reduce the consideration to be
received by the Company's stockholders in the Merger. Such
extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
9.3. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to
constitute an original.
9.4. Governing Law. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of
New York applicable to contracts made and to be performed
entirely within such State and without regard to any laws that
might otherwise govern under applicable principles of conflicts
or laws.
9.5. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the
transactions contemplated hereby, except that printing and
mailing expenses and SEC fees shall be shared equally between
the Company and the Buyer.
9.6. Notices. All notices, requests and other
communications hereunder to a party shall be in writing and
shall be
-49-<PAGE>
deemed given if personally delivered, telecopied (with
confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below
or such other address as such party may specify by notice to
the parties hereto.
If to the Company, to:
The Quick & Reilly Group, Inc.
26 Broadway, 11th Floor
New York, New York 10004
Attention: Thomas C. Quick
Facsimile: (212) 747-5651
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Facsimile: (212) 403-2000
If to the Buyer, to:
Fleet Financial Group, Inc.
One Federal Street, 37th Floor
Boston, Massachusetts 02116
Attention: Brian T. Moynihan
Managing Director, Strategic Planning
and Corporate Development
Facsimile: (617) 346-0137
with a copy to:
Fleet Financial Group, Inc.
75 State Street, 33rd Floor
Boston, Massachusetts 02110
Attention: Drew J. Pfirrman, Esq.
Assistant General Counsel
Facsimile: (617) 346-4284
-50-<PAGE>
and to:
Edward & Angell
2700 Hospital Tower
Providence, Rhode Island
Attention: V. Duncan Johnson, Esq.
Facsimile: (401) 276-6611
9.7. Entire Understanding; No Third-Party Beneficiaries.
Except for the Confidentiality Agreement, this Agreement
(including the documents and instruments referred to herein)
represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby, and this
Agreement supersedes any and all other oral or written
agreements heretofore made. Except for Section 6.10(b),
nothing in this Agreement expressed or implied, is intended to
confer upon any Person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.8. Interpretation; Effect. When a reference is made in
this Agreement to Sections, Exhibit or Schedules, such
reference shall be to a Section of, or Exhibit or Schedule to,
this Agreement unless otherwise indicated. The 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 to be followed by the words "without
limitation". No provision of this Agreement shall be construed
to require the Company, the Buyer, Merger Sub or any of their
respective Subsidiaries, affiliates or directors to take any
action which would violate applicable law (whether statutory or
common law), rule or regulation.
9.9. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad
as to be unenforceable, the provision shall be interpreted to
be only so broad as is enforceable.
9.10. Assignment. Neither this Agreement nor any of the
rights, interests or obligations shall be assigned by either of
the parties hereto (whether by operation of law or otherwise)
-51-<PAGE>
without the prior written consent of the other party. Subject
to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
-52-<PAGE>
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.
THE QUICK & REILLY GROUP, INC.
/s/ Leslie C. Quick, Jr.
By:---------------------------
Name: Leslie C. Quick, Jr.
Title: Chairman of the Board and
Chief Executive Officer
FLEET FINANCIAL GROUP, INC.
/s/ H. Jay Sarles
By:---------------------------
Name: H. Jay Sarles
Title: Vice Chairman
FLEET SECURITIES, INC.
/s/ Brian T. Moynihan
By:---------------------------
Name: Brian T. Moynihan
Title: Vice President
-53-
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated September 16, 1997,
between THE QUICK & REILLY GROUP, INC., a Delaware corpora-
tion ("Issuer"), and FLEET FINANCIAL GROUP, INC., a Rhode Is-
land corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an
Agreement and Plan of Merger of even date herewith (the
"Merger Agreement"), which agreement has been executed by the
parties hereto immediately prior to this Agreement; and
WHEREAS, 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 de-
fined):
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. (a) Issuer hereby grants to Grantee an uncon-
ditional, irrevocable option (the "Option") to purchase, sub-
ject to the terms hereof, up to 7,688,241 fully paid and non-
assessable shares of Issuer's Common Stock, par value $0.10
per share ("Common Stock"), at a price of $35.04 per share
(the "Option Price"); provided further that in no event shall
the number of shares of Common Stock for which this Option is
exercisable exceed 19.9% of the Issuer's issued and outstand-
ing 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), the number of shares of Common Stock subject to
the Option shall be increased so that, after such issuance,
it equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares<PAGE>
subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision
of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or part, and from time to time,
if, but only if, both an Initial Triggering Event (as here-
inafter defined) and a Subsequent Triggering Event (as here-
inafter 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 Sec-
tion 2) within 90 days following such Subsequent Triggering
Event. Each of the following shall be an Exercise Termina-
tion Event: (i) the Effective Time of the Merger; (ii) ter-
mination of the Merger Agreement in accordance with the pro-
visions thereof if such termination occurs prior to the oc-
currence of an Initial Triggering Event except a termination
by Grantee pursuant to Section 8.1(b) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of
termination is non-volitional); or (iii) the passage of
twelve months after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Trig-
gering Event or is a termination by Grantee pursuant to Sec-
tion 8.1(b) of the Merger Agreement (unless the breach by Is-
suer giving rise to such right of termination is non-
volitional) (provided that if an Initial Triggering Event
continues or occurs beyond such termination and prior to the
passage of such twelve-month period, the Exercise Termination
Event shall be twelve months from the expiration of the Last
Triggering Event but in no event more than 18 months after
such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Hold-
er" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean
any of the following events or transactions occurring after
the date hereof:
(i) Issuer or any of its Subsidiaries (each
an "Issuer Subsidiary"), without having received Grant-
ee'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 as-
signed 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
-2-<PAGE>
Subsidiary") or the Board of Directors of Issuer shall
have recommended that the stockholders of Issuer approve
or accept any Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w)
a merger or consolidation, or any similar transaction,
involving Issuer or any Significant Subsidiary (as de-
fined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC")) of Is-
suer, (x) a purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or
other acquisition (including by way of merger, consoli-
dation, share exchange or otherwise) of securities rep-
resenting 10% or more of the voting power of Issuer or
any Significant Subsidiary of Issuer, or (z) any sub-
stantially similar transaction; provided, however, that
in no event shall any (i) merger, consolidation or simi-
lar transaction involving Issuer or any Significant Sub-
sidiary in which the voting securities of Issuer out-
standing immediately prior thereto continue to represent
(by either remaining outstanding or being converted into
the voting securities of the surviving entity of any
such transaction) at least 65% of the combined voting
power of the voting securities of the Issuer or the sur-
viving entity outstanding immediately after the consum-
mation of such merger, consolidation, or similar trans-
action, or (ii) any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or
more of its Subsidiaries or involving only any two or
more of such Subsidiaries, be deemed to be an Acquisi-
tion Transaction, provided any such transaction is not
entered into in violation of the terms of the Merger
Agreement;
(ii) Issuer or any Issuer Subsidiary, without
having received Grantee's prior written consent, shall
have authorized, recommended, proposed or publicly an-
nounced its intention to authorize, recommend or pro-
pose, to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or
the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its in-
terest to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the
Merger Agreement;
(iii) Any person other than Grantee, any
Grantee Subsidiary or any Issuer Subsidiary acting in a
fiduciary capacity in the ordinary course of its
business shall have acquired beneficial ownership or the
right to
-3-<PAGE>
acquire beneficial ownership of 10% or more of the out-
standing shares of Common Stock (the term "beneficial
ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the
1934 Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any
Grantee Subsidiary shall have made a bona fide proposal
to Issuer or its stockholders by public announcement or
written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transac-
tion;
(v) After an overture is made by a third par-
ty to Issuer or its stockholders to engage in an Acqui-
sition Transaction, Issuer shall have breached any cov-
enant or obligation contained in the Merger Agreement
and such breach (x) would entitle Grantee to terminate
the Merger Agreement and (y) shall not have been cured
prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any
Grantee Subsidiary, other than in connection with a
transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with
the Federal Reserve Board, or other federal or state
bank regulatory authority, which application or notice
has been accepted for processing, for approval to engage
in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall
mean either of the following events or transactions occurring
after the date hereof:
(i) The acquisition by any person of benefi-
cial ownership of 20% 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 (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writ-
ing of the occurrence of any Initial Triggering Event or Sub-
sequent 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 exer-
cise the Option.
-4-<PAGE>
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a
written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of shares
it will purchase pursuant to such exercise and (ii) a place
and date not earlier than 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 notifi-
cation to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice
or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pur-
suant 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 req-
uisite waiting period or periods shall have passed. Any ex-
ercise 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 pay to Issuer the aggre-
gate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately avail-
able funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to desig-
nate such a bank account shall not preclude the Holder from
exercising the Option.
(g) At such closing, simultaneously with the de-
livery of immediately available funds as provided in subsec-
tion (f) of this Section 2, Issuer shall deliver to the Hold-
er 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 evi-
dencing the rights of the Holder thereof to purchase the bal-
ance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(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
-5-<PAGE>
Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Is-
suer 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 de-
livery 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 ef-
fect that such legend is not required for purposes of the
1933 Act; (ii) the reference to the provisions to this Agree-
ment in the above legend shall be removed by delivery of sub-
stitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provi-
sions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend
shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addi-
tion, 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 ap-
plicable 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, notwith-
standing 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 prepara-
tion, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, trans-
feree or designee.
3. 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, war-
rants, 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
-6-<PAGE>
to avoid the observance or performance of any of the cove-
nants, 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 premerger notification, reporting and waiting period re-
quirements specified in 15 U.S.C. 18a and regulations pro-
mulgated thereunder and (y) in the event, under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), or the
Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the Federal Re-
serve Board or to any state regulatory authority is necessary
before the Option may be exercised, cooperating fully with
the Holder in preparing such applications or notices and pro-
viding such information to the Federal Reserve Board or such
state 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 pro-
tect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of the Hold-
er, 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
Stock Option 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 consti-
tute an additional contractual obligation on the part of Is-
suer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. 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 num-
ber of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to ad-
justment from time to time as provided in this Section 5. In
the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups,
-7-<PAGE>
mergers, recapitalizations, combinations, subdivisions, con-
versions, exchanges of shares, distributions on or in respect
of the Common Stock that would be prohibited under the terms
of the Merger Agreement, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such man-
ner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper ad-
justment and the full satisfaction of the Issuer's obliga-
tions hereunder.
6. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Is-
suer shall, at the request of Grantee delivered within 90
days 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
shelf registration statement under the 1933 Act covering this
Option and 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
this Option and any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in ac-
cordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such
registration statement first 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 effec-
tive 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 foregoing
notwithstanding, if, at the time of any request by Grantee
for registration of the Option or Option Shares as provided
above, Issuer is in registration with respect to an under-
written public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or manag-
ing underwriters, or, if none, the sole underwriter or under-
writers, of such offering the inclusion of the Holder's Op-
tion or 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;
and 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 25%
of the total number of shares to be sold by the Holder and
Issuer in the aggregate; and provided further, however, that
-8-<PAGE>
if such reduction occurs, then the Issuer shall file a reg-
istration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder
shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed here-
under. If requested by any such Holder in connection with
such registration, Issuer shall become a party to any under-
writing agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of repre-
sentations, warranties, indemnities and other agreements cus-
tomarily included in such underwriting agreements for the Is-
suer. 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 per-
sons entitled to receive such copies. Notwithstanding any-
thing to the contrary contained herein, in no event shall Is-
suer be obligated to effect more than two registrations pur-
suant to this Section 6 by reason of the fact that there
shall be more than one Grantee as a result of any assignment
or division of this Agreement.
7. (a) Immediately prior to the occurrence of a
Repurchase Event (as defined below), (i) following a request
of the Holder, delivered prior to an Exercise Termination
Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase
Price") equal to the amount by which (A) the market/offer
price (as defined below) exceeds (B) the Option Price, mul-
tiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Op-
tion Shares from time to time (the "Owner"), delivered within
90 days of such occurrence (or such later period as provided
in Section 10), Issuer shall repurchase such number of 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 Stock at which a
tender offer or exchange offer therefor has been made, (ii)
the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice
of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a sub-
stantial portion of Issuer's assets, the sum of the price
paid in such sale for such assets and the current market
-9-<PAGE>
value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, divided by the num-
ber 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 deter-
mined by a nationally recognized investment banking firm se-
lected by the Holder or Owner, as the case may be and reason-
ably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the
Option and any Option Shares pursuant to this Section 7 by
surrendering for such purpose to Issuer, at its principal of-
fice, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or no-
tices 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. Within the latter to occur of (x) five business
days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately
prior to the occurrence of a Repurchase Event, Issuer shall
deliver or cause to be delivered to the Holder the Option Re-
purchase Price and/or to the Owner the Option Share Repur-
chase Price therefor or the portion thereof that Issuer is
not then prohibited under applicable law and regulation from
so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option
and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/
or the Owner, as appropriate, the portion of the Option Re-
purchase Price and the Option Share Repurchase Price, respec-
tively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at
any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under ap-
plicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price
and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to ob-
tain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke
its notice of repurchase of the Option or the Option Shares
-10-<PAGE>
either in whole or to the extent of the prohibition, where-
upon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion
of the Option Repurchase Price or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new
Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which
the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less
the portion thereof theretofore delivered to the Holder and
the denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase
Event shall be deemed to have occurred (i) upon the consum-
mation of any merger, consolidation or similar transaction
involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer,
other than any such transaction which would not constitute an
Acquisition Transaction pursuant to the proviso to Section
2(b)(i) hereof or (ii) upon the acquisition by any person of
beneficial ownership of 50% or more of the then outstanding
shares of Common Stock, provided that no such event shall
constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7
shall not terminate upon the occurrence of an Exercise Ter-
mination Event unless no Subsequent Triggering Event shall
have occurred prior to the occurrence of an Exercise Termi-
nation Event.
8. (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 one of its Subsidiaries, and shall not be the con-
tinuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one
of its Subsidiaries, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securi-
ties of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such mer-
ger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii)
-11-<PAGE>
to sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or one of its Sub-
sidiaries, then, and in each such case, the agreement govern-
ing 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 con-
verted into, or exchanged for, an option (the "Substitute Op-
tion"), at the election of the Holder, of either (x) the Ac-
quiring Corporation (as hereinafter defined) or (y) any per-
son that controls the Acquiring Corporation.
(b) The following terms have the meanings indi-
cated:
(1) "Acquiring Corporation" shall mean (i)
the continuing or surviving corporation of a consolida-
tion or merger with Issuer (if other than Issuer), (ii)
Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or
substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the
common stock issued by the issuer of the Substitute Op-
tion upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/
offer price, as defined in Section 7.
(4) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock
for the one year immediately preceding the consolida-
tion, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Com-
mon Stock on the day preceding such consolidation, merg-
er 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 con-
trols 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 Sub-
stitute 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 substan-
tially the same form as this Agreement, which shall be appli-
cable to the Substitute Option.
-12-<PAGE>
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal
to the Assigned Value multiplied by the number of shares of
Common Stock for which the Option is then exercisable, divid-
ed by the Average Price. The exercise price of the Substi-
tute Option per share of Substitute Common Stock shall then
be equal to the Option Price multiplied by a fraction, the
numerator of which shall be the number of shares of Common
Stock for which the Option is then exercisable and the denom-
inator 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 out-
standing 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 out-
standing prior to exercise but for this clause (e), the is-
suer of the Substitute Option (the "Substitute Option Is-
suer") shall make a cash payment to Holder equal to the ex-
cess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the
value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Acquiring Corpora-
tion.
(f) Issuer shall not enter into any transaction
described in subsection (a) of this Section 8 unless the Ac-
quiring Corporation and any person that controls the Acquir-
ing Corporation assume in writing all the obligations of Is-
suer hereunder.
9. (a) At the request of the holder of the Sub-
stitute Option (the "Substitute Option Holder"), the issuer
of the Substitute Option (the "Substitute Option Issuer")
shall repurchase the Substitute Option from the Substitute
Option Holder at a price (the "Substitute Option Repurchase
Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exer-
cise price of the Substitute Option, multiplied by the number
of shares of Substitute Common Stock for which the Substitute
Option may then be exercised plus (y) Grantee's Out-of-Pocket
Expenses (to the extent not previously reimbursed), 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
-13-<PAGE>
Shares at a price (the "Substitute Share Repurchase Price")
equal to (x) the Highest Closing Price multiplied by the num-
ber of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reim-
bursed). 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 re-
purchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substi-
tute Shares, as applicable.
(b) The Substitute Option Holder and the Substi-
tute Share Owner, as the case may be, may exercise its re-
spective right to require the Substitute Option Issuer to re-
purchase the Substitute Option and the Substitute Shares pur-
suant to this Section 9 by surrendering for such purpose to
the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of
such an agreement, a copy of this Agreement) and certificates
for Substitute Shares accompanied by a written notice or no-
tices stating that the Substitute Option Holder or the Sub-
stitute Share Owner, as the case may be, elects to require
the Substitute Option Issuer to repurchase the Substitute Op-
tion and/or the Substitute Shares in accordance with the pro-
visions of this Section 9. As promptly as practicable, and
in any event within five business days after the surrender of
the Substitute Option and/or certificates representing Sub-
stitute Shares and the receipt of such notice or notices re-
lating 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.
(c) To the extent that the Substitute Option Is-
suer is prohibited under applicable law or regulation from
repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the por-
tion of the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five
business days after the date on which the Substitute Option
Issuer is no longer so prohibited; provided, however, that if
the Substitute Option Issuer is at any time after delivery of
-14-<PAGE>
a notice of repurchase pursuant to subsection (b) of this
Section 9 prohibited under applicable law or regulation from
delivering to the Substitute Option Holder and/or the Sub-
stitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall
use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to ac-
complish such repurchase), the Substitute Option Holder or
Substitute Share Owner may revoke its notice of repurchase of
the Substitute Option or the Substitute Shares either in
whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price
that the Substitute Option Issuer is not prohibited from de-
livering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing
the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exer-
cisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Op-
tion Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, or (B) to
the Substitute Share Owner, a certificate for the Substitute
Option Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain
rights under Sections 2, 6, 7 and 13 shall be extended: (i)
to the extent necessary to obtain all regulatory approvals
for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent neces-
sary to avoid liability under Section 16(b) of the 1934 Act
by reason of such exercise.
11. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
the Board of Directors of Issuer and no other corporate pro-
ceedings on the part of Issuer are necessary to authorize
-15-<PAGE>
this Agreement or to consummate the transactions so contem-
plated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate ac-
tion 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 re-
served 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 pursu-
ant hereto, 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.
(c) Issuer has taken all action (including if re-
quired redeeming all of the Rights or amending or terminating
the Rights Agreement) so that the entering into of this Op-
tion Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do
not and will not result in the grant of any rights to any
person under the Rights Agreement or enable or require the
Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Is-
suer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all neces-
sary corporate action on the part of Grantee. This Agreement
has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of
Common Stock or other securities acquired by Grantee upon ex-
ercise of the Option will not be, acquired with a view to the
public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of
its rights or obligations under this Option Agreement or the
Option created hereunder to any other person, without the ex-
press written consent of the other party, except that in the
event a Subsequent Triggering Event shall have occurred prior
-16-<PAGE>
to an Exercise Termination Event, Grantee, subject to the ex-
press provisions hereof, may assign in whole or in part its
rights and obligations hereunder within 90 days following
such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the
date 15 days following the date on which the Federal Reserve
Board approves an application by Grantee under the BHCA to
acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in
(i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to pur-
chase in excess of 2% of the voting shares of Issuer, (iii)
an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed pub-
lic distribution on Grantee's behalf, or (iv) any other man-
ner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its 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, including without limitation making application to
list the shares of Common Stock issuable hereunder on the New
York Stock Exchange upon official notice of issuance and ap-
plying to the Federal Reserve Board under the BHCA for ap-
proval to acquire the shares issuable hereunder, but Grantee
shall not be obligated to apply to state banking authorities
for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate
to do so.
15. 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 par-
ties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restric-
tion contained in this Agreement is held by a court or a fed-
eral 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 per-
mitted to repurchase pursuant to Section 7, the full number
of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the ex-
press intention of Issuer to allow the Holder to acquire or
-17-<PAGE>
to require Issuer to repurchase such lesser number of shares
as may be permissible, without any amendment or modification
hereof.
17. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been
duly given when delivered in person, by cable, telegram, tel-
ecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective address-
es of the parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and con-
strued in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under ap-
plicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an origi-
nal, but all of which shall constitute one and the same
agreement.
20. 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 bank-
ers, accountants and counsel.
21. Except as otherwise expressly provided herein
or in the Merger Agreement, this Agreement contains the en-
tire agreement between the parties with respect to the trans-
actions contemplated hereunder and supersedes all prior ar-
rangements or understandings with respect thereof, written or
oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. Nothing
in this Agreement, expressed or implied, is intended to con-
fer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, rem-
edies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and
not defined herein shall have the meanings assigned thereto
in the Merger Agreement.
-18-<PAGE>
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above
written.
THE QUICK & REILLY GROUP, INC.
/s/ Leslie C. Quick, Jr.
By:____________________________
Name: Leslie C. Quick, Jr.
Title: Chairman of the Board
and Chief Executive Officer
FLEET FINANCIAL GROUP, INC.
/s/ H. Jay Sarles
By:____________________________
Name: H. Jay Sarles
Title: Vice Chairman
-19-
Contacts:
FOR FLEET:
Media: James E. Mahoney
Fleet Financial Group
617/346-5472
Investor: Thomas R. Rice
Fleet Financial Group
617/346-0148
FOR QUICK & REILLY:
Charles G. Salmans
Corporate Communications-Investor Relations
212-747-6885
e-mail: [email protected]
For Immediate Release
FLEET FINANCIAL GROUP TO ACQUIRE QUICK & REILLY
NEW YORK, September 17, 1997 -- Fleet Financial Group
(NYSE:FLT) and The Quick & Reilly Group, Inc. (NYSE:BQR) an-
nounced today that they have entered into a definitive agree-
ment under which Fleet will acquire Quick & Reilly in a stock-
for-stock transaction, bringing together Fleet's fast-growing
financial services arm with the nation's third largest discount
brokerage firm. Based on Fleet's closing price on Tuesday,
September 16, the value of the transaction is approximately
$1.6 billion.
The top six members of Quick & Reilly's senior management team
will remain in place and have all signed five-year employment
contracts. Quick & Reilly will be run as an independent opera-
tion within Fleet's Investment Management Services division,
reporting to Fleet Vice Chairman Gunnar Overstrom. A represen-
tative of Quick & Reilly will join Fleet's Board.
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"By joining forces with one of the preeminent brands and con-
sumer franchises in the securities business we are creating a
national distribution platform for Fleet investment products as
well as furthering our long-standing goal of providing a much
broader set of financial solutions to our banking customers,"
said Terrence Murray, Fleet's chairman and chief executive
officer. "We intend to maintain the Quick & Reilly name and
position them as our primary delivery system for consumer in-
vestment and securities products. We will continue to operate
the company's 117 investor centers while adding Quick & Reilly
representatives to Fleet's branch network of six million cus-
tomers and offering Fleet investment advisors at Quick & Reilly
locations.
"Quick & Reilly is a unique and highly profitable financial
services firm, with four strong, vertically integrated units --
discount brokerage, including securities trading over the
Internet; correspondent clearing; NYSE specialist business; and
NASDAQ market making -- and together they complement and en-
hance our existing portfolio of investment products," Mr.
Murray said.
Mr. Overstrom said, "This transaction is a natural next step
after our recently announced acquisition of Columbia Management
Company. Columbia significantly increases our assets under
management and provides us with another strong family of mutual
funds. Quick & Reilly provides us with a tremendous distribu-
tion platform. With both, we are well on our way toward our
objective of significantly building our investment services
capabilities through acquisitions and internal growth of pro-
prietary investment products for the benefit of Fleet share-
holders, customers, and employees."
Leslie C. Quick, Jr., chairman and chief executive officer of
Quick & Reilly, said, "We are delighted to have the opportunity
to move into our next stage of growth as a customer-driven
financial services enterprise as a member of the Fleet family.
After 23 years of record revenues, earnings, and return on
shareholders' equity we are extremely pleased with what we have
accomplished as a public company. Now we will build on that
success and move into new areas with access to Fleet's money
management operations, private banking and trust services, and
substantially larger
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capital base that will enable us to invest
in new technology and institutional relationships. We also
look forward to cross-selling Fleet mortgages and credit cards
over the long-term. We are delighted to have this growth op-
portunity with a partner and at a price that serves our share-
holders, customers, and employees exceedingly well."
Under the terms of the agreement, Quick & Reilly shareholders
will receive a fixed exchange ratio of 0.578 shares of Fleet
common stock for each share of Quick & Reilly. Based on the
price of Fleet's stock at the close of the market an Tuesday,
September 16, the transaction is valued at approximately $40.89
per Quick & Reilly share.
"The transaction will be accounted for as a pooling-of-inter-
ests and is expected to be accretive within a year," said
Eugene M. McQuade, Fleet Vice Chairman and Chief Financial
Officer.
The agreement is subject to customary closing conditions and
regulatory approval, including the approval of Quick & Reilly
shareholders. The Quick family owns about 40 percent of the
firm's stock directly or through trusts, and family members
have agreed to vote in favor of the transaction. Subsequent to
the transaction, Quick family members will own about four per-
cent of the Fleet shares outstanding. The transaction is
expected to close in the first quarter of next year.
Fleet is an $83 billion diversified financial services company
listed on the New York Stock Exchange. Fleet's lines of busi-
ness include commercial and consumer banking, mortgage banking,
consumer finance, corporate finance, and investment services.
With $52 billion of assets under management, Fleet has been a
leading provider of services to not-for-profit organizations
and endowments nationwide through its Fleet Investment Advisors
unit.
The Quick & Reilly Group, Inc. is the corporate parent of Quick
& Reilly, Inc., which was the first New York Stock Exchange
member firm to offer discounted commissions to
<PAGE>
individuals; U.S. Clearing Corp., which provides clearing and
execution services to 340 brokerage and banking firms; JJC
Specialist Corp., the second largest specialist on the floor of
the New York Stock Exchange, which makes markets in stocks and
securities for 230 companies listed on the NYSE; and Nash,
Weiss & Co., a leading NASDAQ market-maker, which makes markets
in some 2,500 over the counter stocks.
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