<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1)
OR 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
CONNING CORPORATION
- --------------------------------------------------------------------------------
(NAME OF SUBJECT COMPANY)
CC MERGER SUB INC.
METROPOLITAN LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
(NAME OF FILING PERSONS -- OFFEROR)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
208215 10 3
- --------------------------------------------------------------------------------
(CUSIP NUMBER OF CLASS OF SECURITIES)
JANE WEINBERG, ESQ.
METROPOLITAN LIFE INSURANCE COMPANY
ONE MADISON AVENUE
NEW YORK, NEW YORK 10010
TELEPHONE: (212) 578-2211
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS)
COPY TO:
ADAM O. EMMERICH, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 403-1234
- --------------------------------------------------------------------------------
CALCULATION OF FILING FEE
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- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ------------------------------------------------------------------------------------------------
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$95,425,962.50 $19,026
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
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* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 7,634,077 shares of common stock, par value
$0.01 per share (the "Shares"), at a price per Share of $12.50 in cash. Such
number of Shares represents the fully diluted number of Shares outstanding as
of March 20, 2000, less the number of Shares already beneficially owned by
Metropolitan Life Insurance Company.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[X] issuer tender offer subject to Rule 13e-4.
[X] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
PAGE 1 OF 6 PAGES
EXHIBIT INDEX BEGINS ON PAGE 6
<PAGE> 2
This Tender Offer Statement on Schedule TO is filed by Metropolitan Life
Insurance Company, a New York life insurance company ("MetLife"), and CC Merger
Sub Inc., a Missouri corporation and an indirect wholly owned subsidiary of
MetLife ("Purchaser"). The Schedule TO relates to the offer by Purchaser to
purchase all outstanding shares of Common Stock, par value $0.01 per share (the
"Shares"), of Conning Corporation ("Conning") at $12.50 per Share, net to the
seller in cash (less any required withholding taxes), upon the terms and subject
to the conditions set forth in the offer to purchase (the "Offer to Purchase")
and in the related letter of transmittal (the "Letter of Transmittal," which
together with the Offer to Purchase, as amended or supplemented from time to
time, collectively constitute the "Offer"), attached hereto as Exhibits (a)(1)
and (a)(2), respectively. The information set forth in the Offer is incorporated
herein by reference with respect to Items 1-9, 11 and 13 of Schedule TO. The
Agreement and Plan of Merger, by and among MetLife, Purchaser and Conning, dated
as of March 9, 2000 (the "Merger Agreement"), a copy of which is attached as
Exhibit (d)(1) hereto, is incorporated herein by reference with respect to Items
5 and 11 of Schedule TO.
ITEM 10. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 12. EXHIBITS.
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(a)(1) Offer to Purchase dated March 20, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Text of proposal letter sent by MetLife to Conning on
January 14, 2000.
(a)(7) Text of press release issued by MetLife dated January 18,
2000.
(a)(8) Text of joint press release issued by MetLife and Conning
dated March 9, 2000.
(a)(9) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(10) Form of summary advertisement dated March 20, 2000.
(c)(1) Opinion of Salomon Smith Barney Inc.
(c)(2) Opinion of Credit Suisse First Boston Corporation.
(c)(3) Report of Salomon Smith Barney Inc.
(d)(1) Agreement and Plan of Merger by and among MetLife, Purchaser
and Conning dated as of March 9, 2000.
(d)(2) Investment Advisory Agreement by and between General
American Life Insurance Company and General American
Investment Management Company, dated as of May 1, 1995.
(d)(3) Assignment and Assumption Agreement by and among Conning
Asset Management Company, MetLife and General American Life
Insurance Company, dated as of March 1, 2000.
(d)(4) Limited Partnership Agreement of Conning Capital Partners
VI, L.P., dated as of February 25, 2000.
(d)(5) Side Letter to Limited Partnership Agreement regarding the
participation of MetLife in Conning Capital Partners VI,
L.P., dated as of March 7, 2000.
(f) Statement describing appraisal rights and procedures for
exercising appraisal rights (incorporated by reference from
Offer to Purchase).
(g) None.
(h) None.
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2
<PAGE> 3
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
(a) Financial statements
(1) Conning's Annual Report on Form 10-K for the year ended December
31, 1999 (pages 30-33) is incorporated herein by reference.
(2) The book value per share of Conning common stock as of December
31, 1999 was $6.96 (basic) and $6.74 (diluted).
(b) Not applicable
The financial information incorporated by reference may be read and copied
at the following locations at the SEC:
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Public Reference Room New York Regional Office Chicago Regional Office
Room 1024, Judiciary Plaza Suite 1300 Citicorp Center
450 Fifth Street, N.W. 7 World Trade Center Suite 1400
Washington, D.C. 20549 New York, New York 10048 500 West Madison Street
Chicago, Illinois 60661-2511
</TABLE>
Please call the SEC at 1-800-732-0330 for further information on the public
reference rooms. Conning's SEC filings should also be available to the public
from commercial document retrieval services and at the Internet world wide web
site that the SEC maintains at http://www.sec.gov.
3
<PAGE> 4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
CC MERGER SUB INC.
By /s/ GARY A. BELLER
------------------------------------
Name: Gary A. Beller
Title: President and Chairman of the
Board
METROPOLITAN LIFE INSURANCE COMPANY
By /s/ GARY A. BELLER
------------------------------------
Name: Gary A. Beller
Title: Senior Executive
Vice-President
and General Counsel
Dated: March 20, 2000
4
<PAGE> 5
EXHIBIT INDEX
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(a)(1) Offer to Purchase dated March 20, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Text of proposal letter sent by MetLife to Conning on
January 14, 2000.
(a)(7) Text of press release issued by MetLife dated January 18,
2000.
(a)(8) Text of joint press release issued by MetLife and Conning
dated March 9, 2000.
(a)(9) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(10) Form of summary advertisement dated March 20, 2000.
(c)(1) Opinion of Salomon Smith Barney Inc.
(c)(2) Opinion of Credit Suisse First Boston Corporation.
(c)(3) Report of Salomon Smith Barney Inc.
(d)(1) Agreement and Plan of Merger by and among MetLife, Purchaser
and Conning dated as of March 9, 2000.
(d)(2) Investment Advisory Agreement by and between General
American Life Insurance Company and General American
Investment Management Company, dated as of May 1, 1995.
(d)(3) Assignment and Assumption Agreement by and among Conning
Asset Management Company, MetLife and General American Life
Insurance Company, dated as of March 1, 2000.
(d)(4) Limited Partnership Agreement of Conning Capital Partners
VI, L.P., dated as of February 25, 2000.
(d)(5) Side Letter to Limited Partnership Agreement regarding the
participation of MetLife in Conning Capital Partners VI,
L.P, dated as of March 7, 2000.
(f) Statement describing appraisal rights and procedures for
exercising appraisal rights (incorporated by reference from
Offer to Purchase).
(g) None.
(h) None.
</TABLE>
5
<PAGE> 1
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CONNING CORPORATION
at
$12.50 NET PER SHARE
by
CC MERGER SUB INC.
an indirect wholly owned subsidiary
of
METROPOLITAN LIFE INSURANCE COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON MONDAY, APRIL 17, 2000, UNLESS THE OFFER IS EXTENDED.
A SUMMARY OF THE PRINCIPAL TERMS OF THE OFFER APPEARS ON PAGES (II) THROUGH
(IV). YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE DECIDING WHETHER TO
TENDER YOUR SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS: (a) APPROVED OR DISAPPROVED OF THE TRANSACTION; (b) PASSED UPON
THE MERITS OR FAIRNESS OF THE TRANSACTION; OR (c) PASSED UPON THE ADEQUACY OR
ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Dealer Manager for the Offer is:
Credit Suisse/First Boston Logo
March 20, 2000
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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Summary of the Offer................................................ ii
Introduction........................................................ 1
Special Factors..................................................... 2
I. Background of the Tender Offer and the Merger Agreement..... 2
II. Purpose of, Alternative to, Reasons for and Effects of the
Tender Offer and the Merger................................. 5
III. Fairness of the Tender Offer and the Merger................. 6
IV. Reports, Opinions and Appraisals............................ 7
V. Interests of Certain Persons................................ 16
The Tender Offer and the Merger..................................... 20
1. Terms of the Tender Offer................................... 20
2. Acceptance for Payment and Payment for Conning Shares....... 22
3. Procedures for Accepting the Offer and Tendering Shares..... 23
4. Withdrawal Rights........................................... 25
5. Price Range of the Shares; Dividends........................ 26
6. Possible Effects of the Tender Offer on the Market for the
Conning Shares; Stock Quotation; Securities Exchange Act
Registration; Margin Regulations............................ 26
7. Information Concerning Conning.............................. 28
8. Information Concerning MetLife and Purchaser................ 30
9. The Merger Agreement and the Merger......................... 32
10. Source and Amount of Funds.................................. 41
11. Dividends and Distributions................................. 41
12. Conditions of the Offer..................................... 41
13. Legal and Regulatory Matters................................ 43
14. Fees and Expenses........................................... 45
15. Miscellaneous............................................... 46
Schedule I Directors and Executive Officers of MetLife and I-1
Purchaser.........................................................
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i
<PAGE> 3
SUMMARY OF THE OFFER
PRINCIPAL TERMS
- MetLife, through an indirect wholly owned subsidiary, is offering to buy
all outstanding shares of Conning common stock not already owned by
MetLife and its affiliates. MetLife and its affiliates already own
approximately 60.4% of the outstanding Conning shares. The tender price
is $12.50 per share in cash, less any required withholding taxes.
Tendering stockholders will not have to pay brokerage fees or
commissions.
- As provided in our merger agreement with Conning, the tender offer is the
first step in our plan to acquire all of the outstanding Conning shares
that we do not already own. We would like to acquire enough Conning
shares in the tender offer so that, including the Conning shares we
already own, we would control at least two-thirds of the outstanding
Conning shares. If we reach this target in the tender offer, we will
acquire any remaining Conning shares in a later merger for $12.50 per
share in cash. With control over two-thirds of the outstanding Conning
shares, we can ensure approval of the merger. Conning stockholders who
comply with Missouri law will have appraisal rights in the merger.
- The initial offering period of the offer will expire at 12:00 midnight,
New York City time, on Monday, April 17, 2000, unless we extend the
offer.
- If we decide to extend the tender offer, we will issue a press release
giving the new expiration date no later than 9:00 a.m., New York City
time, on the first business day after the previously scheduled expiration
of the tender offer.
RECOMMENDATION OF THE CONNING SPECIAL COMMITTEE
The Conning board of directors formed a special committee consisting of
Conning's independent director to consider, evaluate and negotiate the terms of
the merger agreement and to make a recommendation on the offer and the merger to
the Conning board of directors.
The Conning special committee has determined that the tender offer and the
merger are fair to, advisable and in the best interests of Conning and its
stockholders, and has recommended to the Conning board of directors that it
recommend to the Conning stockholders acceptance of the tender offer and, if
necessary, approval of the merger agreement.
RECOMMENDATION OF THE CONNING BOARD OF DIRECTORS
The Conning board of directors has determined that, based upon the
recommendation of the Conning special committee and other considerations, the
tender offer and the merger are fair to, advisable and in the best interests of
Conning and its stockholders, and has voted to recommend to the Conning
stockholders acceptance of the tender offer and, if necessary, approval of the
merger agreement. The Conning board of directors recommends that Conning
stockholders tender their shares in the tender offer and, if necessary, approve
the merger agreement.
CONDITIONS
We are not required to complete the tender offer unless enough Conning
shares are validly tendered and not withdrawn prior to the expiration of the
tender offer so that, including the Conning shares we already own, we would
control at least two-thirds of the outstanding Conning shares.
Other conditions to the tender offer are described on pages 41 through 43.
The tender offer is not conditioned on MetLife obtaining financing.
ii
<PAGE> 4
PROCEDURES FOR TENDERING
If you wish to accept the tender offer, you must do the following:
- If you are a record holder (i.e., a stock certificate has been issued to
you), you must either complete and sign the enclosed letter of
transmittal and send it with your stock certificate to the depositary for
the tender offer, ChaseMellon Shareholder Services, L.L.C., or follow the
procedures described in this document for book-entry transfer. These
materials must reach the depositary before the tender offer expires.
Detailed instructions are contained in the letter of transmittal and on
pages 23 through 25 of this document.
- If you are a record holder but your stock certificate is not available or
you cannot deliver it to the depositary before the offer expires, you may
be able to tender your Conning shares using the enclosed notice of
guaranteed delivery. Please call our information agent, MacKenzie
Partners, Inc., at 800-322-2885 for assistance. See page 24 for further
details.
- If you hold your Conning shares through a broker or bank, you should
instruct your broker or bank to tender your Conning shares.
WITHDRAWAL RIGHTS
If, after tendering your Conning shares in the tender offer, you decide
that you do NOT want to accept the tender offer, you can withdraw your Conning
shares by so instructing the depositary before the tender offer expires. If you
tendered by giving instructions to a broker or bank, you must instruct the
broker or bank to arrange for the withdrawal of your Conning shares. See pages
25 and 26 for further details.
SUBSEQUENT OFFERING PERIOD
- We may give stockholders who do not tender in the tender offer another
opportunity to tender at the same price in a subsequent offering period.
However, if there are tendered and not withdrawn enough Conning shares so
that, including the Conning shares we already own, we would control at
least 90% of the outstanding Conning shares, there will not be a
subsequent offering period. Instead, we will complete the merger as soon
as possible after the tender offer expires and without a vote of Conning
stockholders, as permitted under Missouri law. Conning stockholders who
had not previously tendered their shares will receive the same price per
share upon completion of the merger.
- The subsequent offering period, if any, will begin on the day we announce
that we have purchased Conning shares in the offer and last for three to
20 business days. We may extend the subsequent offering period, but it
will not last more than 20 business days in total.
- There will be no withdrawal rights in the subsequent offering period.
RECENT CONNING TRADING PRICES; SUBSEQUENT TRADING
- The average of the closing prices for Conning shares over the 20 trading
days immediately before we publicly announced on January 18, 2000 the
proposal to acquire Conning was $8.68 per share.
- The closing price for Conning shares was:
- $9.56 per share on January 14, 2000, the last trading day before we
announced the proposal to acquire Conning, and
- $12.31 per share on March 17, 2000, the last trading day before the
printing of these materials.
- Before deciding whether to tender, you should obtain a current market
quotation for Conning shares.
iii
<PAGE> 5
FURTHER INFORMATION
If you have questions about the offer, you can call:
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Our Information Agent:
MacKenzie Partners, Inc.
Banks and Brokers Call Collect: (212) 929-5500
All others Call Toll Free: (800) 322-2885
or our Dealer Manager:
Credit Suisse First Boston Corporation
Call Toll Free: (800) 646-4543
</TABLE>
iv
<PAGE> 6
To: All Holders of Shares of Common Stock of Conning Corporation
INTRODUCTION
CC Merger Sub Inc. ("Purchaser"), an indirect wholly owned subsidiary of
Metropolitan Life Insurance Company, or MetLife, is offering to purchase all
outstanding shares of common stock, par value $0.01 per share, of Conning
Corporation at a purchase price of $12.50 per share, net to the seller in cash
(less any required withholding taxes), without interest, upon the terms and
subject to the conditions set forth in this offer to purchase and in the related
letter of transmittal (which, together, constitute the tender offer). As used in
this document, the term "tender offer" includes any subsequent offering period,
as described in Section 1.
Stockholders of record who hold Conning shares registered in their name and
tender the Conning shares directly to ChaseMellon Shareholder Services, L.L.C.
(the "Depositary") will not be required to pay brokerage fees or commissions or,
except as described in Instruction 6 of the letter of transmittal, stock
transfer taxes on the sale of Conning shares in the tender offer. Stockholders
who hold their Conning shares through a bank or broker should check with such
institution as to whether they will be charged any service fees. However, if you
do not complete and sign the Substitute Form W-9 included in the letter of
transmittal, you may be subject to a required backup United States federal
income tax withholding of 31% of the gross proceeds payable to you. See Section
3. We will pay all charges and expenses of Credit Suisse First Boston
Corporation, as Dealer Manager ("Credit Suisse First Boston" or the "Dealer
Manager"), the Depositary, and MacKenzie Partners, Inc., as Information Agent
(the "Information Agent"), incurred in connection with the tender offer. See
Section 14.
THE CONNING SPECIAL COMMITTEE, CONSISTING OF THE SOLE DIRECTOR ON THE
CONNING BOARD OF DIRECTORS WHO WAS NEITHER AN OFFICER OF CONNING NOR AN OFFICER
OF METLIFE, HAS DETERMINED THAT THE TENDER OFFER AND THE MERGER ARE FAIR TO,
ADVISABLE AND IN THE BEST INTERESTS OF CONNING AND ITS STOCKHOLDERS, AND HAS
RECOMMENDED TO THE CONNING BOARD OF DIRECTORS THAT IT RECOMMEND TO THE CONNING
STOCKHOLDERS ACCEPTANCE OF THE TENDER OFFER AND, IF NECESSARY, APPROVAL OF THE
MERGER AGREEMENT. THE CONNING BOARD OF DIRECTORS HAS DETERMINED, BASED UPON THE
RECOMMENDATION OF THE CONNING SPECIAL COMMITTEE AND OTHER CONSIDERATIONS, THAT
THE TENDER OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS
OF CONNING AND ITS STOCKHOLDERS, AND HAS VOTED TO RECOMMEND TO THE CONNING
STOCKHOLDERS ACCEPTANCE OF THE TENDER OFFER AND, IF NECESSARY, APPROVAL OF THE
MERGER AGREEMENT. THE CONNING BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
TENDER THEIR CONNING SHARES IN THE TENDER OFFER AND, IF NECESSARY, APPROVE THE
MERGER AGREEMENT.
We are not required to purchase any Conning shares unless enough Conning
shares are validly tendered and not withdrawn prior to the expiration of the
tender offer so that, including the Conning shares we already own, we would
control at least two-thirds of the outstanding Conning shares (the "Minimum
Condition"). We reserve the right (subject to the applicable rules and
regulations of the Securities and Exchange Commission), which we presently have
no intention of exercising, to waive the Minimum Condition and to elect to
purchase a smaller number of Conning shares. The tender offer is also subject to
certain other terms and conditions. See Sections 1, 9, and 12.
We are making the tender offer under the Agreement and Plan of Merger, by
and among MetLife, Purchaser and Conning, dated as of March 9, 2000. Following
the completion of the tender offer and the satisfaction or waiver of certain
conditions, Conning will merge with Purchaser. Conning will continue as the
surviving corporation. In the merger, each outstanding Conning share that is not
controlled by us (other than Conning shares held by stockholders who perfect and
do not withdraw or otherwise lose their appraisal rights under Missouri law)
will be converted into the right to receive the merger consideration, which will
be $12.50 net in cash or any higher price paid per Conning share in the tender
offer. Section 9 contains a description of the merger agreement.
Salomon Smith Barney Inc. ("Salomon Smith Barney"), financial advisor to
the Conning special committee, delivered to the Conning special committee a
written opinion that, as of the date of the merger
<PAGE> 7
agreement, the consideration of $12.50 per Conning share to be received by the
stockholders of Conning, other than MetLife and its affiliates, in the tender
offer was fair to the Conning stockholders from a financial point of view. A
copy of the Salomon Smith Barney opinion is included with Conning's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
with this offer to purchase; stockholders are urged to read the opinion in its
entirety for a description of the assumptions made, matters considered and
limitations of the review undertaken by Salomon Smith Barney. Salomon Smith
Barney's advisory services and opinion were provided for the information of the
Conning special committee in its evaluation of the tender offer and the merger
and the opinion is not intended to be, nor does it constitute a recommendation
to any Conning stockholder as to whether such holder should tender Conning
shares in the tender offer or vote in favor of the merger, if applicable.
Approval of the merger requires the affirmative vote of the holders of at
least two-thirds of the outstanding Conning shares. As a result, if the Minimum
Condition and the other conditions to the tender offer are satisfied and the
tender offer is completed, we will own a sufficient number of Conning shares to
ensure that the merger will be approved by Conning stockholders. See Sections 9
and 12.
If, pursuant to the tender offer, we acquire enough Conning shares so that,
including the Conning shares we already own, we control at least 90% of the
outstanding Conning shares, it will not be necessary under Missouri law to hold
a meeting of Conning stockholders to approve the merger.
To MetLife's knowledge after making reasonable inquiry, all of the
individuals listed on Schedule I to this offer to purchase and all of the
executive officers, directors and affiliates of Conning who own or hold Conning
shares currently intend to tender their Conning shares (other than Conning
shares that they have the right to purchase by exercising stock options and
Conning shares that, if tendered, would cause them to incur liability under the
short-swing-profits provisions of the Securities Exchange Act of 1934, as
amended) to MetLife in the tender offer. To MetLife's knowledge after making
reasonable inquiry, none of the individuals listed on Schedule I to this offer
to purchase and none of the executive officers and affiliates of Conning, except
those officers who serve on the Conning board of directors, has made a
recommendation either in support of or opposed to the transaction.
Conning has informed us that, as of March 3, 2000, there were 13,753,359
Conning shares issued and outstanding and 2,185,713 Conning shares reserved for
issuance upon the exercise of outstanding stock options.
THE TENDER OFFER IS CONDITIONED UPON THE FULFILLMENT OF THE CONDITIONS
DESCRIBED IN SECTION 12. THE INITIAL OFFERING PERIOD OF THE TENDER OFFER WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 17, 2000, UNLESS
WE EXTEND IT.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION. YOU SHOULD READ THEM CAREFULLY BEFORE YOU MAKE ANY
DECISION WITH RESPECT TO THE TENDER OFFER.
SPECIAL FACTORS
I. BACKGROUND OF THE TENDER OFFER AND THE MERGER AGREEMENT
On January 6, 2000, MetLife acquired indirect beneficial ownership of
8,304,995 Conning shares when it purchased from General American Mutual Holding
Company, a Missouri mutual insurance holding company, all of the issued and
outstanding shares of capital stock of GenAmerica Corporation. GenAmerica owns
all of the issued and outstanding shares of capital stock of General American
Life Insurance Company, which owns all of the issued and outstanding shares of
capital stock of GenAm Holding Company, which is the record owner of the
8,304,995 Conning shares. These Conning shares represent approximately 60.4% of
the outstanding Conning shares, based upon the number of outstanding Conning
shares represented to us by Conning in the merger agreement. MetLife paid $1.2
billion for the capital stock of GenAmerica. The address of the principal office
of each of GenAmerica, General American Life Insurance and GenAm Holding is 700
Market Street, St. Louis, Missouri 63101.
2
<PAGE> 8
Subsequent to the acquisition of GenAmerica, MetLife decided that it would
be in the best interests of MetLife and its policyholders if MetLife acquired
the outstanding Conning shares that it did not already control through
GenAmerica. On the afternoon of January 14, 2000, MetLife submitted a proposal
letter to the Conning board of directors. This letter set forth MetLife's
initial proposal to acquire all of the outstanding Conning shares not already
controlled by MetLife for $10.50 per share in cash. MetLife also informed the
Conning board of directors that it had retained Credit Suisse First Boston to
act as its financial advisor in connection with the proposal.
MetLife issued a press release the next business day, which was January 18,
2000, announcing that it had made the proposal. This press release also
announced that MetLife would assume investment management responsibility over
the general account assets of General American Life Insurance, which Conning was
managing at the time. As of December 31, 1999, these general account assets had
a market value of approximately $5.8 billion. In 1999, Conning received
approximately $6.8 million in fees for providing investment management services
with respect to these assets. MetLife's general policy is to manage its own
general account assets and the general account assets of its insurance
subsidiaries, rather than to retain the services of third-party asset managers
such as Conning. See Section 8. Conning issued a press release announcing that
it had received the proposal letter. A copy of MetLife's press release is
attached as Exhibit (a)(7) to the Tender Offer Statement on Schedule TO (the
"Schedule TO"), and a copy of the proposal letter is attached as Exhibit (a)(6)
to the Schedule TO.
On January 21, 2000, the Conning board of directors met to discuss the
MetLife proposal letter. The Conning board of directors established the Conning
special committee, consisting of John A. Fibiger, the sole director who was
neither an officer of Conning nor an officer of MetLife, for the purpose of
considering, evaluating and negotiating the proposed transaction with MetLife on
behalf of the minority shareholders and making a recommendation to the Conning
board of directors. The Conning board of directors also authorized the Conning
special committee to retain, at the expense of Conning, independent financial
and legal advisors.
On January 24, 2000, the Conning special committee spoke with
representatives of Salomon Smith Barney and the Conning special committee's
independent legal counsel. Both Salomon Smith Barney and such legal counsel had
been retained by a previous special committee of the Conning board of directors
in connection with MetLife's acquisition of GenAmerica. Salomon Smith Barney
advised the Conning special committee that Salomon Smith Barney and its
predecessors and affiliates previously have provided and currently are providing
investment banking services to MetLife and its affiliates unrelated to the offer
and the merger. The Conning special committee nevertheless decided to continue
to use Salomon Smith Barney as its financial advisor. The Conning special
committee determined that other eligible firms were likely to have financial
relationships with MetLife that are comparable to those of Salomon Smith Barney
and that choosing a firm other than Salomon Smith Barney, one less familiar with
Conning, would delay the process of considering, evaluating and negotiating the
proposed transaction with MetLife.
On January 27, 2000, the Conning special committee met with representatives
of Salomon Smith Barney and the Conning special committee's legal counsel. The
Conning special committee's legal counsel reviewed the responsibilities and
legal duties of the Conning special committee. Salomon Smith Barney presented
its preliminary valuation analysis of Conning. The special committee concluded
that better terms, including a higher price per share, should be sought from
MetLife. The special committee then directed legal counsel to pursue discussions
on the status of a draft merger agreement and to facilitate the initiation of a
dialogue between Salomon Smith Barney and Credit Suisse First Boston.
On February 2, 2000, special legal counsel to MetLife delivered a draft
merger agreement to counsel for the Conning special committee and Conning.
On February 4, 2000, representatives of Credit Suisse First Boston and
Salomon Smith Barney held a meeting at the offices of Salomon Smith Barney in
New York to discuss possible valuation analyses of Conning.
3
<PAGE> 9
On February 7 and February 9, 2000, representatives of Credit Suisse First
Boston spoke by phone with Conning's management and representatives of Salomon
Smith Barney to review Conning's financial projections, which took into account
the assumption by MetLife of investment management responsibility over most of
the general account assets of General American Life Insurance and its insurance
subsidiaries (other than Reinsurance Group of America, Incorporated ("RGA")).
Between February 9 and February 23, 2000, representatives of Salomon Smith
Barney and Credit Suisse First Boston spoke on several occasions to discuss
possible valuation analyses of Conning and Conning's financial projections.
On February 23, 2000, the Conning special committee spoke by phone with
representatives of Salomon Smith Barney and the Conning special committee's
legal counsel. The special committee contemplated developments in the process to
date, valuation considerations and next steps in the negotiating process with
MetLife. The special committee instructed its legal counsel and Salomon Smith
Barney to pursue negotiations with their respective MetLife counterparts.
On February 24 and February 25, 2000, representatives of Salomon Smith
Barney and Credit Suisse First Boston held conference calls to discuss Conning's
financial projections and possible valuation analyses of Conning.
On February 25, 2000, representatives of MetLife's financial and legal
advisors spoke with the Conning special committee's financial and legal advisors
to discuss MetLife's perspective on Conning's valuation in light of the Conning
management projections and MetLife's own internal analysis of Conning's
business. As part of these discussions, MetLife's financial and legal advisors
and the Conning special committee's financial and legal advisors met to discuss
various alternatives. During these discussions, Salomon Smith Barney, on behalf
of the Conning special committee, attempted to negotiate a higher price in the
tender offer and the merger. Additional information was sent to Credit Suisse
First Boston. The negotiations eventually resulted in MetLife increasing its
offer to $12.50 per share.
Between February 26, 2000 and March 9, 2000, MetLife, Conning and the
Conning special committee, and their respective counsel, negotiated the terms of
the definitive merger agreement.
On February 27, 2000, the Conning special committee spoke by telephone with
representatives of Salomon Smith Barney and the Conning special committee's
legal counsel to review the results of negotiations, the timing of completing
the negotiation process and possible public announcements regarding related
developments.
On March 2, 2000, the Conning special committee met with representatives of
Salomon Smith Barney and the Conning special committee's legal counsel. Salomon
Smith Barney presented its financial analysis regarding MetLife's current
proposal and gave its oral opinion that, as of March 2, 2000, a $12.50 offer
price was fair, from a financial point of view, to Conning's stockholders other
than MetLife and its affiliates. The Conning special committee's legal counsel
reviewed the legal issues in connection with the draft merger agreement and the
status of related stockholder litigation.
On March 9, 2000, the Conning special committee met with representatives of
Salomon Smith Barney and the Conning special committee's legal counsel to review
remaining issues in the merger negotiations. Salomon Smith Barney confirmed that
its fairness opinion regarding the terms of the proposed merger with MetLife had
not changed since it presented to the Conning special committee on March 2,
2000. Subject to an acceptable outcome in the negotiation of final terms of the
merger agreement, the special committee (a) determined that the tender offer and
proposed merger are fair to, advisable and in the best interests of Conning and
its stockholders, (b) approved the offer and the merger, (c) recommended that
the Conning board accept the tender offer and approve the merger agreement, and
(d) recommended that the Conning board recommend acceptance of the tender offer
and approval of the merger agreement by Conning's stockholders.
4
<PAGE> 10
Immediately following the meeting of the Conning special committee with its
financial and legal advisors on March 9, 2000, the Conning board of directors
met and received presentations from Conning's counsel and Salomon Smith Barney
and received the recommendation of the Conning special committee. By unanimous
vote, other than Richard A. Liddy who abstained because he is an officer of
MetLife and of an affiliate of MetLife, the Conning board of directors then (a)
determined that each of the tender offer and the merger was fair to, advisable
and in the best interests of Conning and its stockholders (other than MetLife
and its affiliates), (b) voted to recommend to the Conning stockholders
acceptance of the tender offer and, if necessary, approval of the merger
agreement, and (c) recommended that Conning stockholders tender their Conning
shares in the tender offer and, if necessary, approve the merger agreement.
Throughout the period between January 24, 2000 and March 9, 2000, the
Conning special committee regularly consulted with and directed, as appropriate,
the Conning special committee's legal counsel and Salomon Smith Barney on
developments in the negotiations relating to the proposed tender offer and
merger.
On March 9, 2000, MetLife, Purchaser and Conning entered into the merger
agreement. MetLife and Conning also issued a joint press release prior to the
commencement of trading in Conning shares, which release announced the execution
of the merger agreement and the impending tender offer. A copy of this press
release is included as Exhibit (a)(8) to the Schedule TO and is incorporated
herein by reference.
II. PURPOSE OF, ALTERNATIVE TO, REASONS FOR AND EFFECTS OF THE TENDER OFFER AND
THE MERGER
PURPOSE, ALTERNATIVE AND REASONS. The purpose of the tender offer and the
merger is to enable MetLife to acquire control of the entire equity interest in
Conning. MetLife's current intention is to retain the Conning shares that it
acquires in the tender offer and the merger. If the tender offer and the merger
are completed, Conning will merge with Purchaser. Conning will continue as the
surviving corporation. MetLife has no current plan or proposal to sell the
Conning shares that it acquires in the tender offer. However, from time to time,
as conditions warrant, MetLife may dispose of all or any portion of the Conning
shares.
The two-step tender-offer-and-merger structure has been used in lieu of the
alternative one-step merger structure because MetLife believes that the two-step
structure can be completed more quickly than a one-step merger transaction.
MetLife believes that the acquisition of Conning is appropriate at this time
because it will best position Conning to pursue future business and growth
opportunities, maximize the value of Conning and best serve the interests of
Conning and its stockholders.
EFFECTS. When the merger is completed, Conning will be an indirect wholly
owned subsidiary of MetLife. It is MetLife's intention that a majority of the
Conning board of directors will consist of representatives of MetLife.
Following completion of the tender offer and the merger, MetLife's and its
subsidiaries' combined interest in Conning's net book value and net earnings
will increase from approximately 60.4% to 100%. According to Conning's Form 10-K
for the year ended December 31, 1999, 100% of Conning's net book value as of
December 31, 1999 was approximately $95.7 million (which means that 60.4% was
approximately $57.8 million), and 100% of Conning's net income for the year
ended December 31, 1999 was approximately $13.3 million (which means that 60.4%
was approximately $8.0 million). MetLife and its subsidiaries will be entitled
to all of the benefits of owning 100% of Conning, including all income generated
by Conning's operations, any future increase in Conning's value and the right to
elect all members of the Conning board of directors. Similarly, MetLife will
also bear the risk of losses resulting from Conning's operations and from any
decline in the value of Conning after the merger.
Following completion of the tender offer and the merger, MetLife will cause
Conning's common stock to be delisted from the NASDAQ and Conning will be a
privately held corporation. Accordingly, current Conning stockholders who are
not affiliated with MetLife will not have the opportunity to participate in the
earnings and growth of Conning and will not have any right to vote on corporate
matters. Similarly,
5
<PAGE> 11
after completion of the merger, former stockholders will not face the risk of
losses resulting from Conning's operations or from any decline in the value of
Conning.
MATERIAL UNITED STATES FEDERAL INCOME TAX EFFECTS. Your receipt of cash
for Conning shares in the tender offer or the merger will be a taxable
transaction for United States federal income tax purposes and may also be a
taxable transaction under applicable state, local, foreign and other tax laws.
For United States federal income tax purposes, if you sell or exchange your
Conning shares in the tender offer or the merger, you would generally recognize
gain or loss equal to the difference between the amount of cash received and
your tax basis for the Conning shares that you sold or exchanged. That gain or
loss will be capital gain or loss (assuming you hold your Conning shares as a
capital asset), and any such capital gain or loss will be long term if, as of
the date of sale or exchange, you have held the Conning shares for more than one
year or will be short term if, as of such date, you have held the Conning shares
for one year or less.
The discussion above may not be applicable to certain types of
stockholders, including stockholders who acquired Conning shares through the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States, foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (such as insurance companies, tax-exempt
entities and regulated investment companies).
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE TENDER OFFER AND MERGER,
INCLUDING UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES.
III. FAIRNESS OF THE TENDER OFFER AND THE MERGER
MetLife and Purchaser believe that the consideration to be received in the
tender offer and the merger by the Conning stockholders that are unaffiliated
with MetLife is fair to those stockholders. MetLife and Purchaser base their
belief on the following:
- after a thorough review with independent financial and legal advisors,
the Conning special committee concluded that the tender offer and the
merger are fair to, advisable and in the best interests of Conning and
its stockholders, and approved the tender offer and the merger agreement;
- based upon the recommendation of the Conning special committee and other
considerations, the Conning board of directors, other than Richard A.
Liddy who abstained because of his positions as an officer of MetLife and
of a MetLife subsidiary, determined that the tender offer and the merger
are fair to, advisable and in the best interests of Conning stockholders,
and unanimously approved the tender offer and the merger agreement;
- on March 9, 2000, the Conning special committee received a written
fairness opinion from Salomon Smith Barney that, subject to the various
assumptions and limitations set forth in that opinion, as of the date
thereof, the $12.50 per Conning share in cash to be received by Conning
stockholders in the tender offer and the merger was fair to Conning
stockholders (other than MetLife or Conning and their respective wholly
owned subsidiaries) from a financial point of view;
- for over six weeks, the merger agreement was negotiated at arm's length
with the Conning special committee, which acted independently, with the
assistance of financial and legal advisors and on behalf of Conning
stockholders unaffiliated with MetLife;
- Conning's historical financial performance and MetLife's projections of
Conning's future financial performance, which take into account MetLife's
assumption of investment management responsibility over the general
account assets of General American Life Insurance;
- Conning's business and earnings prospects, near- and long-term business
risks, the competitive business environment in which Conning operates and
business and valuation trends in Conning's industry;
6
<PAGE> 12
- the cash consideration of $12.50 per share to be paid in the tender offer
and the merger represents (a) a premium of approximately 30.7% above the
closing price of Conning shares on the last trading day before MetLife
announced its initial proposal to acquire Conning, (b) a premium of
approximately 44.0% above the average of the closing prices for Conning
shares over the 20 trading days immediately before we publicly announced
the proposal to acquire Conning, and (c) a premium of approximately 48.1%
above the closing price for Conning shares on each of December 14, 15 and
16, 1999, approximately one month before MetLife announced its initial
proposal to acquire Conning;
- the structure of the transaction is designed to result in Conning
stockholders, other than MetLife and its affiliates, receiving the
consideration in the tender offer and the merger at the earliest possible
time; and
- MetLife's internally prepared financial analysis, which included a review
of comparable current market prices and historical comparable transaction
prices of Conning's peer group, as well as a discounted cash flow
analysis, to determine the value of Conning shares.
MetLife and Purchaser did not find it practicable to assign, nor did they
assign, relative weights to the individual factors considered in reaching their
conclusion as to fairness. In light of the nature of Conning's business, MetLife
and Purchaser did not deem net book value or liquidation value to be relevant
indicators of the value of Conning shares. The merger can be completed without
the approval of a majority of the Conning stockholders that are unaffiliated
with MetLife.
IV. REPORTS, OPINIONS AND APPRAISALS
OPINION OF SALOMON SMITH BARNEY. Salomon Smith Barney was retained to act
as financial advisor to the Conning special committee in connection with, among
other things, the proposed acquisition by MetLife of the outstanding Conning
shares owned by stockholders not affiliated with MetLife. Pursuant to Salomon
Smith Barney's engagement letter with the independent directors of Conning,
dated August 16, 1999, Salomon Smith Barney rendered an oral opinion to the
special committee on March 2, 2000, which opinion was confirmed in writing on
March 9, 2000, to the effect that, based upon and subject to the considerations
and limitations set forth in the opinion, its work described below and other
factors it deemed relevant, as of that date, the tender offer price was fair,
from a financial point of view, to the holders of Conning shares other than
MetLife and its affiliates.
The full text of Salomon Smith Barney's opinion, which sets forth the
assumptions made, general procedures followed, matters considered and limits on
the review undertaken, is included as Exhibit (c)(1) to the Schedule TO. A copy
of the Salomon Smith Barney opinion is available for inspection and copying by
any holder of Conning shares or any representative of such holder who has been
so designated in writing, at the principal executive offices of Conning during
normal business hours. The summary of Salomon Smith Barney's opinion set forth
below is qualified in its entirety by reference to the full text of the opinion.
STOCKHOLDERS ARE URGED TO READ SALOMON SMITH BARNEY'S OPINION CAREFULLY AND IN
ITS ENTIRETY.
In arriving at its opinion, Salomon Smith Barney reviewed a draft of the
merger agreement, dated March 7, 2000, and held discussions with certain senior
officers, directors and other representatives and advisors of Conning concerning
the businesses, operations and prospects of Conning. Salomon Smith Barney
examined publicly available business and financial information relating to
Conning, as well as financial forecasts and other information and data for
Conning that were provided to or otherwise discussed with Salomon Smith Barney
by the management of Conning. Salomon Smith Barney reviewed the financial terms
of the tender offer and the merger as set forth in the merger agreement in
relation to, among other things:
- current and historical market prices and trading volumes of Conning
shares;
- the historical and projected earnings and other operating data of
Conning; and
- the capitalization and financial condition of Conning.
7
<PAGE> 13
Salomon Smith Barney also considered, to the extent publicly available, the
financial terms of other similar transactions recently effected that Salomon
Smith Barney considered relevant in evaluating the tender offer and the merger
and analyzed financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon Smith
Barney considered relevant in evaluating those of Conning. In addition, Salomon
Smith Barney conducted such other analyses and examinations and considered such
other information and financial, economic and market criteria as it deemed
appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with it, Salomon Smith Barney was advised by the management of Conning
that such forecasts and other information and data had been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of Conning as to the future financial performance of Conning.
Salomon Smith Barney did not make and was not provided with an independent
evaluation or appraisal of Conning's assets or liabilities (contingent or
otherwise) nor did Salomon Smith Barney make any physical inspection of
Conning's properties or assets. Representatives of Conning advised Salomon Smith
Barney, and Salomon Smith Barney assumed, that the final terms of the definitive
merger agreement would not vary materially from those set forth in the draft
reviewed by Salomon Smith Barney. Salomon Smith Barney noted that MetLife and
its affiliates hold approximately 60.4% of the outstanding Conning shares, and
that MetLife had indicated that it is not interested, under any circumstances,
in selling its interest in Conning. Accordingly, Salomon Smith Barney was not
requested to, and did not, solicit third-party indications of interest in the
possible acquisition of all or part of Conning, nor was it requested to
consider, and its opinion did not address, the relative merits of the tender
offer and the merger as compared to any alternative business strategies that
might exist for Conning or the effect of any other transaction in which Conning
might engage.
In addition, Salomon Smith Barney noted that MetLife had stated its
intention to terminate certain business relationships that General American Life
Insurance and its insurance subsidiaries have with Conning and had begun the
process of doing so. In arriving at its opinion, Salomon Smith Barney took into
account the prospective effect on Conning's revenues, cash flow and earnings of
such termination of business and other potential loss of business derived from
Conning's relationship with MetLife and its affiliates.
Salomon Smith Barney's opinion necessarily was based on information
available to it, and financial, stock market and other conditions and
circumstances existing and disclosed to Salomon Smith Barney as of the date of
the opinion.
SALOMON SMITH BARNEY'S ADVISORY SERVICES AND OPINION WERE PROVIDED FOR THE
INFORMATION OF THE CONNING SPECIAL COMMITTEE IN ITS EVALUATION OF THE TENDER
OFFER AND THE MERGER AND THE OPINION IS NOT INTENDED TO BE, NOR DOES IT
CONSTITUTE, A RECOMMENDATION TO ANY HOLDER OF CONNING SHARES AS TO WHETHER SUCH
HOLDER SHOULD TENDER CONNING SHARES IN THE TENDER OFFER OR VOTE IN FAVOR OF THE
MERGER, IF APPLICABLE.
In connection with rendering its opinion, Salomon Smith Barney made a
presentation to the Conning special committee on March 2, 2000 with respect to
the material analyses performed by Salomon Smith Barney in evaluating the
fairness of the offer price. The following is a summary of this presentation. In
connection with confirming its opinion in writing on March 9, 2000, Salomon
Smith Barney updated internally certain of the analyses performed in connection
with its oral opinion delivered on March 2, 2000. The following summary of
financial analyses includes information presented in tabular format. IN ORDER TO
UNDERSTAND FULLY THE FINANCIAL ANALYSES USED BY SALOMON SMITH BARNEY, THESE
TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO
NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. The following
quantitative information, to the extent it is based on market data, is,
8
<PAGE> 14
except as otherwise indicated, based on market data as it existed at or prior to
February 25, 2000, and is not necessarily indicative of current or future market
conditions.
In performing its financial analyses, Salomon Smith Barney relied on
certain assumptions, financial forecasts and other information provided by
management of Conning in order to evaluate Conning's expected future operating
performance. Two sets of financial projections were used in Salomon Smith
Barney's financial analyses:
- Management Projections -- Reflects Conning's future operating performance
as prepared by Conning's senior management after taking into account the
announced termination of certain business relationships with General
American Life Insurance and its insurance subsidiaries ("Management
Projections").
- Sensitivity Analysis -- Reflects Conning's future operating performance
as prepared by Conning's senior management and adjusted for other
potential loss of business derived from Conning's relationship with
General American Life Insurance and its insurance subsidiaries in
addition to the loss taken into account under the definition of
Management Projections ("Sensitivity Analysis").
* * *
TRANSACTION SUMMARY. Salomon Smith Barney reviewed the terms of the tender
offer and noted that the offer price of $12.50 per share resulted in an implied
value of $171.9 million for 100% of the Conning shares issued and outstanding
and an implied value of $68.1 million for the outstanding Conning shares not
owned by MetLife and its affiliates. Salomon Smith Barney also noted that the
offer price per share represented:
- a multiple of 11.2x year 2000 estimated earnings per share for Conning
published by I/B/E/S International, Inc. ("IBES") as of February 25,
2000;
- a multiple of 13.4x year 2000 estimated earnings per share based on the
Management Projections;
- a multiple of 17.3x year 2000 estimated earnings per share based on the
Sensitivity Analysis;
- a discount of 33.3% to Conning's 52-week high price of $18.75 per share;
- a premium of 85.2% to Conning's 52-week low price of $6.75 per share;
- a premium of 30.7% to the $9.5625 price per Conning share one day prior
to MetLife's initial offer of $10.50 per share on January 18, 2000; and
- a premium of 48.1% to the $8.4375 price per Conning share on December 16,
1999, approximately one month prior to MetLife's initial offer.
HISTORICAL TRADING AND RELATIVE PRICE PERFORMANCE ANALYSIS. Salomon Smith
Barney reviewed the daily closing prices and trading volume for Conning shares
during the period from December 17, 1997 (the date of Conning's initial public
offering) through February 25, 2000, with particular emphasis on Conning's
trading history for the period from July 29, 1999 through February 25, 2000.
Salomon Smith Barney compared the daily closing price of Conning shares for
the period from December 17, 1997 through February 25, 2000 with the trading
performance of:
- an index of six publicly traded asset managers comprised of Federated
Investors, Inc., BlackRock, Inc., The John Nuveen Company, Affiliated
Managers Group, Inc., United Asset Management Corp. and Gabelli Asset
Management Inc. (the "Asset Managers");
- the Standard & Poor's 500 Stock Index; and
- the Russell 2000 Index.
RELATIVE PRICE TO FORWARD EARNINGS RATIO ANALYSIS. Salomon Smith Barney
compared, for the period from December 17, 1997 through February 25, 2000, the
multiples of closing prices of Conning
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<PAGE> 15
shares to IBES estimated 12 month forward earnings per share with the average
multiples of closing prices of the Asset Managers to IBES estimated forward
earnings per share over the same period.
MORTGAGE BUSINESS RELATIVE PRICE PERFORMANCE. Salomon Smith Barney noted
that Conning derives a sizable portion of its revenue from a mortgage-related
business. Salomon Smith Barney compared, for the period from December 17, 1997
through February 25, 2000, the trading performance of the Asset Managers with
the performance of:
- an index of three publicly traded residential mortgage banks comprised of
Countrywide Credit Industries, Inc., Irwin Financial Corporation and
Resource Bancshares Mortgage Group, Inc.;
- an index of six publicly traded mortgage Real Estate Investment Trusts
comprised of Indymac Mortgage Holdings, Inc., Anthracite Capital, Inc.,
Redwood Trust, Inc., Amresco, Inc., Resource Asset Investment Trust and
Laser Mortgage Management, Inc. (the "REIT Group"); and
- the Standard & Poor's 500 Stock Index.
ANALYSIS OF HISTORICAL OPERATING PERFORMANCE. Salomon Smith Barney
analyzed Conning's historical operating performance, affiliated and unaffiliated
assets under management and the associated revenue and pre-tax income for each
year from 1996 through 1999. Salomon Smith Barney also reviewed the same
information for each quarter in 1999 to assess the relative growth of affiliated
and unaffiliated assets under management and the associated revenue and pre-tax
income. Salomon Smith Barney also reviewed the ratios of pre-tax income to
revenue and pre-tax income to average assets under management with respect to
Conning's affiliated and unaffiliated assets under management.
Salomon Smith Barney compared certain operating statistics for Conning with
those of the Asset Managers. In addition, Salomon Smith Barney noted that the
average ratio of stock price to IBES estimated forward net income for Conning
declined from 19.4x in 1998 to 14.1x for the period January 1, 1999 to August 9,
1999 as compared to a decline of 19.2x in 1998 to 16.9x for the Asset Managers
over the same period.
Salomon Smith Barney also compared Conning's client base (institutional
versus retail) and type of assets under management (equity versus fixed-income
and domestic versus international) with the client base and type of assets under
management for each of the Asset Managers.
COMPONENT VALUATION ANALYSIS. Salomon Smith Barney derived implied
valuation ranges per Conning share by applying ranges of multiples of share
price to year 2000 estimated net income derived from Conning's different
business lines using both the Management Projections and the Sensitivity
Analysis as set forth in the following table:
<TABLE>
<CAPTION>
ESTIMATED AS OF 2/25/00
YEAR 2000 NET PRICE/YEAR 2000
INCOME PER MULTIPLE MEDIAN IMPLIED
BUSINESS LINE SHARE VALUATION (+/- 10%) VALUATION RANGE
- ------------- ------------- ------------------- ---------------
<S> <C> <C> <C>
MANAGEMENT PROJECTIONS
Unaffiliated Assets under Management... $0.56 11.6x - 14.2x $6.45 - $ 7.88
Affiliated Assets under Management..... 0.04 11.6 - 14.2 0.52 - 0.64
Mortgage............................... 0.33 4.7 - 5.8 1.59 - 1.94
----- ------------ --------------
Total.................................. $0.93 9.1x - 11.2x $8.55 - $10.46
===== ============ ==============
SENSITIVITY ANALYSIS
Unaffiliated Assets under Management... $0.45 11.6x - 14.2x $5.21 - $ 6.36
Mortgage............................... 0.28 4.7 - 5.8 1.30 - 1.59
----- ------------ --------------
Total.................................. $0.72 9.0x - 11.0x $6.51 - $ 7.96
===== ============ ==============
</TABLE>
Salomon Smith Barney selected the range of multiples of price to year 2000
estimated net income per share for Conning's asset management business based on
a range of multiples derived for the Asset
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<PAGE> 16
Managers and selected the range of multiples for Conning's mortgage business
based on a range of multiples derived for the REIT Group. Salomon Smith Barney
noted that the offer price of $12.50 per share was higher than the ranges of
values suggested by this analysis.
COMPARABLE COMPANY ANALYSIS. Salomon Smith Barney compared certain
financial data for Conning using both the Management Projections and the
Sensitivity Analysis with corresponding financial data for the Asset Managers
based on IBES estimates. Salomon Smith Barney calculated the multiples of
closing share prices as of February 25, 2000 to each of: (a) latest 12 months
net income per share as of December 31, 1999; (b) year 2000 estimated net income
per share; and (c) year 2001 estimated net income per share.
The following table sets forth information concerning the range and median
of multiples for the Asset Managers described above, as well as multiples for
Conning using the Management Projections and the Sensitivity Analysis.
<TABLE>
<CAPTION>
CONNING
ASSET MANAGERS -------------------------
---------------------- MANAGEMENT SENSITIVITY
RANGE MEDIAN PROJECTIONS ANALYSIS
------------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Price to Latest 12 Months Net Income per Share as
of December 31, 1999............................ 10.8x - 20.2x 12.8x 12.9x 16.7x
Price to Year 2000 Estimated Net Income per
Share........................................... 10.0x - 15.1x 12.9x 11.4x 14.8x
Price to Year 2001 Estimated Net Income per
Share........................................... 8.4x - 12.7x 11.2x 9.6x 11.0x
</TABLE>
Salomon Smith Barney then applied the low and median multiples of price to
year 2000 estimated net income for the Asset Managers to derive ranges of
implied prices per Conning share of approximately $9.25 to approximately $12.00
based on the Management Projections and of approximately $7.25 to $9.25 per
share based on the Sensitivity Analysis. Salomon Smith Barney noted that the
offer price of $12.50 per share is higher than the ranges of values suggested by
this analysis.
PREMIUM ANALYSIS. Salomon Smith Barney reviewed the premium to share price
for 95 going-private transactions from January 1, 1995 to February 25, 2000
using both one-month and one-day premiums prior to each announcement. Using the
premiums paid to stock price one-month and one-day prior to announcement for the
25th percentile and 75th percentile of the precedent going-private transactions,
Salomon Smith Barney derived valuation ranges of approximately $9.75 to
approximately $11.75 and approximately $10.75 to $12.50 per Conning share,
respectively.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a three-year
discounted cash flow analysis to establish a range of equity values for Conning
shares. The discounted cash flow was calculated assuming a discount rate of 12%
and net income growth rates ranging from 5.0% to 20.0% for the years 2000 to
2002 and was comprised of the sum of (a) the present value of Conning's
estimated interim cash flows and (b) the fiscal year 2002 terminal value of
Conning based on terminal value multiples ranging from 9.0x to 10.5x year 2002
estimated net income. Based upon the foregoing analysis, and using Management
Projections, this analysis resulted in a valuation range per Conning share of
$8.56 to $13.62. Salomon Smith Barney also performed a discounted cash flow
analysis similar to the one described above using the Sensitivity Analysis. This
analysis resulted in a valuation range per Conning share of $6.93 to $10.96.
* * *
The preceding discussion is a summary of the material financial analyses
furnished by Salomon Smith Barney to the Conning special committee, but it does
not purport to be a complete description of the analyses performed by Salomon
Smith Barney or of its presentation to the Conning special committee. The
preparation of financial analyses and fairness opinions is a complex process
involving subjective judgments, and is not necessarily susceptible to partial
analysis or summary description. Salomon Smith Barney made no attempt to assign
specific weights to particular analyses or factors considered, but, rather, made
qualitative judgments as to the significance and relevance of all the analyses
and factors considered
11
<PAGE> 17
and determined to give its fairness opinion as described above. Accordingly,
Salomon Smith Barney believes that its analyses, and the summary set forth
above, must be considered as a whole, and that selecting portions of the
analyses and of the factors considered by Salomon Smith Barney, without
considering all of the analyses and factors, could create a misleading or
incomplete view of the processes underlying the analyses conducted by Salomon
Smith Barney and its opinion. With regard to the comparable companies analyses
summarized above Salomon Smith Barney selected comparable public companies on
the basis of various factors, including the size and similarity of the line of
business; however, no company utilized as a comparison in these analyses
summarized above is identical to Conning. As a result, these analyses are not
purely mathematical, but also take into account differences in financial and
operating characteristics of the subject companies and other factors that could
affect the public trading value of the subject companies to which Conning is
being compared. In its analyses, Salomon Smith Barney made numerous assumptions
with respect to Conning, industry performance, general business, economic,
market and financial conditions, and other matters, many of which are beyond the
control of Conning. Any estimates contained in Salomon Smith Barney's analyses
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than those
suggested by these analyses. Estimates of values of companies do not purport to
be appraisals or necessarily to reflect the prices at which companies may
actually be sold. Because these estimates are inherently subject to uncertainty,
none of Conning, the Conning special committee, the Conning board of directors,
Salomon Smith Barney or any other person assumes responsibility if future
results or actual values differ materially from the estimates. Salomon Smith
Barney's analyses were prepared solely as part of Salomon Smith Barney's
analysis of the fairness of the offer price and were provided to the Conning
special committee in that connection. The opinion of Salomon Smith Barney was
only one of the factors taken into consideration by the Conning special
committee in making its determination to recommend that the Conning board of
directors approve the tender offer and the merger. The opinion of Salomon Smith
Barney was not intended to be and does not constitute a recommendation to any
holder of Conning shares as to whether any such holder should tender Conning
shares in the tender offer or, if applicable, vote in favor of the merger.
Salomon Smith Barney is an internationally recognized investment banking
firm engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Conning special
committee selected Salomon Smith Barney to act as financial advisor to the
Conning special committee on the basis of Salomon Smith Barney's international
reputation and Salomon Smith Barney's familiarity with Conning. Salomon Smith
Barney and its predecessors and affiliates previously have provided and
currently are providing investment banking services to MetLife unrelated to the
offer and the merger, for which Salomon Smith Barney will receive customary
compensation. In particular, Salomon Smith Barney anticipates having a
significant role in the upcoming initial public offering of MetLife, Inc. In the
ordinary course of its business, Salomon Smith Barney and its affiliates may
actively trade or hold the securities of both Conning and MetLife (or its
affiliates) for its own account and for the account of its customers, and,
accordingly, may at any time hold a long or short position in those securities.
Salomon Smith Barney and its affiliates, including Citigroup Inc. and its
affiliates, may maintain relationships with Conning, MetLife and their
respective affiliates.
Pursuant to Salomon Smith Barney's engagement letter, Conning agreed to pay
Salomon Smith Barney approximately $1,000,000 for its services rendered in
connection with the offer and the merger, of which $500,000 has already been
paid by Conning to Salomon Smith Barney. Conning also has agreed to reimburse
Salomon Smith Barney for its reasonable travel and other out-of-pocket expenses
incurred in connection with its engagement, including the reasonable fees and
expenses of its legal counsel up to $50,000, and to indemnify Salomon Smith
Barney against specific liabilities and expenses relating to or arising out of
its engagement, including liabilities under the United States federal securities
laws.
A copy of the Salomon Smith Barney opinion is included as Exhibit (c)(1) to
the Schedule TO. The Salomon Smith Barney opinion is available for inspection
and copying at the principal executive offices of
12
<PAGE> 18
Conning during its regular business hours by any interested Conning stockholder
or representative who has been so designated in writing. A copy of Salomon Smith
Barney's presentation to the Conning special committee on March 2, 2000 is
included as Exhibit (c)(3) to the Schedule TO.
OPINION OF FINANCIAL ADVISOR TO METLIFE. MetLife engaged Credit Suisse
First Boston to act as its financial advisor in connection with the proposed
tender offer and merger. In connection with the engagement, MetLife requested
that Credit Suisse First Boston evaluate the fairness to MetLife, from a
financial point of view, of the aggregate consideration to be paid by MetLife in
the tender offer and the merger. At a meeting of the MetLife board of directors
on March 8, 2000, Credit Suisse First Boston rendered to the MetLife board of
directors its oral opinion (which opinion was confirmed by delivery of a written
opinion dated March 8, 2000) to the effect that, as of such date and based upon
and subject to certain matters stated in the opinion, the aggregate
consideration to be paid by MetLife in the tender offer and the merger was fair
to MetLife from a financial point of view.
CREDIT SUISSE FIRST BOSTON'S OPINION WAS PROVIDED TO THE METLIFE BOARD OF
DIRECTORS. THE OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION
FROM A FINANCIAL POINT OF VIEW TO METLIFE AND DOES NOT ADDRESS THE FAIRNESS OF
THE CONSIDERATION TO CONNING OR THE CONNING STOCKHOLDERS THAT ARE NOT AFFILIATED
WITH METLIFE.
The full text of Credit Suisse First Boston's written opinion dated March
8, 2000 to the MetLife board of directors, which describes the procedures
followed, assumptions made, matters considered and limitations of the review
undertaken, has been filed as Exhibit (c)(2) to the Schedule TO. The summary of
Credit Suisse First Boston's opinion set forth below is qualified in its
entirety by reference to the full text of such opinion.
In arriving at its opinion, Credit Suisse First Boston reviewed certain
publicly available business and financial information relating to Conning, as
well as a recent draft of the merger agreement. Credit Suisse First Boston also
reviewed certain other information, including financial forecasts, provided to
it by MetLife and Conning, and met with the respective managements of MetLife
and Conning to discuss the business and prospects of Conning.
Credit Suisse First Boston also considered certain financial and stock
market data of Conning, and compared those data for Conning with similar data
for other publicly held companies in businesses similar to Conning and
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions that recently have been
effected. Credit Suisse First Boston also considered other information,
financial studies, analyses and investigations and financial, economic and
market criteria which it deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the foregoing
information and relied on such information being complete and accurate in all
material respects. With respect to the financial forecasts, Credit Suisse First
Boston was advised, and assumed, that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of MetLife and Conning as to the future financial
performance of Conning. Credit Suisse First Boston was not requested to make,
and did not make, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Conning, and was not furnished with any
such evaluations or appraisals. Credit Suisse First Boston also assumed, with
the consent of MetLife, that the executed merger agreement and all of the terms
and conditions thereof would conform in all material respects with the draft of
the merger agreement reviewed by Credit Suisse First Boston and that the tender
offer and the merger would be completed on the terms described in such draft.
Credit Suisse First Boston's opinion was necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated on
the date of its opinion.
With respect to outstanding litigation involving Conning, including
litigation relating to the tender offer and the merger, MetLife instructed
Credit Suisse First Boston to rely solely upon the judgment of the management of
Conning and its counsel that the outcome of the litigation will not have a
material adverse effect on the financial condition or results of operations of
Conning.
13
<PAGE> 19
In preparing its opinion for the MetLife board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses set forth below does not purport to be a complete description of the
analyses underlying Credit Suisse First Boston's opinion. The preparation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. In arriving
at its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor considered by it.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the analyses underlying its opinion. In its analyses, Credit
Suisse First Boston considered and made numerous assumptions with respect to
Conning, industry performance, regulatory, general business, economic, market
and financial conditions and other matters. Many of these factors are beyond the
control of MetLife and Conning. No company, transaction or business used in
Credit Suisse First Boston's analyses as a comparison is identical to MetLife or
Conning or the tender offer and the merger, nor is an evaluation of the results
of such analyses entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the acquisition value, public trading value
or other values of the companies, their business segments or the transactions
being analyzed. The estimates contained in Credit Suisse First Boston's analyses
and the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the MetLife board of directors in its evaluation
of the tender offer and the merger and should not be viewed as determinative of
the views of the MetLife board of directors with respect to the tender offer and
the merger or the consideration to be paid in the tender offer and the merger.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in arriving at its oral opinion delivered on March 8,
2000 and its written opinion dated March 8, 2000, but does not purport to be a
complete description of the analyses performed by Credit Suisse First Boston for
such purposes. Each valuation analysis performed by Credit Suisse First Boston
described below assumed that the investment management responsibility over the
general account assets of General American Life Insurance and its insurance
subsidiaries (except for certain assets) would be transferred from Conning's
asset management subsidiary, Conning Asset Management Company, to MetLife, as
well as the possible loss of investment management responsibility over
additional assets, resulting in both a loss of service fee revenue and an
expense saving to Conning. Specifically, each of the discounted cash flow
analysis, the comparable companies analysis and the comparable acquisitions
analysis performed by Credit Suisse First Boston assumed, based on information
provided by MetLife and Conning management, that Conning would lose annual
revenue of approximately $7.9 million and would achieve an annual expense
savings of approximately $1.9 million as a result of the transfer of
approximately $7.7 billion of assets under management, which would result in a
$6.0 million decrease to Conning's pre-tax income.
DISCOUNTED CASH FLOW ANALYSIS. Based upon assumptions and five-year
projections provided by MetLife and, with respect to certain information,
Conning, Credit Suisse First Boston performed a discounted free cash flow
analysis employing discount rates ranging from 13% to 15% and terminal-value
multiples of fifth-year projected earnings before interest, taxes, depreciation
and amortization ("EBITDA"), ranging from 7.0x to 9.0x. In addition, Credit
Suisse First Boston assumed 0% growth in 2000 revenue from Conning's annualized
fourth-quarter 1999 revenue and applied an 8.5% annual growth rate thereafter.
Credit Suisse First Boston also assumed that Conning Capital Partners VI, L.P.,
a private
14
<PAGE> 20
equity fund described in Section 8 below, raises a total of $200 million. This
analysis indicated an implied valuation range for the Conning shares of
approximately $10.92 to $13.38 per share.
COMPARABLE COMPANIES ANALYSIS. Credit Suisse First Boston compared
financial and operating data of Conning with corresponding data of selected
publicly traded companies in the asset management industry (the "Comparable
Companies"), with particular emphasis on asset managers with a substantial fixed
income asset management business, including BlackRock, Inc. and Federated
Investors, Inc. Credit Suisse First Boston reviewed the enterprise values,
calculated as equity market value, plus total debt, preferred stock and minority
interests, less excess cash, and the equity values, of the Comparable Companies
as multiples of 1999 net income, 1999 EBITDA and 2000 estimated net income.
Estimated financial data for the Comparable Companies were based on publicly
available research analysts' consensus estimates provided by First Call
Corporation. All multiples were based on closing stock prices on March 7, 2000.
Credit Suisse First Boston then applied a range of selected multiples derived
from the Comparable Companies data to adjusted 1999 net income, 2000 estimated
net income and adjusted 1999 EBITDA of Conning, as adjusted for the assumed loss
to Conning of the investment management responsibility over the general account
assets of General American Life Insurance and its insurance subsidiaries (except
for certain assets) and certain other assets and cost savings, as discussed
above. Based on the Comparable Companies data, Credit Suisse First Boston
selected a relevant multiple range of 12.0x to 14.0x adjusted 1999 net income,
10.0 to 12.0x 2000 estimated net income and 8.0x to 8.7x adjusted 1999 EBITDA.
This analysis indicated an implied valuation range for the Conning shares of
approximately $8.45 to $9.86 per share.
COMPARABLE ACQUISITIONS ANALYSIS. Using publicly available information,
Credit Suisse First Boston analyzed recent acquisitions in the asset management
industry (the "Comparable Acquisitions"), and calculated the implied multiples
of selected financial data for such acquisitions. In its analysis, Credit Suisse
First Boston reviewed information relating to acquisitions of U.S. asset
managers since 1997 involving consideration of approximately $100 million to
$300 million, giving particular emphasis to the following acquisitions:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- -------- ------
<S> <C>
Affiliated Managers Group, Inc. Frontier Capital Management Co., Inc.
ReliaStar Financial Group Pilgrim Capital Corporation
Affiliated Managers Group, Inc. Tweedy, Brown Company LLC
</TABLE>
Credit Suisse First Boston's comparable acquisition analysis indicated a
1999 EBITDA multiple range of 9.5x to 11.0x. Credit Suisse First Boston then
applied a range of this multiple to Conning's adjusted 1999 EBITDA as adjusted
for the assumed loss to Conning of the investment management responsibility over
the general account assets of General American Life Insurance and its insurance
subsidiaries (except for certain assets) and certain other assets and cost
savings, as discussed above. This analysis indicated an implied valuation range
for the Conning shares of approximately $11.27 to $12.68 per share.
MERGER CONSEQUENCE ANALYSIS. Credit Suisse First Boston performed a merger
consequence analysis to assess the impact of the tender offer and the merger on
MetLife's estimated earnings per share in the calendar years 2000, 2001 and 2002
after taking into account the impact of the transfer of the investment advisory
responsibility for the general account assets of General American Life Insurance
and its insurance subsidiaries from Conning to MetLife, as well as Conning's
possible loss of investment advisory responsibility for additional assets. This
analysis indicated that the merger would be approximately break-even to
MetLife's earnings per share in 2000 and modestly accretive in 2001 and 2002.
The actual results achieved by MetLife following the merger may vary from
projected results and the variations may be material.
OTHER FACTORS. In the course of preparing its opinion, Credit Suisse First
Boston considered other information and data, including the premiums implied by
the consideration payable in the tender offer and the merger relative to
historical stock prices for the Conning shares, which indicated that the $12.50
per share to be paid in the tender offer and merger represented a 45% premium
over the December 17, 1999
15
<PAGE> 21
per share closing price (the closing price one month prior to the public
announcement of MetLife's initial proposal) and a 31% premium over the January
14, 2000 per share closing price (the closing price on the last full trading day
prior to the public announcement of MetLife's initial proposal).
Credit Suisse First Boston was selected by MetLife as its financial advisor
based on its experience and familiarity with MetLife and its business. Credit
Suisse First Boston is an internationally recognized investment banking firm and
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
Pursuant to the terms of Credit Suisse First Boston's engagement, MetLife
has agreed to pay Credit Suisse First Boston a customary transaction fee upon
completion of the tender offer and the merger. MetLife has also agreed to
reimburse Credit Suisse First Boston for all out-of-pocket expenses, including
the fees and expenses of legal counsel and any other advisor retained by Credit
Suisse First Boston, and to indemnify Credit Suisse First Boston and its
affiliates and related persons against certain expenses and liabilities,
including liabilities under the federal securities laws, arising in connection
with its engagement. In the past, Credit Suisse First Boston and its affiliates
have provided and are currently providing certain investment banking services to
MetLife unrelated to the proposed tender offer and the merger, including acting
as financial advisor in MetLife's proposed demutualization and joint-lead
underwriter in the proposed related initial public offering of MetLife, Inc.,
and have received and expect to receive customary fees for such services. In
connection with MetLife, Inc.'s proposed initial public offering, Credit Suisse
Group, the ultimate parent of Credit Suisse First Boston, has agreed in
principle that it or its affiliates will purchase, at the initial public
offering price, in a private placement from MetLife, Inc., common stock which
could represent approximately 4.9% of the total number of shares of MetLife,
Inc. common stock outstanding upon consummation of the initial public offering
and the private placements. In addition, the Vice Chairman of MetLife is a
member of the board of directors of Credit Suisse Group, the ultimate parent of
Credit Suisse First Boston, and an officer of MetLife is a member of the
investment committee of Credit Suisse First Boston International Equity
Partners, L.P., an affiliate of Credit Suisse First Boston. MetLife is also a
limited partner of certain limited partnerships affiliated with Credit Suisse
First Boston. In the ordinary course of its business, Credit Suisse First Boston
and its affiliates may actively trade the debt and equity securities of MetLife
(or its affiliates) and Conning for their own accounts and for the accounts of
customers and, accordingly, may at any time hold long or short positions in such
securities.
The full text of Credit Suisse First Boston's written opinion dated March
8, 2000 to the MetLife board of directors has been filed as Exhibit (c)(2) to
the Schedule TO filed with the SEC with respect to the tender offer and may be
inspected and copied from the SEC in the manner specified in Section 7.
V. INTERESTS OF CERTAIN PERSONS
INITIAL PUBLIC OFFERING OF METLIFE, INC. COMMON STOCK. One of Conning's
subsidiaries, Conning & Company, will act as a junior co-manager in the proposed
initial public offering of MetLife, Inc. common stock. The extent of Conning &
Company's participation in the offering has not yet been determined.
OPTION HOLDERS AND REPLACEMENT AWARDS. Prior to the completion of the
tender offer, the Conning board of directors (or, if appropriate, any committee
thereof) will take all actions necessary to provide for the cancellation, at the
Effective Time, of all outstanding stock options (the "Stock Options"), that
have been granted under any stock option or similar plan or agreement of Conning
(the "Stock Plans").
Conning will also take all actions necessary to provide, as of the
Effective Time, (a) for the termination of all Stock Plans, and (b) the deletion
of any provisions in any other plan, program or arrangement that provides for
the issuance or grant of any other interest in the capital stock of Conning or
any of its subsidiaries.
In connection with the cancellation of the Stock Options, holders of Stock
Options will receive replacement awards that will be substituted for the Stock
Options. Under the replacement award program,
16
<PAGE> 22
all employees that hold Stock Options as of the Effective Time will receive
either (a) a cash payment equal to the product of (1) the total number of
Conning shares subject to such Stock Option and (2) the excess of $12.50 over
the per share exercise price of the Stock Option; or (b) a deferred payment. In
the case of non-qualified options, the deferred payment will be equal to the
present value of the Stock Options, calculated using a Black-Scholes formula. In
the case of incentive stock options, the deferred payment will equal the greater
of (a) the Black-Scholes value of the Stock Options and (b) the excess of $12.50
over the per share exercise price of the Stock Option, plus an additional
payment representing the value of the loss of the favorable tax treatment of
incentive stock options calculated based on such excess. All deferred awards
will bear interest. The replacement award program is subject to change, provided
that the program remains consistent with its current terms or with any amendment
to which Conning, MetLife and Purchaser mutually agree.
EMPLOYMENT AGREEMENT. Paul Kopsky was recently appointed Chief Financial
Officer, effective March 16, 2000, replacing Fred M. Schpero, who resigned. In
connection with Mr. Kopsky's appointment, Mr. Kopsky and Conning, with MetLife's
consent (as is required by the merger agreement), reached an oral understanding
that Mr. Kopsky and Conning would enter into an employment agreement providing,
among other customary points, for a retention bonus. The aggregate value of the
annual salary, incentive bonus and retention bonus proposed to be offered in the
definitive agreement to Mr. Kopsky for each of two years will equal at least
$475,000 per year.
TRANSITIONAL RETENTION BONUS PROGRAM. Prior to the execution of the merger
agreement, Conning adopted a transitional retention bonus program for certain
selected employees at a cost of approximately $2.3 million. Recently, in
consultation with MetLife, a proposal was made to expand the program to include
other employees (including certain executive officers). This proposal is subject
to the approval of the Conning board of directors and, under the terms of the
merger agreement, the consent of MetLife. Conning estimates that the total cost
for the entire program, including both the program adopted prior to the
execution of the merger agreement and the expanded program, will be
approximately $10 million to $13 million.
SEVERANCE PLAN. In February 2000, Conning adopted a severance plan
covering all Conning employees, including executive officers. The severance plan
provides for compensation to any employee (a) whose job is eliminated or
significantly altered (as described in the plan) or (b) who does not accept a
requested transfer to a location more than a specified distance from the
previous location if the position at the previous location becomes unavailable.
The plan provides for payments to eligible employees equal to the greater of (a)
one week of base salary per year of service with a minimum of 10 weeks or (b) a
number of weeks of base salary according to the employee's job classification up
to a maximum of 52 weeks. The severance plan is subject to amendment or
termination by Conning at any time.
17
<PAGE> 23
BENEFICIAL OWNERSHIP OF SHARES. The following table sets forth
information, as of March 16, 2000, regarding the ownership of Conning shares by
each person known by Conning to be the beneficial owner of more than 5% of the
outstanding Conning shares, and any director or executive officer of MetLife,
Purchaser, Conning or any of their affiliates who is the beneficial owner of
Conning shares or options to purchase Conning shares. Except as indicated below,
the directors and executive officers of MetLife, Purchaser, Conning and their
affiliates do not own any Conning shares or options to purchase Conning shares:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
---------------- ----------------------- ----------
<S> <C> <C>
GREATER THAN 5% STOCKHOLDER:
MetLife..................................................... 8,304,995(2) 60.4%
DIRECTORS AND OFFICERS OF CONNING:
Arthur C. Reeds, III,
Chairman.................................................. 1,334(3) *
James L. Lipscomb,
President and Chief Executive Officer..................... -- --
John B. Clinton,
Executive Vice President.................................. 138,070(4) 1.0%
Michael D. McLellan,
Executive Vice President.................................. 128,510(5) *
Thomas D. Sargent,
Executive Vice President.................................. 78,444(6) *
Paul W. Kopsky, Jr.,
Chief Financial Officer................................... 4,106(7) *
John A. Fibiger,
Director.................................................. 3,001(8) *
Richard A. Liddy,
Director.................................................. 57,500(9) *
All Conning directors and executive officers as a group (8 410,965(10) 2.9%
persons)..................................................
</TABLE>
- ------------------------
* Represents less than one percent.
(1) Unless otherwise noted, each person has sole voting and investment power
with respect to all Conning shares listed opposite such person's name.
Conning shares issuable upon exercise of a person's exercisable Stock
Options are deemed to be outstanding for purposes of calculating such
person's percentage ownership.
(2) Conning shares directly owned by GenAm Holding.
(3) Includes 1,000 Conning shares held in a joint account with Mr. Reeds' wife,
an account over which he has shared voting and investment power, and 334
Conning shares subject to Stock Options that are exercisable within 60
days. On March 9, Mr. Reeds resigned from his positions as President and
Chief Executive Officer. He remained on the Conning board of directors.
(4) Includes 25,840 Conning shares subject to Stock Options that are
exercisable within 60 days and 1,953 restricted Conning shares that are
subject to forfeiture in accordance with the terms of the specific grant
(as to which Mr. Clinton has no investment power).
(5) Includes 105,068 Conning shares subject to Stock Options that are
exercisable within 60 days and 3,242 restricted Conning shares that are
subject to forfeiture in accordance with the terms of the specific grant
(as to which Mr. McLellan has no investment power).
(6) Includes 25,840 Conning shares subject to Stock Options that are
exercisable within 60 days and 2,188 restricted Conning shares that are
subject to forfeiture in accordance with the terms of the specific grant
(as to which Mr. Sargent has no investment power).
(7) Includes 1,000 Conning shares subject to Stock Options that are exercisable
within 60 days and 2,031 restricted Conning shares that are subject to
forfeiture in accordance with the terms of the
18
<PAGE> 24
specific grant (as to which Mr. Kopsky has no investment power) and 100
shares owned by Mr. Kopsky's children.
(8) Includes 1,001 Conning shares subject to Stock Options that are exercisable
within 60 days.
(9) Includes 15,000 Conning shares subject to Stock Options that are
exercisable within 60 days and 42,500 Conning shares held in a joint
account with Mr. Liddy's wife, an account over which he has shared voting
and investment power. Mr. Liddy is a member of the Executive Committee of
MetLife and disclaims beneficial ownership of the Conning shares
beneficially owned by MetLife.
(10) Includes 173,749 Conning shares subject to Stock Options that are
exercisable within 60 days and 9,414 restricted Conning shares that are
subject to forfeiture in accordance with the terms of the specific grants
(as to which the individuals have no investment power), but does not
include the Conning shares held by Donald L. McDonald, who resigned from
his position as Executive Vice President effective March 14, 2000, or the
Conning shares held by Fred M. Schpero, who resigned from his position as
Chief Financial Officer effective March 15, 2000.
19
<PAGE> 25
THE TENDER OFFER AND THE MERGER
1. TERMS OF THE TENDER OFFER
Upon the terms and subject to the conditions of the tender offer
(including, if the tender offer is extended or amended, the terms and conditions
of any extension or amendment), we will purchase all Conning shares validly
tendered and not withdrawn in accordance with the procedures set forth in
Section 4 on or prior to the Expiration Date. The term "Expiration Date" means
12:00 midnight, New York City time, on Monday, April 17, 2000, unless we extend
the period of time for which the initial offering period of the tender offer is
open, in which case the term "Expiration Date" will mean the time and date at
which the initial offering period of the tender offer, as so extended, will
expire.
Upon the terms and subject to the conditions of the tender offer, including
the Minimum Condition, we will purchase, as soon as permitted under the terms of
the tender offer, all Conning shares validly tendered and not withdrawn prior to
the Expiration Date, including such Conning shares held by officers and
directors of Conning. If, at the Expiration Date the conditions to the tender
offer described in Section 12 have not been satisfied or earlier waived, then we
may, in our sole discretion, extend the Expiration Date for an additional period
or periods of time by giving oral or written notice of the extension to the
Depositary and by publicly announcing the new Expiration Date. During any
extension of the initial offering period (as opposed to the subsequent offering
period), all Conning shares previously tendered and not withdrawn will remain
subject to the tender offer and subject to your right to withdraw. See Section
4.
Subject to the applicable regulations of the Securities and Exchange
Commission and the terms of the merger agreement, we also reserve the right, in
our sole discretion, at any time or from time to time, to (a) terminate the
tender offer (whether or not any Conning shares have previously been purchased
pursuant to the tender offer) if any condition referred to in Section 12 has not
been satisfied or earlier waived or upon the occurrence of any event specified
in Section 12; and (b) waive any condition or (except as set forth in the merger
agreement as summarized below) otherwise amend the tender offer in any respect,
in each case, by giving oral or written notice of the termination, waiver or
amendment to the Depositary and, other than, in the case of any waiver, by
making a public announcement thereof. We acknowledge that (a) Rule 14e-1(c)
under the Securities Exchange Act requires us to pay the consideration offered
or return the Conning shares tendered promptly after the termination of the
tender offer and (b) we may not delay purchase of, or payment for, any Conning
shares upon the occurrence of any event specified in Section 12 without
extending the period of time during which the tender offer is open.
The rights we reserve in the preceding paragraph are in addition to our
rights pursuant to Section 12. Any extension, termination or amendment of the
tender offer will be followed as promptly as practicable by a public
announcement. An announcement in the case of an extension will be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which we
may choose to make any public announcement, subject to applicable law (including
those rules under the Securities Exchange Act that require that material changes
be promptly disseminated to holders of Conning shares), we will have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
Under the merger agreement, without the prior written consent of the
Conning special committee and the Conning board of directors, we will not (a)
impose additional conditions to the tender offer, (b) amend the existing
conditions to the tender offer or any other term of the tender offer in a manner
adverse to Conning stockholders, (c) decrease the number of Conning shares
subject to the tender offer, (d) reduce the price per Conning share, (e) change
the form of consideration payable in the tender offer, or (f) extend the
Expiration Date, except as permitted in the merger agreement.
If we make a material change in the terms of the tender offer, or if we
waive a material condition to the tender offer, we will extend the tender offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(d), 14d-6(c) and 14e-1 under the Securities Exchange Act. The
minimum
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<PAGE> 26
period during which a tender offer must remain open following material changes
in the terms of the offer, other than a change in price or a change in
percentage of securities sought, depends upon the facts and circumstances,
including the materiality of the changes. In the SEC's view, a tender offer
should remain open for a minimum of five business days from the date the
material change is first published, sent or given to stockholders, and, if
material changes are made with respect to information that approaches the
significance of price and the percentage of securities sought, a minimum of ten
business days may be required to allow for adequate dissemination and investor
response. With respect to a change in price, a minimum ten-business-day period
from the date of the change is generally required to allow for adequate
dissemination to stockholders. Accordingly, if, prior to the Expiration Date, we
decrease the number of Conning shares being sought, or increase or decrease the
consideration offered pursuant to the tender offer, and if the tender offer is
scheduled to expire at any time earlier than the period ending on the tenth
business day from the date that notice of the increase or decrease is first
published, sent or given to holders of Conning shares, we will extend the tender
offer at least until the expiration of such period of ten business days. For
purposes of the tender offer, a "business day" means any day other than a
Saturday, Sunday or a United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
THE TENDER OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION
OF THE MINIMUM CONDITION.
Consummation of the tender offer is subject to the conditions set forth in
Section 12. We reserve the right, in accordance with applicable rules and
regulations of the SEC, to waive any or all of those conditions. If, by the
Expiration Date, any or all of those conditions have not been satisfied, we may,
in the exercise of our good faith judgment, elect to (a) extend the tender
offer, and, subject to applicable withdrawal rights, retain all tendered Conning
shares until the expiration of the tender offer, as extended, subject to the
terms of the tender offer and the merger agreement; (b) waive all of the
unsatisfied conditions, and, subject to complying with applicable rules and
regulations of the SEC, accept for payment all Conning shares so tendered; or
(c) terminate the tender offer and not accept for payment any Conning shares and
return all tendered Conning shares to tendering Conning stockholders. In the
event that we waive any condition set forth in Section 12, the SEC may, if the
waiver is deemed to constitute a material change to the information previously
provided to the Conning stockholders, require that the tender offer remain open
for an additional period of time or that we disseminate information concerning
such waiver.
Conning has provided us with its stockholder lists and security position
listings for the purpose of disseminating the tender offer to holders of Conning
shares. We will mail this offer to purchase, the related letter of transmittal
and other relevant materials to record holders of Conning shares, and we will
furnish the materials to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
securityholder lists or, if applicable, that are listed as participants in a
clearing agency's security position listing, for forwarding to beneficial owners
of Conning shares.
SUBSEQUENT OFFERING PERIOD. We reserve the right, in accordance with the
merger agreement and the rules and regulations of the SEC, to provide a
subsequent offering period of three business days to 20 business days after the
expiration of the initial offering period and our purchase of Conning shares
tendered. A subsequent offering period would give Conning stockholders who do
not tender in the initial offering period another opportunity to tender their
Conning shares and receive the same tender offer price. If we elect to provide a
subsequent offering period, we will disseminate additional tender offer
materials, if necessary. During the subsequent offering period, Conning
stockholders will not have the right to withdraw Conning shares previously
tendered or tendered during the subsequent offering period. We expect to make
the subsequent offering period available to Conning stockholders unless there
are validly tendered and not properly withdrawn enough Conning shares so that,
including the Conning shares we already own, we would have control over 90% of
the outstanding Conning shares, in which case the merger will be completed as
soon as possible and without a vote of Conning stockholders. Conning
stockholders who had not previously tendered their shares will receive the same
price per share upon completion of the merger.
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<PAGE> 27
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR CONNING SHARES
Upon the terms and subject to the conditions of the tender offer
(including, if we extend or amend the tender offer, the terms and conditions of
the tender offer as so extended or amended), we will purchase, by accepting for
payment, and will pay for, all Conning shares validly tendered and not withdrawn
(as permitted by Section 4) prior to the Expiration Date promptly after the
later of (a) the Expiration Date and (b) the satisfaction or waiver of the
conditions to the tender offer set forth in Section 12. In addition, subject to
applicable rules of the SEC, we reserve the right to delay acceptance for
payment of, or payment for, Conning shares pending receipt of any governmental
approvals set forth in Section 13.
For information with respect to approvals that we are required to obtain
prior to the completion of the tender offer, see Section 13.
In all cases, we will pay for Conning shares purchased in the tender offer,
including during the subsequent offering period, only after timely receipt by
the Depositary of (a) certificates representing the Conning shares ("Conning
Certificates") or timely confirmation (a "Book-Entry Confirmation") of the
book-entry transfer of the Conning shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3; (b) the appropriate letter of transmittal (or
a facsimile), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined below) in connection with a
book-entry transfer; and (c) any other documents that the letter of transmittal
requires.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Conning shares that are the subject of the
Book-Entry Confirmation that the participant has received and agrees to be bound
by the terms of the letter of transmittal and that we may enforce that agreement
against the participant.
For purposes of the tender offer, we will be deemed to have accepted for
payment, and purchased, Conning shares validly tendered and not withdrawn as, if
and when we give oral or written notice to the Depositary of our acceptance of
the Conning shares for payment pursuant to the tender offer. In all cases, upon
the terms and subject to the conditions of the tender offer, payment for Conning
shares purchased pursuant to the tender offer, including during any subsequent
offering period, will be made by deposit of the purchase price for the Conning
shares with the Depositary, which will act as agent for tendering Conning
stockholders for the purpose of receiving payment from us and transmitting
payment to validly tendering Conning stockholders.
UNDER NO CIRCUMSTANCES WILL WE PAY INTEREST ON THE PURCHASE PRICE FOR
CONNING SHARES, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.
If we do not purchase any tendered Conning shares pursuant to the tender
offer for any reason, or if you submit Conning Certificates representing more
Conning shares than you wish to tender, we will return Conning Certificates
representing unpurchased or untendered Conning shares, without expense to you
(or, in the case of Conning shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, the Conning shares will be credited to an
account maintained within the Book-Entry Transfer Facility), as promptly as
practicable following the expiration, termination or withdrawal of the tender
offer.
IF, PRIOR TO THE EXPIRATION DATE, WE INCREASE THE PRICE OFFERED TO HOLDERS
OF CONNING SHARES IN THE TENDER OFFER, WE WILL PAY THE INCREASED PRICE TO ALL
HOLDERS OF CONNING SHARES THAT WE PURCHASE IN THE TENDER OFFER, WHETHER OR NOT
THE CONNING SHARES WERE TENDERED BEFORE THE INCREASE IN PRICE.
We reserve the right, subject to the provisions of the merger agreement, to
transfer or assign, in whole or from time to time in part, to one or more of our
subsidiaries or affiliates the right to purchase all or any portion of the
Conning shares tendered in the tender offer, but any such transfer or assignment
will not
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<PAGE> 28
relieve us of our obligations under the tender offer or prejudice your rights to
receive payment for Conning shares validly tendered and accepted for payment in
the tender offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES
VALID TENDER OF CONNING SHARES. Except as set forth below, in order for
you to tender Conning shares in the tender offer, the Depositary must receive
the letter of transmittal (or a facsimile thereof), properly completed and
signed, together with any required signature guarantees or an Agent's Message in
connection with a book-entry delivery of Conning shares and any other documents
that the letter of transmittal requires at one of its addresses set forth on the
back cover of this tender offer to Purchase on or prior to the Expiration Date,
and either (a) you must deliver Conning Certificates representing tendered
Conning shares to the Depositary or you must cause your Conning shares to be
tendered pursuant to the procedure for book-entry transfer set forth below and
the Depositary must receive Book-Entry Confirmation, in each case, on or prior
to the Expiration Date, or (b) you must comply with the guaranteed delivery
procedures set forth below.
THE METHOD OF DELIVERY OF CONNING CERTIFICATES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND SOLE RISK, AND DELIVERY
WILL BE CONSIDERED MADE ONLY WHEN THE DEPOSITARY ACTUALLY RECEIVES THE CONNING
CERTIFICATES. IF DELIVERY IS BY MAIL, WE RECOMMEND USING REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Conning shares at the Book-Entry Transfer Facility for purposes of the
tender offer within two business days after the date of this offer to purchase.
Any financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make book-entry delivery of Conning shares by causing the
Book-Entry Transfer Facility to transfer the Conning shares into the
Depositary's account at the Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures. However, although Conning shares may
be delivered through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Depositary must receive the letter of
transmittal (or facsimile thereof), properly completed and signed, with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, at one of its addresses
set forth on the back cover of this offer to purchase on or before the
Expiration Date, or you must comply with the guaranteed delivery procedure set
forth below.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. A bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution") must guarantee
signatures on all letters of transmittal, unless the Conning shares tendered are
tendered (a) by a registered holder of Conning shares that has not completed
either the box labeled "Special Payment Instructions" or the box labeled
"Special Delivery Instructions" on the letter of transmittal or (b) for the
account of an Eligible Institution. See Instruction 1 of the letter of
transmittal.
If the Conning Certificates are registered in the name of a person other
than the signer of the letter of transmittal, or if payment is to be made to, or
Conning Certificates for unpurchased Conning shares are to be issued or returned
to, a person other than the registered holder, then the tendered Conning
Certificates must be endorsed or accompanied by appropriate stock powers, signed
exactly as the name or names of the registered holder or holders appear on the
Conning Certificates, with the signatures on the Conning Certificates or stock
powers guaranteed by an Eligible Institution as provided in the letter of
transmittal. See Instructions 1 and 5 of the letter of transmittal.
If the Conning Certificates are forwarded separately to the Depositary, a
properly completed and duly executed letter of transmittal (or manually signed
facsimile) must accompany each delivery of Conning Certificates.
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<PAGE> 29
GUARANTEED DELIVERY. If you want to tender Conning shares in the tender
offer and your Conning Certificates are not immediately available or time will
not permit all required documents to reach the Depositary on or before the
Expiration Date or the procedures for book-entry transfer cannot be completed on
time, your Conning shares may nevertheless be tendered if you comply with all of
the following guaranteed delivery procedures:
- your tender is made by or through an Eligible Institution;
- the Depositary receives, as described below, a properly completed and
signed Notice of Guaranteed Delivery, substantially in the form made
available by us, on or before the Expiration Date; and
- the Depositary receives the Conning Certificates (or a Book-Entry
Confirmation) representing all tendered Conning shares, in proper form
for transfer together with a properly completed and duly executed letter
of transmittal (or manually signed facsimile), with any required
signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the letter of
transmittal within three trading days after the date of execution of the
Notice of Guaranteed Delivery.
You may deliver the Notice of Guaranteed Delivery by hand or mail or
transmitted by facsimile transmission to the Depositary. The Notice of
Guaranteed Delivery must include a guarantee by an Eligible Institution in the
form set forth in the Notice of Guaranteed Delivery and a representation that
you own the Conning shares being tendered within the meaning of Rule 14e-4 under
the Securities Exchange Act. Guaranteed delivery procedures are not available in
the subsequent offering period.
Notwithstanding any other provision of the tender offer, we will pay for
Conning shares only after timely receipt by the Depositary of Conning
Certificates for, or, of Book-Entry Confirmation with respect to, the Conning
shares, a properly completed and duly executed letter of transmittal (or
facsimile thereof), together with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message) and any other documents
required by the appropriate letter of transmittal. Accordingly, payment might
not be made to all tendering stockholders at the same time and will depend upon
when the Depositary receives Conning Certificates or Book-Entry Confirmation
that the Conning shares have been transferred into the Depositary's account at a
Book-Entry Transfer Facility.
BACKUP UNITED STATES FEDERAL INCOME TAX WITHHOLDING. Under the backup
United States federal income tax withholding laws applicable to certain
stockholders (other than certain exempt stockholders, including, among others,
all corporations and certain foreign individuals), the Depositary may be
required to withhold 31% of the amount of any payments made to those
stockholders pursuant to the tender offer or the merger. To prevent backup
United States federal income tax withholding, you must provide the Depositary
with your correct taxpayer identification number and certify that you are not
subject to backup United States federal income tax withholding by completing the
Substitute Form W-9 included in the letter of transmittal. Non-United States
holders must submit a completed Form W-8 or Form W-8 BEN to qualify as an exempt
recipient. These forms may be obtained from the Depositary. See Instruction 9 of
the letter of transmittal.
APPOINTMENT AS PROXY. By executing the letter of transmittal, you
irrevocably appoint our designees, and each of them, as your agents,
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the letter of transmittal, to the full extent of your rights with
respect to the Conning shares that you tender and that we accept for payment and
with respect to any and all other Conning shares and other securities or rights
issued or issuable in respect of those Conning shares on or after the date of
this offer to purchase. All such powers of attorney and proxies will be
considered irrevocable and coupled with an interest in the tendered Conning
shares. This appointment will be effective when we accept your Conning shares
for payment in accordance with the terms of the tender offer. Upon such
acceptance for payment, all other powers of attorney and proxies given by you
with respect to your Conning shares and such other securities or rights prior to
such payment will be revoked, without further action, and no subsequent powers
of attorney and proxies may be given by you (and, if given, will not be deemed
effective). Our designees will, with respect to the Conning shares and such
other securities and
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<PAGE> 30
rights for which the appointment is effective, be empowered to exercise all your
voting and other rights as they, in their sole discretion, may deem proper at
any annual or special meeting of Conning stockholders, or any adjournment or
postponement thereof, or by consent in lieu of any such meeting or otherwise. In
order for Conning shares to be deemed validly tendered, immediately upon the
acceptance for payment of such Conning shares, we or our designee must be able
to exercise full voting rights with respect to such Conning shares and other
securities, including voting at any meeting of Conning stockholders.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Conning shares will be determined by us, in our sole
discretion, which determination will be final and binding on all parties. We
reserve the absolute right to reject any or all tenders determined by us not to
be in proper form or the acceptance of or payment for which may, in the opinion
of our counsel, be unlawful. We also reserve the absolute right to waive any of
the conditions of the tender offer or any defect or irregularity in any tender
of Conning shares of any particular Conning stockholder, whether or not similar
defects or irregularities are waived in the case of other Conning stockholders.
No tender of Conning shares will be deemed to have been validly made until
all defects and irregularities with respect to the tender have been cured or
waived by us. None of MetLife, Purchaser or any of their respective affiliates
or assigns, the Dealer Manager, the Depositary, the Information Agent or any
other individual or entity will be under any duty to give any notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification.
Our acceptance for payment of Conning shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between us
and you upon the terms and subject to the conditions of the tender offer.
4. WITHDRAWAL RIGHTS
Except as described in this Section 4, tenders of Conning shares made in
the tender offer are irrevocable. You may withdraw Conning shares that you have
previously tendered in the tender offer at any time on or before the Expiration
Date, and, unless theretofore accepted for payment as provided herein, you may
also withdraw Conning shares at any time after May 19, 2000; provided, however,
you may not withdraw Conning shares during any subsequent offering period.
If, for any reason, acceptance for payment of any Conning shares tendered
in the tender offer is delayed, or we are unable to accept for payment or pay
for Conning shares tendered in the tender offer, then, without prejudice to our
rights set forth in this document, the Depositary may, nevertheless, on our
behalf, retain Conning shares that you have tendered, and you may not withdraw
your Conning shares, except to the extent that you are entitled to and duly
exercise withdrawal rights as described in this Section 4. Any such delay will
be by an extension of the tender offer to the extent required by law.
In order for your withdrawal to be effective, you must timely deliver a
written or facsimile transmission notice of withdrawal to the Depositary at one
of its addresses set forth on the back cover of this offer to purchase. Any such
notice of withdrawal must specify your name, the number of Conning shares that
you want to withdraw, and (if Conning Certificates have been tendered) the name
of the registered holder of the Conning shares as shown on the Conning share
Certificate if different from your name. If Conning Certificates have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Conning Certificates, you must submit the serial numbers shown
on the particular Conning Certificates evidencing the Conning shares to be
withdrawn and an Eligible Institution must guarantee the signature on the notice
of withdrawal, except in the case of Conning shares tendered for the account of
an Eligible Institution. If Conning shares have been tendered pursuant to the
procedures for book-entry transfer set forth in Section 3, the notice of
withdrawal must specify the name and number of the account at the appropriate
Book-Entry Transfer Facility to be credited with the withdrawn Conning shares,
in which case a notice of withdrawal will be effective if delivered to the
Depositary by any method of delivery described in the first sentence of this
paragraph. You may not rescind a withdrawal of Conning shares. Any Conning
shares that you withdraw will be considered not validly tendered for purposes of
the
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<PAGE> 31
tender offer, but you may tender your Conning shares again at any time before
the Expiration Date by following any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by us, in our sole discretion, which
determination will be final and binding. None of MetLife, Purchaser, Conning or
any of their respective affiliates or assigns, the Dealer Manager, the
Depositary, the Information Agent or any other individual or entity will be
under any duty to give any notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. PRICE RANGE OF THE SHARES; DIVIDENDS
According to Conning's Form 10-K for the fiscal year ending December 31,
1999, Conning shares are traded on the Nasdaq National Market (the "NASDAQ")
under the symbol "CNNG." The following table sets forth, for the periods
indicated, the reported high and low sale prices for the Conning shares on the
NASDAQ and dividends paid, as reported by published financial sources.
CONNING CORPORATION
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
----- ----- ---------
<S> <C> <C> <C>
FISCAL 1998
First Quarter........................................... 21.75 16.00 .04
Second Quarter.......................................... 22.50 18.25 .04
Third Quarter........................................... 20.88 12.13 .04
Fourth Quarter.......................................... 20.75 10.63 .04
FISCAL 1999
First Quarter........................................... 21.00 13.50 .05
Second Quarter.......................................... 21.00 13.50 .05
Third Quarter........................................... 18.75 9.25 .05
Fourth Quarter.......................................... 11.75 6.75 .05
FISCAL 2000
First Quarter (through March 17, 2000).................. 13.25 7.88 .05
</TABLE>
Under the terms of the merger agreement, Conning is not permitted to
declare or pay dividends (other than regularly scheduled dividends) with respect
to the Conning shares without the prior written consent of MetLife.
The average of the closing prices on the NASDAQ for the Conning shares over
the 20 last full days of trading before MetLife publicly announced the proposal
on January 18, 2000 to acquire Conning was $8.68 per share. On January 14, 2000,
the last full day of trading before MetLife announced the proposal to acquire
Conning, the reported closing price on the NASDAQ for the Conning shares was
$9.56 per share. On March 17, 2000, the last full day of trading prior to the
commencement of the tender offer, the reported closing price on the NASDAQ for
the Conning shares was $12.31 per share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE CONNING
SHARES.
6. POSSIBLE EFFECTS OF THE TENDER OFFER ON THE MARKET FOR THE CONNING SHARES;
STOCK QUOTATION; SECURITIES EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS
If there are validly tendered and not properly withdrawn enough Conning
shares so that, including the Conning shares we already own, we would have
control over 90% of the outstanding Conning shares, we will complete the merger
as soon as possible after the expiration of the tender offer (including any
subsequent offering period) and without a vote of the stockholders of Conning.
Conning stockholders who had not previously tendered their shares will receive
the same price per share upon completion of the
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<PAGE> 32
merger. If, however, we acquire less than the number of Conning shares necessary
to give us control over 90% of the outstanding Conning shares, Conning would
have to hold a meeting of Conning stockholders to vote on the approval of the
merger agreement before we could complete the merger. Until we complete the
merger, our purchase of Conning shares pursuant to the tender offer could have
the following effects.
THE MARKET FOR CONNING SHARES. The purchase of Conning shares pursuant to
the tender offer will reduce the number of Conning shares that might otherwise
trade publicly and could adversely affect the liquidity and market value of the
remaining Conning shares held by the public. The purchase of Conning shares
pursuant to the tender offer can also be expected to reduce the number of
holders of Conning shares. We cannot predict whether the reduction in the number
of Conning shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of the Conning shares
or whether it would cause future market prices to be greater or less than the
tender offer price.
STOCK QUOTATION. Depending upon the number of Conning shares purchased
pursuant to the tender offer, the Conning shares may no longer meet the
requirements of The Nasdaq Stock Market, Inc. for continued inclusion in the
NASDAQ, which require that an issuer have at least 200,000 publicly held shares,
held by at least 400 stockholders or 300 stockholders of round lots, with a
market value of at least $1,000,000, and have net tangible assets of at least
$1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during
the issuer's four most recent fiscal years. If these standards are not met, the
Conning shares might nevertheless continue to be included in the Nasdaq Stock
Market with quotations published in its "additional list" or in one of the
"local lists," but if the number of holders of the Conning shares were to fall
below 300, or if the number of publicly held Conning shares were to fall below
100,000, or there were not at least two registered and active market makers for
the Conning shares, the rules of The Nasdaq Stock Market, Inc. provide that the
Conning shares would no longer be "qualified" for Nasdaq Stock Market reporting
and the Nasdaq Stock Market would cease to provide any quotations. Conning
shares held directly or indirectly by directors, officers or beneficial owners
of more than 10% of the Conning shares are not considered as being publicly held
for this purpose. According to Conning's representation in the merger agreement,
as of March 3, 2000, there were 13,753,359 Conning shares outstanding. If, as a
result of the purchase of Conning shares pursuant to the tender offer or
otherwise, the Conning shares no longer meet the requirements for continued
inclusion in any tier of the Nasdaq Stock Market and the Conning shares are no
longer included in any tier of the Nasdaq Stock Market, the market for Conning
shares could be adversely affected.
In the event that the Conning shares no longer meet the requirements for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible that
the Conning shares would continue to trade in the over-the-counter market and
that price quotations would be reported by other sources. The extent of the
public market for the Conning shares and the availability of such quotations
would, however, depend upon the number of holders of Conning shares remaining at
such time, the interest in maintaining a market in Conning shares on the part of
securities firms, the possible termination of registration of the Conning shares
under the Securities Exchange Act, as described below, and other factors.
SECURITIES EXCHANGE ACT REGISTRATION. The Conning shares are currently
registered under the Securities Exchange Act. The purchase of the Conning shares
pursuant to the tender offer may result in the Conning shares becoming eligible
for deregistration under the Securities Exchange Act. Registration of the
Conning shares may be terminated upon application by Conning to the SEC if the
Conning shares are not listed on a "national securities exchange" or the Nasdaq
Stock Market and there are fewer than 300 record holders of Conning shares.
Termination of registration of the Conning shares under the Securities Exchange
Act would substantially reduce the information that Conning is required to
furnish to its stockholders and the SEC and would make certain provisions of the
Securities Exchange Act, such as the short-swing profit recovery provisions of
Section 16(b) and the requirements of furnishing a proxy statement in connection
with stockholders' meetings pursuant to Sections 14(a) or 14(c) and the related
requirement of an annual report, no longer applicable to Conning. If the Conning
shares are no longer registered under the Securities Exchange Act, the
requirements of Rule 13e-3 under the Securities Exchange Act with respect to
"going-private" transactions would no longer be applicable to Conning. In
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<PAGE> 33
addition, the ability of "affiliates" of Conning and persons holding "restricted
securities" of Conning to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, may be impaired or,
with respect to certain persons, eliminated. If registration of the Conning
shares under the Securities Exchange Act were terminated, the Conning shares
would no longer be "margin securities" or eligible for stock exchange listing or
reporting on the Nasdaq Stock Market. We believe that the purchase of the
Conning shares pursuant to the tender offer may result in the Conning shares
becoming eligible for deregistration under the Securities Exchange Act, and it
would be our intention to cause Conning to make an application for termination
of registration of the Conning shares as soon as possible after successful
completion of the tender offer if the Conning shares are then eligible for such
termination.
If registration of the Conning shares is not terminated prior to the
merger, then the registration of the Conning shares under the Securities
Exchange Act and the quotation of the Conning shares on the NASDAQ will be
terminated following the completion of the merger.
MARGIN REGULATIONS. The Conning shares are currently "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System,
which regulations have the effect, among other things, of allowing brokers to
extend credit on the collateral of the Conning shares for the purpose of buying,
carrying or trading in securities ("Purpose Loans"). Depending upon factors,
such as the number of record holders of the Conning shares and the number and
market value of publicly held Conning shares, following the purchase of Conning
shares pursuant to the tender offer, the Conning shares might no longer
constitute "margin securities" for purposes of the Federal Reserve Board's
margin regulations and, therefore, could no longer be used as collateral for
Purpose Loans made by brokers. In addition, if registration of the Conning
shares under the Securities Exchange Act were terminated, the Conning shares
would no longer constitute "margin securities."
7. INFORMATION CONCERNING CONNING
According to Conning's Form 10-K for the fiscal year ending December 31,
1999, Conning's principal executive offices are located at 700 Market Street,
St. Louis, Missouri 63101, and Conning's telephone number is (314) 444-0498.
The following description of Conning and its business has been taken from
Conning's Form 10-K for the fiscal year ended December 31, 1999, and is
qualified in its entirety by reference to such report: Conning provides asset
management services primarily to insurance companies and institutional
investors, manages private equity funds investing in insurance and
insurance-related companies, and conducts in-depth research on the insurance
industry.
The selected financial information of Conning and its consolidated
subsidiaries set forth below has been excerpted and derived from Conning's Form
10-K for the fiscal year ending December 31, 1999 and from Conning's Form 10-Q
for the period ending September 30, 1999. More comprehensive financial and other
information is included in those reports (including management's discussion and
analysis of financial condition and results of operations) and in other reports
and documents filed by Conning with the SEC. The financial information set forth
below is qualified in its entirety by reference to the reports and documents
filed by Conning with the SEC and the financial statements and related notes
that they contain. You can examine these reports and other documents and obtain
copies of them in the manner set forth below.
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<PAGE> 34
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS AT AS AT
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Current assets............................. $102,015,046 $71,556,346
Noncurrent assets.......................... 64,165,909 50,921,777
Current liabilities........................ 67,465,244 38,765,638
Noncurrent liabilities..................... 3,052,500 3,535,897
Book value per share -- basic.............. 6.96 6.05
Book value per share -- diluted............ 6.74 5.48
</TABLE>
INCOME STATEMENT DATA
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Income per common share from continuing
operations -- basic...................... $1.66 $1.75
Income per common share from continuing
operations -- diluted.................... 1.61 1.64
Net income per common share -- basic....... 0.99 1.00
Net income per common share -- diluted..... 0.95 0.93
</TABLE>
Conning files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information filed at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's public reference rooms in New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Conning's SEC filings should
also be available to the public from commercial document retrieval services and
at the Internet world wide web site maintained by the SEC at http://www.sec.gov.
Although we have no knowledge that any such information is untrue, we take
no responsibility for the accuracy or completeness of information contained in
this offer to purchase with respect to Conning or any of its subsidiaries or
affiliates or for any failure by Conning to disclose events that may have
occurred or may affect the significance or accuracy of any such information.
In the course of the discussions between us and Conning, we prepared our
projections of Conning's future operating performance (the "MetLife
Projections"). The MetLife Projections contain several assumptions that Conning
did not make in preparing its October 1999 projections, including Conning's
transfer to us of investment management responsibility over most of the assets
contained in the general account of General American Life Insurance and its
insurance subsidiaries; excluding RGA. See Section 8. The MetLife Projections
were not prepared with a view to public disclosure or compliance with published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections, do not reflect the impact,
if any, of the recent resignations of certain senior executives (as described in
notes 3 and 10 on pages 18 and 19), and are included in this offer to purchase
only because we prepared them. Neither we nor Conning, nor either of our
respective financial advisors nor the Dealer Manager assumes any responsibility
for the accuracy of the MetLife Projections. Although presented with numerical
specificity, the MetLife Projections are based upon a variety of assumptions
relating to the businesses of Conning that may not be realized and are subject
to significant uncertainties and contingencies, many of which are beyond the
control of us and Conning. There can be no assurance that the MetLife
Projections will be realized, and actual results may vary materially from those
shown.
Set forth below is a summary of the MetLife Projections, adjusted to take
into account the loss of revenues attributable to Conning's assignment to
MetLife, at the request of General American Life Insurance, of investment
management responsibility over most of the general account assets of General
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<PAGE> 35
American Life Insurance and its insurance subsidiaries (excluding RGA). The
MetLife Projections should be read together with the financial statements of
Conning referred to herein.
CONNING CORPORATION
THE METLIFE PROJECTIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------
DEC. 31, 2000 DEC. 31, 2001 DEC. 31, 2002
------------- ------------- -------------
<S> <C> <C> <C>
Total Revenue.............................. $82.00 $91.10 $99.00
Net income................................. 9.30 11.90 12.90
Earnings per share......................... 0.68 0.87 0.94
</TABLE>
In October 1999, Conning management also prepared projections of Conning's
operating performance as part of its annual budgeting and planning process.
Conning management provided us with a copy of these projections during the
course of our discussions with Conning. These projections, which were prepared
in October 1999, estimated total revenue for 2000, 2001 and 2002 to be $102
million, $112 million and $124 million, respectively; net income for 2000, 2001
and 2002 to be $15 million, $18 million and $21 million, respectively; and
earnings per share for 2000, 2001 and 2002 to be $1.06, $1.24 and $1.45,
respectively. During the course of our negotiations, we also received the
Management Projections (as defined on page 9). Conning's October 1999
projections differ from the MetLife Projections primarily because Conning's
projections do not, and the MetLife Projections do, take into account (a)
Conning's recent assignment to MetLife, at the request of General American Life
Insurance, of investment management responsibility over most of the general
account assets of General American Life Insurance and (b) Conning's assignment
to MetLife, to be made in the near-term, of investment management responsibility
over most of the general account assets of General American Life Insurance's
insurance subsidiaries, excluding RGA. The MetLife Projections differ from the
Management Projections because different values were placed on the decreases in
revenues and expenses in connection with Conning's loss of investment management
responsibility over such assets. See Section 8. Conning did not prepare these
projections with a view to public disclosure or compliance with published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections. The projections are included
in this offer to purchase only because Conning provided them to us. Neither we
nor Conning, nor either of our respective financial advisors nor the Dealer
Manager assumes any responsibility for the accuracy of Conning's projections.
Although presented with numerical specificity, Conning's projections are based
upon a variety of assumptions relating to the businesses of Conning which may
not be realized and are subject to significant uncertainties and contingencies,
many of which are beyond the control of us and Conning. There can be no
assurance that Conning's projections will be realized, and actual results may
vary materially from those shown.
8. INFORMATION CONCERNING METLIFE AND PURCHASER
MetLife is a New York life insurance company whose principal executive
offices are located at One Madison Avenue, New York, New York 10010, and whose
telephone number is (212) 578-2211. Headquartered in New York City since 1868,
MetLife is a leading provider of insurance and financial services to a broad
spectrum of individual and group customers. MetLife, with approximately $420
billion of assets under management (as of December 31, 1999, on a pro forma
basis, including the acquisition of GenAmerica), provides individual insurance
and investment products to approximately 9 million households in the United
States. In addition, the corporations and institutions that MetLife provides
with group insurance and investment products have approximately 33 million
employees and members. MetLife also has international insurance operations in
ten countries, with a focus on the Asia/Pacific region, Latin America and
selected European countries.
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<PAGE> 36
MetLife beneficially owns 8,304,995 Conning shares, which are approximately
60.4% of the outstanding Conning shares. This percentage amount is based upon
the number of Conning shares outstanding as of March 3, 2000, as represented to
us by Conning in the merger agreement. In addition, Richard A. Liddy, Senior
Executive Vice-President of MetLife, beneficially owns 57,500 Conning shares.
Purchaser's principal executive offices are located at One Madison Avenue,
New York, New York 10010, and its telephone number is (212) 578-2211. Purchaser
is a newly formed Missouri corporation and an indirect wholly owned subsidiary
of MetLife. Purchaser has not conducted any business other than in connection
with the tender offer and the merger.
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of MetLife and Purchaser are set forth in Schedule I to this
offer to purchase.
None of MetLife, Purchaser or, to the best knowledge of MetLife and
Purchaser, any of the persons listed in Schedule I to this offer to purchase,
has during the last five years (a) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) been a party to
any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or prohibiting
activities subject to, United States federal or state securities laws or finding
any violation of such laws.
Except as set forth elsewhere in this offer to purchase or Schedule I to
this offer to purchase: (a) neither we nor, to our knowledge, any of the persons
listed in Schedule I or any associate or majority-owned subsidiary of ours or of
any of the persons so listed, beneficially owns or has a right to acquire any
Conning shares or any other equity securities of Conning; (b) neither we nor, to
our knowledge, any of the individuals or entities referred to in clause (a)
above or any of their executive officers, directors or subsidiaries has effected
any transaction in the Conning shares or any other equity securities of Conning
during the past 60 days; (c) neither we nor, to our knowledge, any of the
persons listed in Schedule I to this offer to purchase, has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of Conning (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations); (d) in the past two years, there have
been no transactions that would require reporting under the rules and
regulations of the SEC between us or any of our subsidiaries or, to our
knowledge, any of the persons listed in Schedule I, on the one hand, and Conning
or any of its executive officers, directors or affiliates, on the other hand;
and (e) in the past two years, there have been no contacts, negotiations or
transactions between us or any of our subsidiaries or, to our knowledge, any of
the persons listed in Schedule I, on the one hand, and Conning or any of its
subsidiaries or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
CONNING CAPITAL PARTNERS VI, L.P. On March 9, 2000, MetLife became a
limited partner of Conning Capital Partners VI, L.P. ("Fund VI"), which is a
private equity fund whose general partner is partially owned by two subsidiaries
of Conning and certain employees of Conning's private equity group. Conning and
its subsidiaries' capital commitment to Fund VI is $20 million. MetLife's
capital commitment to Fund VI is 5.5% of the total capital commitments of all
partners of Fund VI (without regard to the amount of MetLife's capital
commitment). However, MetLife's total capital commitment to Fund VI is subject
to a cap of $27.5 million, and the total capital commitments of MetLife and
Conning to Fund VI are subject to an aggregate cap of $47.5 million. As of March
9, 2000, the total capital commitments of Fund VI were approximately $163.5
million (including MetLife's capital commitment of approximately $9 million).
INVESTMENT MANAGEMENT SERVICES. For a number of years, pursuant to various
investment advisory agreements, Conning (through its subsidiary Conning Asset
Management Company) has provided
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<PAGE> 37
investment management services, including investment advisory services,
portfolio management services and back-office services (such as accounting
services) in respect of the general account assets of General American Life
Insurance and its insurance subsidiaries (including RGA). As of December 31,
1999, these general account assets had a market value of approximately $10.6
billion. In 1999, Conning received approximately $12.4 million in fees for
providing these services relating to these general account assets. MetLife
acquired indirect ownership of these general account assets (except for a 57.9%
interest in the general account assets of RGA and its subsidiaries) when it
completed its acquisition of GenAmerica Corporation, General American Life
Insurance's parent, on January 6, 2000. MetLife's general policy is to manage
its own general account assets and the general account assets of its insurance
subsidiaries, rather than retain the services of third-party asset managers such
as Conning. Because of this policy, beginning in March 2000, following receipt
of approval from the Missouri Department of Insurance, Conning Asset Management
Company began to transfer to MetLife, at the request of General American Life
Insurance, investment management responsibility over the general account assets
of General American Life Insurance (except for approximately $1.6 billion of
real estate mortgage assets). In a series of two additional phases (beginning no
later than June 30, 2000 and ending no later than September 30, 2000), Conning
Asset Management Company will transfer to MetLife its portfolio management and
back-office responsibilities in respect of these general account assets (except
for the real estate mortgage assets). MetLife and Conning Asset Management
Company are also in the process of effectuating similar transfers of investment
advisory, portfolio management and back-office responsibility in respect of the
general account assets of General American Life Insurance's insurance
subsidiaries (other than RGA). These transfers will be subject to the approval
of various state insurance departments. In general, the fees that MetLife will
be charging General American Life Insurance and such subsidiaries (other than
RGA) for its services will be lower than the fees that Conning Asset Management
Company charged for the same services. As a result of these transfers, Conning
Asset Management Company will no longer provide investment management services
with respect to the general account assets of General American Life Insurance
and its subsidiaries (other than in respect of the real estate mortgage assets
and the general account assets of RGA and its insurance subsidiaries).
Therefore, Conning Asset Management Company will receive significantly lower
asset management fees from General American Life Insurance and its insurance
subsidiaries (other than RGA).
9. THE MERGER AGREEMENT AND THE MERGER
THE MERGER AGREEMENT. The following summary description of the merger
agreement is qualified in its entirety by reference to the agreement itself,
which we have filed as Exhibit (d)(l) to the Schedule TO that we have filed with
the SEC. You may examine and copy the Schedule TO as set forth in Section 7,
except that it will not be available at the regional offices of the SEC.
THE TENDER OFFER. The merger agreement provides for the tender offer by
Purchaser under the terms described in Section 1.
THE MERGER. As soon as practicable after the satisfaction or waiver of the
conditions to the merger, Conning and Purchaser will take such actions to make
the merger effective. As a result of the merger, the separate corporate
existence of Purchaser will cease and Conning will continue as the surviving
corporation. At the effective time of the merger (the "Effective Time"), each
Conning share issued and outstanding immediately prior to the Effective Time
(other than any Conning shares held by MetLife or any wholly owned subsidiary of
MetLife, in the treasury of Conning or by any wholly owned subsidiary of
Conning, which Conning shares will remain outstanding or in the treasury of
Conning, as the case may be, and any Conning shares held by stockholders who
shall have properly demanded and perfected appraisal rights under Missouri law)
will be canceled and retired and will be converted into the right to receive the
tender offer price, without interest thereon. At the Effective Time, shares of
common stock of Purchaser outstanding immediately prior to the Effective Time
will be converted into Conning shares.
The directors of Conning immediately prior to the Effective Time and three
directors to be determined by MetLife will be the initial directors of Conning
and the officers of Conning immediately before the Effective Time will remain as
officers of Conning after the Effective Time. At the Effective
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<PAGE> 38
Time, the articles of incorporation of Purchaser will be the articles of
incorporation of Conning, except that it will provide that the company will be
named "Conning Corporation." The merger agreement also provides that the bylaws
of Purchaser will become the bylaws of Conning, subject to a requirement in the
merger agreement that certain indemnification provisions be preserved. See
"-- Indemnification; Directors' and Officers' Insurance."
If required by law in order to consummate the merger, Conning will (a)
prepare and file with the SEC a preliminary proxy statement relating to the
merger agreement, (b) use reasonable best efforts to have it cleared by the SEC
and to cause a definitive proxy statement to be mailed to Conning stockholders,
and (c) convene a special meeting of Conning stockholders for the purpose of
considering and taking action upon the merger agreement.
Notwithstanding the foregoing, if Purchaser acquires pursuant to the tender
offer such number of Conning shares that, when aggregated with the Conning
shares MetLife already beneficially owns, represents at least 90% of the
outstanding Conning shares, the parties to the merger agreement will take all
necessary and appropriate actions to cause the merger to become effective as
soon as practicable after the acceptance for payment of and payment for the
Conning shares by Purchaser pursuant to the tender offer without a meeting of
Conning stockholders, in accordance with, and to the extent permitted by the
Missouri General and Business Corporation Law (the "MGBCL").
STOCK OPTIONS AND REPLACEMENT AWARDS. Prior to the completion of the
tender offer, the Conning board of directors (or, if appropriate, any committee
thereof) will take all actions necessary to provide for the cancellation, at the
Effective Time, of all outstanding Stock Options that have been granted under
any Stock Plans.
Conning will also take all actions necessary to provide for, as of the
Effective Time, (a) the termination of all Stock Plans, and (b) the deletion of
any provisions in any other plan, program or arrangement that provides for the
issuance or grant of any other interest in the capital stock of Conning or any
of its subsidiaries.
In connection with the cancellation of the Stock Options, holders of Stock
Options will receive replacement awards that will be substituted for the Stock
Options. Under the replacement award program, all employees that hold Stock
Options as of the Effective Time will receive either (a) a cash payment equal to
the product of (1) the total number of Conning shares subject to such Stock
Option and (2) the excess of $12.50 over the per share exercise price of the
Stock Option; or (b) a deferred payment. In the case of non-qualified options,
the deferred payment will be equal to the present value of the Stock Options,
calculated using a Black-Scholes formula. In the case of incentive stock
options, the deferred payment will equal the greater of (a) the Black-Scholes
value of the Stock Options and (b) the excess of $12.50 over the per share
exercise price of the Stock Option, plus an additional payment representing the
value of the loss of the favorable tax treatment of incentive stock options
calculated based on such excess. All deferred awards will bear interest. The
replacement award program is subject to change, provided that the program
remains consistent with its current terms or with any amendment to which
Conning, MetLife and Purchaser mutually agree.
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<PAGE> 39
REPRESENTATIONS AND WARRANTIES. Conning has made customary representations
and warranties to MetLife and Purchaser in the merger agreement with respect to:
<TABLE>
<S> <C>
- - organization, qualification and - brokers
subsidiaries
- - capitalization - absence of certain changes
- - authority - taxes
- - SEC reports and financial statements - intellectual property
- - information to be included in the - opinion of the financial advisor to
proxy statement and other documents the Conning special committee
- - consents and approvals - material contracts
- - absence of defaults - insurance
- - absence of undisclosed liabilities - affiliated transactions
- - litigation - investment contracts, funds and
clients
- - permits - Conning Broker/Dealers
- - employee benefit matters - takeover statutes
</TABLE>
MetLife and Purchaser made customary representations and warranties to
Conning with respect:
<TABLE>
<S> <C>
- - organization and qualification - financing
- - authority - ownership of Conning shares
- - consents and approvals - conduct of business of Purchaser
- - information to be included in the
proxy statement and other documents
</TABLE>
COVENANTS. The merger agreement obligates Conning and its subsidiaries,
from the date of the merger agreement until the Effective Time, to conduct their
businesses in the ordinary course consistent with past practice. The merger
agreement also obligates Conning and its subsidiaries to use their reasonable
best efforts to preserve intact their business organizations, to keep available
the services of their present officers and key employees and to preserve their
business relationships. In addition, the merger agreement contains specific
restrictive covenants as to certain impermissible activities prior to the
earlier of the Effective Time without the prior written consent of MetLife
relating to, among other things:
<TABLE>
<S> <C>
- - amendments to Conning's articles of - issuances or sales of its securities
incorporation or by-laws
- dividends in excess of $.05 per
- - changes in capital structure quarter
- - repurchases or redemptions of - assumption of debt
securities
- material acquisitions or dispositions
- - adoption of another plan of merger
- changes in accounting methods
- - increases in compensation or adoption
of new benefit plans - additional obligations to indemnify
officers and directors
- - tax elections
- - settlement of litigation and certain
other material events or transactions.
</TABLE>
In the event Conning seeks MetLife's consent to take any of the
aforementioned actions, MetLife must respond within seven days.
ACQUISITION PROPOSALS. Under the merger agreement, Conning must promptly
advise MetLife of the receipt of any inquiries, discussions, negotiations or
proposals relating to an acquisition proposal, such as (a) a merger,
consolidation or other business combination involving Conning or its
subsidiaries, or (b) the acquisition of any capital stock or any material
portion of the assets of Conning or its subsidiaries. Conning must identify for
MetLife the offeror and the terms of any acquisition proposal and must promptly
advise
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<PAGE> 40
MetLife of any material development relating to such proposal, including the
results of any discussions or negotiations. Neither Conning nor any of its
subsidiaries may provide any non-public information to any third party (other
than MetLife, Purchaser or any of their respective affiliates or advisors)
without having entered into a customary confidentiality agreement with respect
to such information.
EFFORTS. Upon the terms and conditions contained in the merger agreement,
MetLife, Purchaser and Conning have agreed to use their reasonable best efforts
(a) to do all things necessary, proper or advisable under any applicable law to
consummate as promptly as practicable the transactions contemplated by the
merger agreement, and (b) to cause the Effective Time to occur as soon as
practicable after the stockholder vote, if any. Moreover, if, after the
Effective Time any further action is necessary to carry out the purposes of the
merger agreement, the proper officers and directors of MetLife, Purchaser and
Conning will use reasonable best efforts to take such necessary action.
In addition, none of MetLife, Purchaser or Conning may take any action that
would reasonably be expected to delay materially the obtaining of, or result in
not obtaining, any permission, approval or consent from any governmental entity
that must be obtained prior to the completion of the tender offer or the merger.
The parties to the merger must promptly consult with one another and provide any
necessary information with respect to all filings with any governmental entity,
and must otherwise cooperate in responding to governmental entities. However,
MetLife is not required to (a) enter into any agreement with any governmental
entity or to consent to any order, decree or judgment requiring MetLife to hold
separate or divest, or to restrict the dominion or control of Purchaser or any
of its affiliates over, any of the assets, properties or businesses of
Purchaser, its affiliates or Conning, in each case, as in existence on the date
of the merger agreement, or (b) defend against any litigation brought by any
governmental entity seeking to prevent the completion of the transactions
contemplated by the merger agreement.
CONSENTS. MetLife, Purchaser and Conning will use all reasonable efforts
to obtain consents of all third parties and governmental entities necessary,
proper or advisable for the completion of the transactions contemplated by the
merger agreement.
PUBLIC ANNOUNCEMENTS. MetLife, Purchaser and Conning have agreed to
consult one another before issuing any press release or other public statements
with respect to the tender offer or the merger, and each has agreed not to issue
any such press release or make any such public statement prior to consultation,
except as may be required by law or in accordance with any listing agreement
that they may have with any securities exchange or NASDAQ.
EMPLOYEE BENEFIT PLANS. Subject to the following paragraph, Purchaser,
Conning and its subsidiaries will honor, without modification, all contracts,
agreements and other commitments of the parties prior to the date of the merger
agreement that apply to any current or former employee or current or former
director of Conning or its subsidiaries. However, this undertaking will not
prevent MetLife, Purchaser or Conning or its subsidiaries from enforcing or
complying with any of these commitments in accordance with its terms, including,
exercising any right permitted thereunder or under applicable law to amend,
modify, suspend, revoke or terminate any such commitment in whole or in part.
Any workforce reductions carried out following the Effective Time by MetLife,
Conning or any of its subsidiaries with respect to employees of Conning and its
subsidiaries shall be carried out in accordance with all laws and regulations
governing the employment relationship and termination thereof, including the
Worker Adjustment and Retraining Notification Act and regulations promulgated
thereunder and any analogous state or local law.
Each of the company employee benefit plans (other than the Stock Plans) (as
defined in the merger agreement) in effect as of the date of the merger
agreement will be maintained with respect to the employees or former employees
of Conning and its subsidiaries who are covered by any such company employee
benefit plan immediately prior to the Effective Time (the "Affiliated
Employees") until MetLife, Purchaser or Conning or its subsidiaries otherwise
determines after the Effective Time. However, the merger agreement does not
limit any right contained in any such company employee benefit plan or under
applicable law to amend, modify, suspend, revoke or terminate any such company
employee benefit plan. Nonetheless, MetLife, Purchaser, Conning or their
respective subsidiaries will cause the Affiliated Employees to be provided with
employee benefits for a period of not less than one year following the
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<PAGE> 41
Effective Time that are no less favorable in the aggregate than those provided
to similarly situated employees of MetLife and its affiliates. Without limiting
the foregoing, with respect to any benefit plan established to replace any
company employee benefit plan (other than the Stock Plans) (each such plan, a
"New Plan"), each participant in any such company employee benefit plan shall
receive credit for purposes of eligibility to participate and vesting under such
New Plan for service credited for the corresponding purpose under such company
employee benefit plan; however, such crediting of service will not operate to
duplicate any benefit to any such participant or the funding for any such
benefit or cause any such company employee benefit plan or New Plan to fail to
comply with the applicable provisions of the Internal Revenue Code or the
Employee Retirement Income Security Act of 1974, as amended.
With respect to any New Plan that is a welfare benefit plan, other than
limitations, exclusions or waiting periods that are already in effect with
respect to Affiliated Employees and that have not been satisfied as of the
Effective Time, such New Plan shall waive all limitations to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements and provide each Affiliated Employee with full credit for
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements applicable to the same
calendar year under such New Plan.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The parties agreed
that all rights to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of Conning and its subsidiaries in
effect as of the date of the merger agreement with respect to matters occurring
prior to the Effective Time shall survive the Effective Time and shall continue
in full force and effect. To the maximum extent permitted by law, this
indemnification will be mandatory rather than permissive, and Conning will
advance expenses to those persons who are indemnified.
In addition, after the Effective Time, MetLife and Conning will jointly and
severally, to the fullest extent permitted by law, defend and hold harmless
everyone who serves as a director of Conning between the date of the merger
agreement and the Effective Time against all expenses, claims, damages,
liabilities and amounts paid in settlement that relate to the transactions
contemplated by the merger agreement. However, neither MetLife nor Conning will
be liable for any settlement effected without its written consent, which consent
may not be unreasonably withheld. Under this indemnification, MetLife and
Conning also will pay the reasonable fees and expenses of counsel representing
directors seeking indemnification, as long as this counsel is reasonably
satisfactory to MetLife and Conning. MetLife and Conning will promptly reimburse
these directors for any documented expenses they reasonably incur.
After the Effective Time, Conning will maintain, for six years, the
policies of the directors' and officers' liability and fiduciary insurance that
are currently in effect. Nonetheless, Conning may substitute policies of at
least the same coverage containing terms and conditions that are no less
advantageous to the beneficiaries so long as this substitution does not result
in gaps or lapses in coverage.
If Conning consolidates with or merges into any other entity and is not the
surviving corporation or if Conning transfers or conveys all or any substantial
portion of its properties and assets to any person, then proper provision will
be made so that, the successors and assigns of Conning assume the obligations of
indemnification described above.
NOTIFICATION OF CERTAIN MATTERS. The parties to the merger agreement
agreed to notify one another promptly of any of the following:
- any fact that would be reasonably likely to cause (a) any representation
or warranty to be untrue or inaccurate in any material respect, or (b)
any covenant, condition or agreement not to be complied with or satisfied
in any material respect;
- any failure to comply with or satisfy any covenant, condition or
agreement; and
- any notice or other communication from any third party alleging that its
consent may be required to complete any of the transactions contemplated
by the merger agreement.
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STATE TAKEOVER LAWS. Upon MetLife's request, Conning will take all
reasonable steps to assist in any challenge by Purchaser to the validity or
applicability of any state takeover law to any transaction contemplated by the
merger agreement.
STOCKHOLDER LITIGATION. Conning will give MetLife reasonable opportunity
to participate in the defense of any stockholder litigation against Conning or
its officers and directors relating to the transactions contemplated by the
merger agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the merger
agreement, the obligations of MetLife, Purchaser and Conning to complete the
merger are subject to the satisfaction of each of the following conditions:
- Conning will have obtained the approval of the merger agreement by the
holders of at least two-thirds of the outstanding Conning shares, unless,
after the tender offer, MetLife beneficially owns at least 90% of the
Conning shares, in which case no vote is necessary;
- Purchaser will have accepted for payment Conning shares pursuant to the
tender offer in accordance with the terms of the tender offer; and
- no law or ruling of any court of competent jurisdiction or any
governmental entity will have restrained, enjoined or prohibited the
completion of the merger, and there will not have been any statute, rule
or regulation that prevents the completion of the merger or has the
effect of making the purchase of Conning shares illegal.
In addition, the obligations of MetLife and Purchaser are conditioned on
the following:
- Conning's representations and warranties in the merger agreement must be
true and correct on the date of the merger agreement and at the Effective
Time (except to the extent any such representation or warranty expressly
speaks as of an earlier or different date), unless any inaccuracy of the
representations and warranties would not, in the aggregate, be reasonably
expected to have a material adverse effect on Conning;
- Conning must have performed all obligations required by the merger
agreement, unless non-performance would not, in the aggregate, reasonably
be expected to have a material adverse effect on Conning or prevent
completion of the merger;
- an executive officer of Conning must have signed and delivered to MetLife
a certificate regarding satisfaction of the two preceding conditions; and
- no holder of Stock Options or other options, warrants, rights or
agreements will have any right to receive any Conning shares upon
exercise of his Stock Option or other options, warrants, rights or
agreements.
In addition, the obligations of Conning are conditioned on the following:
- MetLife's and Purchaser's representations and warranties in the merger
agreement must be true and correct on the date of the merger agreement
and at the Effective Time (except to the extent any such representation
or warranty expressly speaks as of an earlier or different date), unless
any inaccuracy of the representations and warranties would not, in the
aggregate, be reasonably expected to have a material adverse effect on
MetLife;
- MetLife and Purchaser must have performed all obligations required by the
merger agreement, unless non-performance would not, in the aggregate,
reasonably be expected to have a material adverse effect on the Company
or prevent completion of the merger; and
- an executive officer of MetLife must have signed and delivered to Conning
a certificate regarding satisfaction of the two preceding conditions.
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TERMINATION. The merger agreement may be terminated and the tender offer
and the merger may be abandoned at any time prior to the Effective Time, even
after any approval by Conning stockholders:
- by the mutual written consent of MetLife and Conning;
- by MetLife or Conning if any law or any ruling of a court of competent
jurisdiction or governmental entity has restrained, enjoined or
prohibited the completion of the merger, or there exists any statute,
rule or regulation that prevents the completion of the merger or has the
effect of making the purchase of Conning shares illegal;
- by MetLife or Conning if the Effective Time has not occurred by September
9, 2000;
- by MetLife if, due to an occurrence or circumstance that would result in
a failure to satisfy any of the Tender Offer Conditions, Purchaser shall
have (a) failed to commence the tender offer within the time prescribed
by the merger agreement, (b) terminated the tender offer without having
accepted any Conning shares for payment thereunder, or (c) failed to pay
for Conning shares pursuant to the tender offer by July 9, 2000, unless
the failure to satisfy any of the Tender Offer Conditions has been caused
by a material breach of any of MetLife's or Purchaser's representations,
warranties or covenants;
- by Conning if, due to an occurrence or circumstance that would result in
a failure to satisfy any of the Tender Offer Conditions, Purchaser shall
have (a) failed to commence the tender offer within the time period
prescribed by the merger agreement, (b) terminated the tender offer
without having accepted any Conning shares for payment or (c) failed to
pay for Conning shares pursuant to the tender offer by July 9, 2000,
unless, the failure to satisfy any of the Tender Offer Conditions has
been caused by a material breach of any of Conning's representations,
warranties or covenants;
- by Conning if, before Purchaser acquires any Conning shares in the tender
offer, the Conning special committee approves or recommends another offer
or an agreement with a third party to effect an acquisition transaction
with terms that the Conning special committee has determined in good
faith (a) to be more favorable to Conning and Conning stockholders (other
than MetLife and Purchaser) than the tender offer and the merger, and (b)
require approval or else the Conning special committee would be breaching
its fiduciary duties;
- by MetLife if the Conning special committee (a) shall have withdrawn or
modified in a manner adverse to Purchaser its approval or recommendation
of the tender offer, the merger agreement or the merger, (b) shall have
approved or recommended another offer or an agreement to effect a
proposal made by a third party to effect an acquisition transaction, or
(c) shall have resolved to effect any of the foregoing;
- by MetLife if the Minimum Condition shall not have been satisfied by the
initially scheduled Expiration Date of the tender offer and on or prior
to this Expiration Date any person shall have made a proposal or public
announcement or communication to Conning with respect to an acquisition
transaction; or
- by MetLife or Conning in the event of any of (a) a material breach by the
other party of any representation or warranty contained in the merger
agreement if this breach cannot be or has not been cured within 20
business days after the giving of written notice, (b) a material breach
by the other party of any of the obligations or agreements contained
herein if this breach cannot be or has not been cured within 20 business
days after the giving of written notice to the breaching party of such
breach, or (c) Conning has incurred a material adverse effect (in which
case MetLife may terminate the merger agreement) or MetLife has incurred
a material adverse effect (in which case Conning may terminate the merger
agreement).
EFFECT OF TERMINATION. If MetLife, Purchaser or Conning terminates the
merger agreement, it will become void and have no effect, except that each party
will bear its own expenses. No party, and none of its directors, officers or
shareholders, will have any liability, except as may arise from the breach of
the merger agreement.
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AMENDMENT. MetLife, Purchaser and Conning may amend the merger agreement
by mutual written consent at any time before the Effective Time. However, if
Conning stockholders approve the merger agreement, then, after this approval, no
amendment that requires their approval can be made without their approval.
WAIVER. At any time before the Effective Time, any party to the merger
agreement may (a) extend the time for the performance of any of the obligations
or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party, or (c) waive compliance by
the other party with any of the agreements or conditions. Any agreement to any
extension or waiver will be valid only if set forth in a signed, written
instrument. The failure of any party to assert any of its rights under the
merger agreement will not constitute a waiver of its rights.
STATUTORY REQUIREMENTS. In general, under the MGBCL, a merger of two
Missouri corporations requires (a) the board of directors of each of the
corporations desiring to merge to approve a plan of merger containing provisions
with respect to certain statutorily specified matters and (b) the stockholders
of each corporation to approve the plan of merger. The stockholders of a
corporation can approve a plan of merger with the affirmative vote of the
holders of two-thirds of the outstanding shares of stock entitled to vote on
such merger. According to Conning's articles of incorporation, the Conning
shares are the only securities of Conning that entitle the holders thereof to
voting rights.
The MGBCL also provides that, if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of the
subsidiary. Accordingly, if, as a result of the tender offer or otherwise,
Purchaser acquires or controls the voting power of at least 90% of the Conning
shares, Purchaser could, and intends to, effect the merger without prior notice
to, or any action by, any other Conning stockholder.
EFFECTS OF INABILITY TO CONSUMMATE THE MERGER. Pursuant to the merger
agreement, following the completion of the tender offer and subject to certain
other conditions, Purchaser will be merged with Conning. If, following the
tender offer, Missouri law requires the approval of Conning stockholders in
order to complete the merger, Conning will submit the merger to Conning
stockholders for approval. Unless the Minimum Condition is satisfied, there can
be no assurance that the required vote of the Conning stockholders will be
obtained. Moreover, there can be no assurance that all other conditions to the
merger (as described in Sections 9 and 12) will be satisfied. Therefore, it is
possible that the merger will not be completed.
If the merger is completed, Conning stockholders that elected not to tender
their Conning shares in the tender offer will receive the same amount of
consideration in exchange for each Conning share as they would have received in
the tender offer.
MetLife already controls more than 50% of the outstanding Conning shares.
If the merger is not completed, Conning stockholders, other than those
affiliated with MetLife, will lack sufficient voting power to elect directors or
to cause other actions to be taken that require majority approval. If, for any
reason, the merger is not completed, MetLife reserves the right (a) to acquire
additional Conning shares through private purchases, market transactions, tender
or exchange offers or otherwise on terms and at prices that may be more or less
favorable than those of the tender offer, or (b) subject to any applicable legal
restrictions, to dispose of any or all Conning shares controlled by MetLife.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
tender offer. However, if the merger is completed, Conning stockholders will
have certain rights under Sections 351.447 and 351.455 of the MGBCL to dissent
and demand appraisal of, and payment of the fair value of, their Conning shares.
Such rights, if the statutory procedures (as outlined below) were complied with,
could lead to a judicial determination of the fair value required to be paid to
such dissenting holders for their Conning shares. Any such judicial
determination of the fair value of Conning shares could be based upon
considerations other than, or in addition to, the price paid in the tender offer
and the market value of the Conning shares, including asset values and the
investment value of the Conning shares. The value so determined could be more or
less than the purchase price per the applicable Conning share pursuant to
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the tender offer or the consideration per the applicable Conning share to be
paid in the merger. The judicial determination of fair value is made as of (a)
the day prior to the date on which such vote is taken if completion of the
merger requires a stockholder vote; and (b) immediately prior to the merger,
exclusive of any element of value arising from the expectation or accomplishment
of the merger, if completion of the merger does not require a stockholder vote.
In either case, the stockholder is entitled to interest on the fair value to the
date of judgment.
STATUTORY PROCEDURES FOR EXERCISING APPRAISAL RIGHTS. If completion of the
merger requires a stockholder vote, a stockholder who wishes to exercise
appraisal rights must (a) file with Conning, prior to or at the meeting at which
Conning stockholders will vote on the merger, a written objection to the merger;
(b) not vote in favor of the merger; and (c) within 20 days after the merger is
effected, make written demand on Conning for payment of the fair value of his
Conning shares as of the day prior to the date on which the vote was taken. The
written demand must state the number and class of the Conning shares that the
dissenting stockholder owns. Any stockholder who fails to make demand within the
requisite 20-day period will be conclusively presumed to have consented to the
merger and will be bound by its terms. If, within 30 days after the date on
which the merger is effected, the dissenting stockholder and Conning agree upon
the value of the dissenting stockholder's Conning shares, payment will be made,
within 90 days after the date on which the merger is effected, upon the
dissenting stockholder's surrender of his Conning Certificates. Payment of the
agreed value will terminate the stockholder's interest in Conning shares and in
Conning. If the dissenting stockholder and Conning cannot agree upon the value
of the dissenting stockholder's Conning shares, the dissenting stockholder may,
within 60 days after the expiration of the 30-day period, file a petition in any
court of competent jurisdiction within the County of Cole in the State of
Missouri asking for a judicial determination of the fair value of his Conning
shares as of the day prior to the date on which the vote was taken. If the
dissenting stockholder fails to file the petition within such time, he and all
persons claiming under him will be conclusively presumed to have approved and
ratified the merger, and will be bound by its terms. The judgment will be
payable only upon and simultaneously with the dissenting stockholder's surrender
of his Conning Certificates. Upon payment of the judgment, the dissenting
stockholder will cease to have any interest in his Conning shares and in
Conning. A dissenting stockholder's right to be paid the fair value of his
Conning shares will cease if and when Conning abandons the merger.
If completion of the merger does not require a stockholder vote, Conning
will notify each stockholder that the merger has become effective within ten
days after the Effective Date. Within 20 days after the mailing of this notice,
a stockholder who wishes to exercise appraisal rights must make a written demand
to Conning for payment of the value of his Conning shares immediately prior to
the merger exclusive of any element of value arising from the expectation or
accomplishment of the merger. After this 20-day period expires, the dissenting
stockholder and Conning will have 30 days to agree upon the value of the
dissenting stockholder's Conning shares. If the dissenting stockholder and
Conning cannot agree, the dissenting stockholder may, within 60 days after the
expiration of the 30-day period, file a petition in any court of competent
jurisdiction within the County of Cole in the State of Missouri asking for a
judicial determination of the fair value of his Conning shares immediately prior
to the merger exclusive of any element of value arising from the expectation or
accomplishment of the merger. If the dissenting stockholder fails to file such a
petition within such time, he and all persons claiming under him will be
conclusively presumed to have approved and ratified the merger, and will be
bound by its terms. The judgment will be payable only upon and simultaneously
with the dissenting stockholder's surrender to Conning of his Certificates. Upon
payment of the judgment, the dissenting stockholder will cease to have any
interest in his Conning shares and in Conning.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE SUBSTANTIVE RIGHTS OF, OR THE
PROCEDURES TO BE FOLLOWED BY, STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE
APPRAISAL RIGHTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTIONS
351.447 AND 351.455 OF THE MGBCL.
THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE
TO THE APPLICABLE PROVISIONS OF THE MGBCL.
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PLANS FOR CONNING. If MetLife acquires 100% control of Conning, it is
MetLife's present intent to operate Conning as a subsidiary under Conning's
current name. In addition, MetLife may make nominations to the Conning board of
directors to appoint individuals to fill current vacancies on the Conning board
of directors. MetLife also reserves the right to replace current Conning board
members. In addition, MetLife reserves the right to make recommendations to the
Conning board of directors to appoint individuals to fill vacant senior
management positions that may exist at Conning from time to time. Conning
announced, on March 9, 2000, that the Conning board of directors named James L.
Lipscomb as President and Chief Executive Officer, succeeding Arthur C. Reeds,
III, who announced his resignation effective immediately. Mr. Reeds will remain
on the Conning board of directors. Mr. Lipscomb, a Senior Vice President at
MetLife, has had a wide range of experience at MetLife, including investments,
and, most recently, was in charge of corporate planning.
MetLife will conduct a further review of Conning and its subsidiaries and
their respective assets, businesses, corporate structure, capitalization,
operations, properties, policies, management and personnel. After such review,
MetLife will determine what actions or further changes, if any, would be
desirable in light of the circumstances that then exist, and reserves the right
to effect such actions or changes. MetLife's decisions could be affected by
information hereafter obtained, changes in general economic or market conditions
or in the business of Conning or its subsidiaries, actions by Conning or its
subsidiaries, and other factors.
Except as described in this offer to purchase, MetLife and its affiliates
have no present plans or proposals that would require disclosure under United
States federal securities laws.
PROVISIONS FOR UNAFFILIATED STOCKHOLDERS. MetLife will not grant Conning
stockholders that are unaffiliated with MetLife access to the corporate files of
MetLife. MetLife will not provide unaffiliated Conning stockholders with counsel
or appraisal services at the expense of MetLife.
10. SOURCE AND AMOUNT OF FUNDS
Purchaser estimates that the total amount of funds required to purchase all
outstanding Conning shares pursuant to the tender offer, to pay the replacement
awards that will be substituted for the Stock Options and to pay related fees
and expenses will be approximately $88 million. The funds necessary to purchase
Conning shares pursuant to the tender offer, to pay the replacement awards and
to pay related fees and expenses will be derived from MetLife's working capital.
11. DIVIDENDS AND DISTRIBUTIONS
Conning may not, without the prior written consent of MetLife, split,
combine, or reclassify any shares of its capital stock, declare, set aside or
pay any dividend or other distribution in respect of its capital stock, other
than regularly scheduled quarterly dividends not to exceed $0.05 per share per
quarter, or redeem or otherwise acquire any of its securities.
12. CONDITIONS OF THE OFFER
Notwithstanding any other provision of the tender offer, Purchaser is not
required to accept for payment or (subject to any applicable rules and
regulations of the SEC) pay for, and may delay the acceptance for payment of,
any tendered Conning shares and may terminate or, subject to the terms of the
merger agreement, amend the tender offer, unless (a) the Minimum Condition shall
have been satisfied, and (b) at any time on or after execution of the merger
agreement and before the acceptance for payment for Conning shares, none of the
following conditions exists or has occurred and remains in effect:
(1) there is pending any action by any governmental entity, or any law
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the tender offer:
- seeking to or that does prohibit or impose any material limitations on
MetLife's or Purchaser's ownership or operation (or that of any of
their respective subsidiaries or affiliates) of all or a material
portion of their or Conning's or any of its subsidiaries' businesses
or assets, or to
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compel MetLife or Purchaser or their respective subsidiaries and
affiliates to dispose of or hold separate any material portion of the
business or assets of Conning or MetLife or Purchaser and their
respective subsidiaries, in each case, taken as a whole,
- seeking to or that does make the acceptance for payment of, or the
payment for, some or all of the Conning shares illegal or otherwise
prohibiting, restricting or significantly delaying consummation of the
tender offer or the merger or the performance of any of the other
transactions contemplated by the merger agreement, or seeking to
obtain from Conning or Purchaser any damages that are material in
MetLife's view in relation to Conning and its subsidiaries as taken as
a whole,
- seeking to or that does impose material limitations on the ability of
Purchaser, or render Purchaser unable, to acquire or hold or to
exercise effectively all rights of ownership of the Conning shares,
including, the right to vote any Conning shares purchased by Purchaser
on all matters properly presented to Conning stockholders, or
effectively to control in any material respect in MetLife's view the
business, assets or operations of Conning, its subsidiaries or
Purchaser or any of their respective affiliates,
- seeking to or that does impose circumstances under which the purchase
or payment for some or all of the Conning shares pursuant to the
tender offer and merger could reasonably be expected to have a
material adverse effect on Purchaser, or
- that otherwise would reasonably be expected to have a material adverse
effect on Conning; or
(2) there has occurred any change that could reasonably be expected to
constitute a material adverse effect on Conning; or
(3) there has occurred (A) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange,
Inc. or the NASDAQ for a period in excess of 24 hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (B)
the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not mandatory),
(C) the commencement of a war or other international or national
calamity, directly or indirectly, involving the United States, (D) any
mandatory limitation by any United States governmental authority or
agency that would reasonably be expected to have a material adverse
effect on the extension of credit by banks or other financial
institutions, or (E) in the case of any of the foregoing, existing at
the date of the execution of the merger agreement, a material
acceleration or worsening thereof; or
(4) the merger agreement has been terminated in accordance with its terms;
or
(5) (A) the Conning special committee has withdrawn, changed or modified
(including by amendment of Conning's Solicitation/Recommendation
Statement on Schedule 14D-9) in a manner adverse to Purchaser or
MetLife its approval or recommendation of the tender offer, the merger
agreement or the merger or has recommended an acquisition proposal, or
has adopted any resolution to effect any of the foregoing, (B) the
Conning special committee has recommended any proposal other than this
agreement in respect of an acquisition proposal, (C) the Conning
special committee has continued discussions with any third party
concerning an acquisition proposal for more than ten business days
after the date of receipt of such acquisition proposal, or (D) an
acquisition proposal that is publicly disclosed and that contains a
proposal as to price (without regard to whether such proposal specifies
a specific price or a range of potential prices) has been commenced,
publicly proposed or communicated to Conning and the Conning special
committee has not rejected such proposal within ten business days of
the earlier to occur of (i) Conning's receipt of such acquisition
proposal and (ii) the date such acquisition proposal first becomes
publicly disclosed; or
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(6) not all consents, permits and approvals of governmental entities and
other persons have been obtained without material adverse conditions
attached and material expenses imposed on Conning or any of its
subsidiaries; or
(7) the representations and warranties of Conning set forth in the merger
agreement are not true and correct as of the date of the merger
agreement or on and as of the Expiration Date as though made on and as
of the Expiration Date (except to the extent any such representation or
warranty expressly speaks as of an earlier or different date, and
except for changes contemplated or permitted by the terms hereof),
except, in either case, where the failure of such representations and
warranties to be so true and correct would not, in the aggregate, be
reasonably likely to have a material adverse effect on Conning; or
(8) Conning has not performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior
to the Expiration Date.
The foregoing conditions are for the sole benefit of MetLife and Purchaser.
MetLife or Purchaser may assert the failure of any of the conditions regardless
of the circumstances (other than any circumstance arising solely by any action
or inaction by MetLife or Purchaser) giving rise to any such failure. The
conditions may be waived by MetLife or Purchaser in whole or in part at any
time. The failure by MetLife or Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, and each such
right shall be deemed an ongoing right that may be asserted at any time.
A public announcement may be made of a material change in, or waiver of,
such conditions. The tender offer may, in certain circumstances, be extended in
connection with any such change or waiver.
Purchaser acknowledges that the SEC believes that (a) if Purchaser is
delayed in accepting the Conning shares it must either extend the tender offer
or terminate the tender offer and promptly return the Conning shares, and (b)
the circumstances in which a delay in payment is permitted are limited and do
not include unsatisfied conditions of the tender offer, except with respect to
most required regulatory approvals.
13. LEGAL AND REGULATORY MATTERS
Except as set forth in this offer to purchase, based on our review of
publicly available filings by Conning with the SEC and other information
regarding Conning, we are not aware of any licenses or regulatory permits that
appear to be material to the business of Conning and its subsidiaries, taken as
a whole, that might be adversely affected by our acquisition of Conning shares
in the tender offer. In addition, we are not aware of any filings, approvals or
other actions by or with any governmental entity or administrative or regulatory
agency that would be required for our acquisition or ownership of the Conning
shares. Should any such approval or other action be required, we expect to seek
such approval or action, except as described under "-- Takeover Laws." Should
any such approval or other action be required, we cannot be certain that we
would be able to obtain any such approval or action without substantial
conditions, or that adverse consequences might not result to Conning's or its
subsidiaries' businesses, or that certain parts of Conning's, MetLife's or any
of their respective subsidiaries' businesses might not have to be disposed of or
held separate in order to obtain such approval or action. In that event, we may
not be required to purchase any Conning shares in the tender offer. See
"Introduction" and Section 12 for a description of the conditions to the tender
offer.
STATE TAKEOVER LAWS. A number of states (including Missouri, where Conning
is incorporated) have adopted takeover laws and regulations that purport to be
applicable to attempts to acquire securities of corporations that are
incorporated in those states or that have substantial assets, stockholders,
principal executive offices or principal places of business in those states. To
the extent that these state takeover statutes purport to apply to the tender
offer or the merger, we believe that those laws conflict with United States
federal law and are an unconstitutional burden on interstate commerce. In 1982,
the United States Supreme Court, in Edgar v. Mite Corp., invalidated, on
constitutional grounds, the Illinois Business Takeovers Statute, which, as a
matter of state securities law, made takeovers of corporations meeting
43
<PAGE> 49
certain requirements more difficult. The reasoning in that decision is likely to
apply to certain other state takeover statutes. In 1987, however, in CTS Corp.
v. Dynamics Corp. of America, the United States Supreme Court held that the
State of Indiana could, as a matter of corporate law, and, in particular, those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, as long as
those laws were applicable only under certain conditions. Subsequently, in TLX
Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma because they would subject those
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit. In December 1988, a federal district court in
Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of
the Florida Affiliated Transactions Act and Florida Control Conning Share
Acquisition Act were unconstitutional as applied to corporations incorporated
outside of Florida.
We have not attempted to comply with any state takeover statutes in
connection with the tender offer or the merger. We reserve the right to
challenge the validity or applicability of any state law allegedly applicable to
the tender offer or the merger, and nothing in this tender offer to purchase nor
any action that we take in connection with the tender offer is intended as a
waiver of that right. In the event that it is asserted that one or more takeover
statutes apply to the tender offer or the merger, and it is not determined by an
appropriate court that the statutes in question do not apply or are invalid as
applied to the tender offer or the merger, as applicable, we may be required to
file certain documents with, or receive approvals from, the relevant state
authorities, and we might be unable to accept for payment or purchase Conning
shares tendered in the tender offer or be delayed in continuing or consummating
the tender offer. In that case, we may not be obligated to accept for purchase,
or pay for, any Conning shares tendered. See Section 12.
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended, and the rules that have been promulgated thereunder by the Federal
Trade Commission, certain transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice and the FTC and certain waiting period requirements have been satisfied.
However, the acquisition of Conning shares by Purchaser pursuant to the tender
offer is not subject to these requirements because MetLife and its affiliates
currently own in excess of 50% of the outstanding Conning shares.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Conning
shares by Purchaser pursuant to the tender offer. At any time before or after
the purchase of Conning shares pursuant to the tender offer by Purchaser, the
FTC or the Antitrust Division could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Conning shares pursuant to the tender offer or seeking
the divestiture of Conning shares purchased by Purchaser or the divestiture of
substantial assets of MetLife or its subsidiaries. Private parties and the state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances. Based upon an examination of information
available to MetLife relating to the businesses in which MetLife, Conning and
their respective affiliates are engaged, MetLife believes that the tender offer
will not violate the antitrust laws. Nevertheless, there can be no assurance
that a challenge to the tender offer on antitrust grounds will not be made or,
if such a challenge is made, what the result would be.
STOCKHOLDER LITIGATION. Conning, MetLife and certain of Conning's
directors have been named as defendants in three purported stockholder class
actions. Two of these actions have been filed in the Supreme Court of the State
of New York, County of New York, and are captioned Shive v. Metropolitan Life
Ins. Co. and Hamann v. Metropolitan Life Ins. Co. The third action was filed in
the Circuit Court of the City of Saint Louis, 22d Circuit, State of Missouri,
and is captioned Moritz v. Reeds. The allegations in all three cases (the
"Actions") are substantially similar, and each complaint in the Actions alleges
that
44
<PAGE> 50
(a) the MetLife proposal of $10.50 was unfair, (b) MetLife and the Conning
directors were breaching their fiduciary duties to the stockholders of Conning
not affiliated with MetLife in connection with the MetLife proposal, and (c)
appropriate steps were not being taken to insure that the stockholders of
Conning not affiliated with MetLife would receive fair value for their Conning
shares in any transaction that might occur. As relief, the complaints in the
Actions sought, among other things, an injunction against completion of the
original MetLife proposal.
On March 8, 2000, as the result of negotiations between counsel for parties
in the Actions, an agreement in principle was reached providing for the
settlement of the Actions, subject to Court approval and the completion of the
merger, among other things. As part of the proposed settlement, the defendants
have acknowledged that the pendency of the Actions and the efforts of
plaintiffs' counsel were significant factors that led to the increase in the
MetLife offer from $10.50 per share to $12.50 per share.
14. FEES AND EXPENSES
Credit Suisse First Boston is acting as the Dealer Manager in connection
with the tender offer and has provided certain financial advisory services to
MetLife in connection with the tender offer and the merger. We will pay Credit
Suisse First Boston a customary transaction fee for its services and will
reimburse Credit Suisse First Boston for reasonable out-of-pocket expenses. We
have agreed to indemnify Credit Suisse First Boston and its affiliates and
certain other persons against certain liabilities and expenses in connection
with their services as the Dealer Manager and financial advisor, including
liabilities under the United States federal securities laws. At any time, Credit
Suisse First Boston and its affiliates may actively trade Conning shares for
their own account or for the accounts of customers, and, accordingly, may at any
time hold a long or short position in Conning shares.
We have retained MacKenzie Partners as Information Agent in connection with
the tender offer. The Information Agent may contact holders of Conning shares by
mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward material relating to
the tender offer to beneficial owners of Conning shares. We will pay the
Information Agent reasonable and customary compensation for these services in
addition to reimbursing the Information Agent for its reasonable out-of-pocket
expenses. We have agreed to indemnify the Information Agent against certain
liabilities and expenses in connection with the tender offer, including certain
liabilities under the United States federal securities laws.
In addition, we have retained ChaseMellon Shareholder Services as the
Depositary. We will pay the Depositary reasonable and customary compensation for
its services in connection with the tender offer, will reimburse the Depositary
for its reasonable out-of-pocket expenses and will indemnify the Depositary
against certain liabilities and expenses, including certain liabilities under
the federal securities laws.
MetLife has paid or will be responsible for paying certain out-of-pocket
expenses and the following expenses incurred or estimated to be incurred in
connection with the tender offer and the merger:
<TABLE>
<CAPTION>
IN THOUSANDS
------------
<S> <C>
Dealer Manager and Financial Advisor.................... $ 750
Legal................................................... 500
Filing.................................................. 19
Information Agent....................................... 5
Depositary.............................................. 15
Printing................................................ 50
</TABLE>
45
<PAGE> 51
Conning has paid or will be responsible for paying the following expenses
incurred or estimated to be incurred in connection with the tender offer and the
merger:
<TABLE>
<CAPTION>
IN THOUSANDS
------------
<S> <C>
Financial Advisor....................................... $1,100
Legal................................................... 505
</TABLE>
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Conning shares pursuant
to the tender offer. We will reimburse brokers, dealers, commercial banks and
trust companies and other nominees, upon request, for customary clerical and
mailing expenses incurred by them in forwarding offering materials to their
customers.
15. MISCELLANEOUS
We are not aware of any jurisdiction in which the making of the tender
offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If we become aware of any valid state statute prohibiting
the making of the tender offer or the acceptance of Conning shares, we will make
a good faith effort to comply with that state statute. If, after a good faith
effort, we cannot comply with the state statute, we will not make the tender
offer to, nor will we accept tenders from or on behalf of, the holders of
Conning shares in that state.
We have filed with the SEC a Schedule TO, together with exhibits,
furnishing certain additional information with respect to the tender offer, and
may file amendments to the Schedule TO. The Schedule TO and any exhibits or
amendments may be examined and copies may be obtained from the SEC in the same
manner as described in Section 7 with respect to information concerning Conning,
except that copies will not be available at the regional offices of the SEC.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON OUR BEHALF THAT IS NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, YOU SHOULD NOT RELY ON ANY
SUCH INFORMATION OR REPRESENTATION.
Neither the delivery of the offer to purchase nor any purchase pursuant to
the tender offer will, under any circumstances, create any implication that
there has been no change in the affairs of MetLife, Purchaser, Conning or any of
their respective subsidiaries since the date as of which information is
furnished or the date of this offer to purchase.
THE MATTERS DISCUSSED UNDER THE HEADING "SPECIAL FACTORS" AND IN SECTION 7
CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
STOCKHOLDERS ARE CAUTIONED THAT, IN ADDITION TO THE OTHER FACTORS SET FORTH
UNDER THE HEADING "SPECIAL FACTORS," THE FOLLOWING FACTORS MAY CAUSE CONNING'S
ACTUAL FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS: (a) SUPPLY AND DEMAND FOR CONNING'S PRODUCTS AND
SERVICES; (b) COMPETITIVE PRICING PRESSURES; AND (c) CHANGES IN INDUSTRY LAWS
AND REGULATION.
CC MERGER SUB INC.
March 20, 2000
46
<PAGE> 52
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF METLIFE AND PURCHASER
DIRECTORS AND EXECUTIVE OFFICERS OF METLIFE. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of MetLife. Unless otherwise indicated below,
each occupation set forth opposite each individual refers to employment with
MetLife. The business address of each such individual is c/o MetLife, One
Madison Avenue, New York, New York 10010, and each such individual is a citizen
of the United States of America, except for Mr. Tweedie who is a citizen of the
United Kingdom and Canada.
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Robert H. Benmosche...................... Chairman, President, Chief Executive Officer and
Director
Curtis H. Barnette....................... Director
Gerald Clark............................. Vice-Chairman, Chief Investment Officer and
Director
Joan Ganz Cooney......................... Director
Burton A. Dole, Jr....................... Director
James R. Houghton........................ Director
Harry P. Kamen........................... Director
Helene L. Kaplan......................... Director
Charles M. Leighton...................... Director
Allen E. Murray.......................... Director
Stewart G. Nagler........................ Vice-Chairman, Chief Financial Officer and
Director
John J. Phelan, Jr....................... Director
Hugh B. Price............................ Director
Robert G. Schwartz....................... Director
Ruth J. Simmons.......................... Director
William C. Steere, Jr.................... Director
Gary A. Beller........................... Senior Executive Vice-President and General
Counsel
James M. Benson.......................... President, Individual Business; Chairman, Chief
Executive Officer and President, New England Life
Insurance Company
C. Robert Henrikson...................... President, Institutional Business
Richard A. Liddy......................... Senior Executive Vice-President
Catherine A. Rein........................ Senior Executive Vice-President; President and
Chief Executive Officer of Metropolitan Property
and Casualty Insurance Company
William J. Toppeta....................... President, Client Services and Chief
Administrative Officer
John H. Tweedie.......................... Senior Executive Vice-President
Lisa M. Weber............................ Executive Vice-President, Human Resources
Judy E. Weiss............................ Executive Vice-President and Chief Actuary
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of Purchaser. Unless otherwise indicated below,
each occupation set forth opposite each individual refers to employment with
Purchaser. The business address of
I-1
<PAGE> 53
each such individual is c/o MetLife, One Madison Avenue, New York, New York
10010, and each such individual is a citizen of the United States of America.
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Gary A. Beller........................... President and Chairman of the Board
Terence Lennon........................... Vice-President and Treasurer
Jane Weinberg............................ Vice-President and Secretary
</TABLE>
Robert H. Benmosche has been a director of MetLife since 1997. Mr.
Benmosche has been Chairman of the Board, President and Chief Executive Officer
of MetLife since July 1998, was President and Chief Operating Officer of MetLife
from November 1997 to June 1998, and was Executive Vice-President of MetLife
from September 1995 to October 1997. Previously, he was Executive Vice-President
of PaineWebber Group Incorporated from 1989 to 1995.
Curtis H. Barnette has been a director of MetLife since 1994. Mr. Barnette
has been Chairman of the Board and Chief Executive Officer of Bethlehem Steel
Corporation since November 1992. He is a director of Owens Corning Incorporated.
Gerald Clark has been a director of MetLife since 1997. Mr. Clark has been
Vice-Chairman of the Board and Chief Investment Officer of MetLife since July
1998, was Senior Executive Vice-President and Chief Investment Officer of
MetLife from December 1995 to July 1998 and was Executive Vice-President and
Chief Investment Officer of MetLife from September 1992 to December 1995. Mr.
Clark is a director of Credit Suisse Group.
Joan Ganz Cooney has been a director of MetLife since 1980. Ms. Cooney has
been Chairman of the Executive Committee of Children's Television Workshop since
1990. Ms. Cooney is a director of Johnson & Johnson Inc.
Burton A. Dole, Jr. has been a director of MetLife since 1996. Mr. Dole was
Chairman of the Board of Nellcor Puritan Bennett, Incorporated from 1995 until
his retirement in 1997. He had been the Chairman of the Board, President and
Chief Executive Officer of Puritan Bennett from 1986 to 1995 and the President
and Chief Executive Officer of Puritan Bennett from 1980 to 1986.
James R. Houghton has been a director of MetLife since 1975. Mr. Houghton
has been Chairman of the Board Emeritus of Corning Incorporated since 1996. He
was the Chairman of the Board of Corning from 1983 until his retirement in 1996.
Mr. Houghton is a director of Corning, Exxon Corporation and J.P. Morgan & Co.
Incorporated.
Harry P. Kamen has been a director of MetLife since 1992. He was the
Chairman of the Board and Chief Executive Officer of MetLife from April 1993
until his retirement in July 1998 and, in addition, was President of MetLife
from December 1995 to November 1997. Mr. Kamen is a director of Banco Santander
Central Hispano SA (Spain), Bethlehem Steel Corporation, National Association of
Securities Dealers, Inc., Nvest Corporation, a subsidiary of MetLife, and
Pfizer, Inc.
Helene L. Kaplan has been a director of MetLife since 1987. Ms. Kaplan is
of counsel to the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. Ms.
Kaplan is a director of Bell Atlantic Corporation, The Chase Manhattan
Corporation, The May Department Stores Company and Exxon Mobil Corporation.
Charles M. Leighton has been a director of MetLife since 1996. Mr. Leighton
was the Chairman and Chief Executive Officer of the CML Group, Inc. from 1969
until his retirement in March 1998. CML Group filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code in December 1998. Mr. Leighton
is a director of Nvest.
Allen E. Murray has been a director of MetLife since 1983. Mr. Murray was
Chairman of the Board, President and Chief Executive Officer of Mobil
Corporation from February 1986 until March 1993, and was Chairman of the Board
and Chief Executive Officer of Mobil from March 1993 until his retirement in
I-2
<PAGE> 54
March 1994. Mr. Murray is a director of Morgan Stanley Dean Witter & Co. and
Minnesota Mining & Manufacturing Company.
Stewart G. Nagler has been a director of MetLife since 1997. Mr. Nagler has
been Vice-Chairman of the Board and Chief Financial Officer of MetLife since
July 1998, and was Senior Executive Vice-President and Chief Financial Officer
of MetLife from April 1993 to July 1998.
John J. Phelan, Jr. has been a director of MetLife since 1985. Mr. Phelan
has been a senior advisor to the Boston Consulting Group since 1992. Prior to
that time, Mr. Phelan was Chairman and Chief Executive Officer of the New York
Stock Exchange. Mr. Phelan is a director of Eastman Kodak Company and Merrill
Lynch & Co., Inc.
Hugh B. Price has been a director of MetLife since 1994. Mr. Price has been
President and Chief Executive Officer of the National Urban League, Inc. since
1994. Mr. Price is a director of Sears, Roebuck and Co. and Bell Atlantic
Corporation.
Robert G. Schwartz has been a director of MetLife since 1980. Mr. Schwartz
was Chairman of the Board, President and Chief Executive Officer of MetLife from
September 1989 until his retirement in March 1993. Mr. Schwartz is a director of
COMSAT Corporation, Consolidated Edison Company of New York, Inc., Lowe's
Companies, Inc. and Potlatch Corporation. Mr. Schwartz will be retiring from the
MetLife board of directors effective on March 31, 2000, after his 72nd birthday.
Ruth J. Simmons has been a director of MetLife since 1995. Dr. Simmons has
been President of Smith College since 1995. Prior to that time, she was
Vice-Provost of Princeton University from 1992 to 1995. Dr. Simmons is a
director of Goldman, Sachs & Co., Pfizer Inc. and Texas Instruments, Inc.
William G. Steere, Jr. has been a director of MetLife since 1997. Mr.
Steere has been Chairman of the Board and Chief Executive Officer of Pfizer
since 1992. Mr. Steere is a director of Dow Jones & Company, Inc., Minerals
Technologies, Inc. and Texaco Inc.
Gary A. Beller has been Senior Executive Vice-President and General Counsel
of MetLife since February 1998. He was Executive Vice-President and General
Counsel of MetLife from August 1996 to January 1998. Mr. Beller served as
Executive Vice-President and Chief Legal Officer of MetLife from November 1994
to July 1996.
James M. Benson has been President of Individual Business of MetLife since
May 1999. He has been Chairman of the Board of New England Life Insurance
Company since May 1998, Chief Executive Officer of New England Life since
January 1998, and President of New England Life since June 1997. He was Chief
Operating Officer of New England Life from June 1997 to December 1997. Mr.
Benson was the President and Chief Operating Officer of The Equitable Companies
Incorporated from February 1996 to May 1997, and was President of The Equitable
Life Assurance Society of the United States from February 1994 to May 1997, and
Chief Executive Officer from February 1996 to May 1997, and Chief Operating
Officer of the Equitable Life Assurance Society from February 1994 to February
1996.
C. Robert Henrikson has been President of Institutional Business of MetLife
since May 1999. He was Senior Executive Vice-President, Institutional Business
of MetLife, from December 1997 to May 1999, Executive Vice-President,
Institutional Business of MetLife, from January 1996 to December 1997, Executive
Vice-President, Pensions of MetLife, from January 1995 to January 1996, and
Senior Vice-President, Pensions of MetLife, from January 1991 to January 1995.
Terence Lennon has been Executive Vice-President of Government Relations,
Compliance and Public Relations (previously called Corporate Special Services)
since January 1998. He was Executive Vice-President of Planning and Mergers &
Acquisitions from January 1997 to January 1998. He was Senior Vice-President of
Mergers & Acquisitions from March 1994 to December 1996.
Richard A. Liddy has been Senior Executive Vice-President of MetLife since
February 2000. He has been Chairman of GenAmerica since January 1997. Prior to
that time he served in various executive
I-3
<PAGE> 55
capacities at General American Life Insurance. Mr. Liddy is a director of RGA,
Conning, Brown Shoe Company, Ralston Purina Company, Energizer Holdings, Inc.
and Ameren Corporation.
Catherine A. Rein has been President and Chief Executive Officer of
Metropolitan Property and Casualty Insurance Company since March 1999. She has
been Senior Executive Vice-President of MetLife since February 1998 and was
Executive Vice-President of MetLife from October 1989 to February 1998. Ms. Rein
is a director of Corning Incorporated, The Bank of New York Company, Inc. and
GPU, Inc.
William J. Toppeta has been President of Client Services and Chief
Administrative Officer of MetLife since May 1999. He was Senior Executive
Vice-President, Head of Client Services, of MetLife from March 1999 to May 1999,
Senior Executive Vice-President, Individual Business, of MetLife from February
1998 to March 1999, Executive Vice-President, Individual Business, of MetLife
from July 1996 to February 1998, Senior Vice-President, of MetLife from October
1995 to July 1996 and President and Chief Executive Officer, Canadian
Operations, of MetLife from January 1994 to October 1995.
John H. Tweedie has been Senior Executive Vice-President, Finance and
International, of MetLife since March 1999. He was Senior Executive
Vice-President of MetLife from May 1998 to March 1999 and Executive
Vice-President from January 1994 to April 1998.
Lisa M. Weber has been Executive Vice-President of MetLife since December
1999 and head of Human Resources of MetLife since March 1998. She was Senior
Vice-President of MetLife from March 1998 to November 1999. Previously, she was
Senior Vice-President of Human Resources of PaineWebber Group Incorporated,
where she was employed for ten years.
Judy E. Weiss has been Executive Vice-President and Chief Actuary of
MetLife since February 1998. She was Senior Vice-President and Chief Actuary of
MetLife from June 1996 to February 1998 and Senior Vice President from May 1991
to June 1996.
Jane Weinberg has been Vice-President and Investment Counsel of MetLife
since June 1999. Previously, she served as Associate General Counsel of MetLife.
I-4
<PAGE> 56
Facsimile copies of letters of transmittal, properly completed and duly
executed, will be accepted. Letters of transmittal, Conning Certificates and any
other required documents should be sent or delivered by each Conning stockholder
or broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below:
The Depositary for the tender offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop - Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
By Facsimile Transmission: Telephone to Confirm Fax:
(201) 296-4293 (201) 296-4860
</TABLE>
You may direct questions and requests for assistance to the Information
Agent or the Dealer Manager at the addresses and telephone numbers set forth
below. You may obtain additional copies of this offer to purchase, the letter of
transmittal and other tender offer materials from the Information Agent or the
Dealer Manager as set forth below, and they will be furnished promptly at our
expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the tender offer.
The Information Agent for the tender offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
Call Collect (212) 929-5500
Call Toll Free (800) 322-2885
The Dealer Manager for the tender offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
CONNING CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 20, 2000
BY
CC MERGER SUB INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
METROPOLITAN LIFE INSURANCE COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, APRIL 17, 2000, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop -- Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
By Facsimile Transmission: Telephone to Confirm Fax:
(201) 296-4293 (201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS
NAME(S) APPEAR ON CERTIFICATE(S))
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- --------------------------------------------------------------------------------------------------------------------------------
SHARE TOTAL NUMBER OF NUMBER
CERTIFICATE SHARES REPRESENTED BY OF SHARES
NUMBER(S) SHARE CERTIFICATE(S)* TENDERED**
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
TOTAL CERTS. SHARES TENDERED
-------------------------------------------
TOTAL BOOK SHARES TENDERED
-------------------------------------------
TOTAL SHARES TENDERED
- --------------------------------------------------------------------------------------------------------------------------------
* Certificate numbers are not required if tender is made by book-entry transfer.
** If you desire to tender fewer than all Shares represented by a certificate listed above, please indicate in this column the
number of Shares you wish to tender. Otherwise, all Shares represented by such certificate will be deemed to have been
tendered. See Instruction 4.
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 9.
Number of Shares represented by the lost or destroyed certificates:
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of Conning
Corporation, a Missouri corporation, either if certificates ("Share
Certificates") representing shares of Common Stock, par value $0.01 per share
(the "Shares"), are to be forwarded herewith or, unless an Agent's Message (as
defined in the Offer to Purchase) is utilized, if delivery of Shares is to be
made by book-entry transfer to an account maintained by ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3, "Procedures for Accepting the Offer and Tendering Shares," of the Offer to
Purchase dated March 20, 2000 (the "Offer to Purchase"). DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or prior to the expiration date of the Offer or who are unable to
complete the procedure for book-entry transfer prior to the expiration date of
the Offer may nevertheless tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3, "Procedures for Accepting the Offer
and Tendering Shares," in the Offer to Purchase. See Instruction 2 below.
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------------------------------------
Provide Account Number and Transaction Code Number:
Account Number:
----------------------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
----------------------------------------------------------------------------
Window Ticket Number (if any):
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------------------------------------------
IF DELIVERED BY BOOK ENTRY TRANSFER TO THE BOOK-ENTRY TRANSFER FACILITY,
CHECK BOX: [ ]
Account Number:
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Transaction Code Number:
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2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to CC Merger Sub Inc., a Missouri
corporation ("Purchaser") and an indirect wholly owned subsidiary of
Metropolitan Life Insurance Company, a New York life insurance company
("Parent"), the above-described shares of Common Stock, par value $0.01 per
share (the "Shares"), of Conning Corporation, a Missouri corporation (the
"Company"), pursuant to Purchaser's offer to purchase all outstanding Shares at
$12.50 per Share, net to the seller in cash (less any required withholding
taxes), without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated March 20, 2000 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this letter of
transmittal (the "Letter of Transmittal," which together with the Offer to
Purchase, as amended or supplemented from time to time, collectively constitute
the "Offer"). The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of March 9, 2000, by and among Parent, Purchaser and the
Company.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after March 20, 2000 (collectively,
"Distributions") and irrevocably appoints ChaseMellon Shareholder Services,
L.L.C. (the "Depositary") the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares and all Distributions, with full power
of substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver certificates representing Shares
("Share Certificates") and all Distributions, or transfer ownership of such
Shares and all Distributions on the account books maintained by the Book-Entry
Transfer Facility, together, in either case, with all accompanying evidences of
transfer and authenticity, to or upon the order of Purchaser; (ii) present such
Shares and all Distributions for transfer on the books of the Company; and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares and all Distributions, all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints each of Gary A. Beller, Terence
Lennon and Jane C. Weinberg as agent, attorney-in-fact and proxy of the
undersigned, each with full power of substitution, to vote in such manner as
such attorney and proxy or his or her substitute shall, in his or her sole
discretion, deem proper and otherwise act (by written consent or otherwise) with
respect to all the Shares tendered herewith and which have been accepted for
payment by Purchaser prior to the time of such vote or other action and all
Shares and other securities issued in Distributions in respect of such Shares
which the undersigned is entitled to vote at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned or postponed
meeting) or consent in lieu of any such meeting or otherwise. This proxy and
power of attorney is coupled with an interest in the Shares tendered herewith,
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with the terms
of the Offer. Such acceptance for payment shall revoke all other proxies and
powers of attorney granted by the undersigned at any time with respect to such
Shares (and all Shares and other securities issued in Distributions in respect
of such Shares), and no subsequent proxy or power of attorney shall be given or
written consent executed (and if given or executed, shall not be effective) by
the undersigned with respect thereto. The undersigned understands that, in order
for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance of such Shares for payment, Purchaser or its designee must be able to
exercise full voting, consent and other rights with respect to such Shares and
other securities, including, without limitation, voting at any meeting of the
Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered herewith and all Distributions, and that when such Shares are accepted
for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares or
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered herewith and all Distributions.
In addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of Purchaser all Distributions in respect of the Shares tendered
hereby and accepted for payment, accompanied by appropriate documentation of
transfer, and pending such remittance and transfer or appropriate assurance
thereof, Purchaser shall be entitled to all rights and privileges as owner of
each such Distribution and may withhold the entire purchase price of the Shares
tendered hereby and accepted for payment, or deduct from such purchase price,
the amount or value of such Distribution as determined by Purchaser in its sole
discretion.
3
<PAGE> 4
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable. See
Section 4 in the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3, "Procedures for Accepting the Offer and
Tendering Shares," of the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer. Without limiting the foregoing, if the
price to be paid in the Offer is amended in accordance with the Offer, the price
to be paid to the undersigned will be the amended price notwithstanding the fact
that a different price is stated in this Letter of Transmittal. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates not purchased or not tendered in
the name(s) of the registered holder(s) appearing above in the box entitled
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates not tendered
or not purchased (and accompanying documents, as appropriate) to the address(es)
of the registered holder(s) appearing above in the box entitled "Description of
Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of all Shares purchased and return all
Share Certificates not purchased or not tendered in the name(s) of, and mail
such check and Share Certificates to, the person(s) so indicated. Unless
otherwise indicated herein in the box entitled "Special Payment Instructions,"
please credit any Shares tendered hereby and delivered by book-entry transfer,
but which are not purchased, by crediting the account at the Book-Entry Transfer
Facility. The undersigned recognizes that Purchaser has no obligation, pursuant
to the Special Payment Instructions, to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not purchase any of the Shares
tendered herewith.
The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to one or more of
its affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
4
<PAGE> 5
- ------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
- ------------------------------------------------------------
To be completed ONLY if Share Certificates not tendered or not purchased
and/or the check for the purchase price of the Shares purchased are to be
issued in the name of and sent to someone other than the undersigned, or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue [ ] check and/or [ ] certificates to:
Name:
---------------------------------------------------
(PLEASE PRINT)
Address:
-------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
(INCLUDE ZIP CODE)
-----------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
[ ] Credit unpurchased Shares tendered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
-----------------------------------------------------------
(ACCOUNT NUMBER)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
- ------------------------------------------------------------
To be completed ONLY if Share Certificates not tendered or not purchased
and/or the check for the purchase price of the Shares purchased are to be sent
to someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail [ ] check and/or [ ] certificates to:
Name:
---------------------------------------------------
(PLEASE PRINT)
Address:
-------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
(INCLUDE ZIP CODE)
-----------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
- ------------------------------------------------------------
5
<PAGE> 6
SIGN HERE
(AND PLEASE COMPLETE SUBSTITUTE FORM W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated:
- ------------------------, 2000
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by Share Certificate(s) and documents transmitted
herewith. If a signature is by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney-in-fact, agent or other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instructions 1 and 5.)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
(Area Code) Telephone Number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
- ---------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE IN SPACE BELOW.
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
NAME (PLEASE PRINT)
- --------------------------------------------------------------------------------
NAME OF FIRM
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
ZIP CODE
- --------------------------------------------------------------------------------
(AREA CODE) TELEPHONE NO.
DATED:
- ------------------------, 2000
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
To complete the Letter of Transmittal, you must do the following:
- Fill in the box entitled "Description of Shares Being Tendered."
- Sign and date the Letter of Transmittal in the box entitled "Sign Here."
- Fill in and sign in the box entitled "Substitute Form W-9."
In completing the Letter of Transmittal, you may (but are not required to)
also do the following:
- If you want the payment for any Shares purchased issued in the name of
another person, complete the box entitled "Special Payment Instructions."
- If you want any certificate for Shares not tendered or Shares not
purchased issued in the name of another person, complete the box entitled
"Special Payment Instructions."
- If you want any payment for Shares or certificate for Shares not tendered
or purchased delivered to an address other than that appearing under your
signature, complete the box entitled "Special Delivery Instructions."
If you complete the box entitled "Special Payment Instructions" or "Special
Delivery Instructions," you must have your signature guaranteed by an Eligible
Institution (as defined in Instruction 1 below) unless the Letter of Transmittal
is signed by an Eligible Institution.
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal, or (ii) if such Shares are tendered for the account
of a firm that is a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (each being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is used, if Shares are
to be delivered by book-entry transfer pursuant to the procedure set forth in
Section 3, "Procedures for Accepting the Offer and Tendering Shares," of the
Offer to Purchase. Share Certificates representing all physically tendered
Shares, or confirmation of a book-entry transfer, if such procedure is
available, into the Depositary's account at the Book-Entry Transfer Facility
("Book-Entry Confirmation") of all Shares delivered by book-entry transfer
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), or an Agent's Message in the case of book-entry transfer,
and any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth herein prior to the
expiration date of the Offer. If Share Certificates are forwarded to the
Depositary in multiple deliveries, a properly completed and duly executed Letter
of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or before the expiration date of the Offer or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares pursuant to the guaranteed delivery procedure described in Section
3, "Procedures for Accepting the Offer and Tendering Shares," of the Offer to
Purchase. Pursuant to such procedure: (i) such tender must be made by or through
an Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser, must
be received by the Depositary on or before the expiration date of the Offer; and
(iii) the Share Certificates representing all physically delivered Shares in
proper form for transfer by delivery, or Book-Entry Confirmation of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three trading days after
the date of execution of such Notice of Guaranteed Delivery, all as described in
Section 3, "Procedures for Accepting the Offer and Tendering Shares," of the
Offer to Purchase.
7
<PAGE> 8
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received this
Letter of Transmittal and agrees to be bound by the terms of this Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or facsimile hereof), all tendering stockholders waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers, the number of Shares
represented by such Share Certificates and the number of Shares tendered should
be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such cases, a new certificate representing the remainder of the
Shares that were represented by the Share Certificates delivered to the
Depositary herewith will be sent to each person signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" herein, as soon as practicable after the expiration or termination
of the Offer. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), in which case, the Share Certificate(s) representing
the Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear on such Share Certificate(s). Signatures on such Share Certificate(s) and
stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
representing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
Purchaser of such person's authority to so act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) representing Shares not tendered or accepted for payment are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of
8
<PAGE> 9
the transfer to such other person will be deducted from the purchase price of
such Shares purchased, unless evidence satisfactory to Purchaser of the payment
of such taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES REPRESENTING THE
SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered herewith is to be issued, or Share Certificate(s)
representing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" herein, the appropriate boxes in this
Letter of Transmittal must be completed. Stockholders delivering Shares tendered
herewith by book-entry transfer may request that Shares not purchased be
credited to the account maintained at the Book-Entry Transfer Facility as such
stockholder may designate in the box entitled "Special Payment Instructions"
herein. If no such instructions are given, all such Shares not purchased will be
returned by crediting the same account at the Book-Entry Transfer Facility as
the account from which such Shares were delivered.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in
whole or in part, by Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares tendered. See Section 12 of the Offer to
Purchase.
9. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly contact ChaseMellon Shareholder Services, L.L.C., which is the
Company's transfer agent and the Depositary, by calling (800) 522-6645. The
stockholder will then be instructed as to the steps that must be taken in order
to replace the certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost, destroyed or stolen
certificates have been followed.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal,
the Notice of Guaranteed Delivery and the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager or from brokers, dealers, commercial
banks or trust companies.
11. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of Federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
a $50 penalty imposed by the Internal Revenue Service and to 31% Federal income
tax withholding on the payment of the purchase price of all Shares purchased
from such stockholder. If the tendering stockholder has not been issued a TIN
and has applied for one or intends to apply for one in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% on all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary. Each foreign stockholder
must complete and submit Form W-8 in order to be exempt from the 31% Federal
income tax backup withholding due on payments with respect to the Shares.
12. NON-UNITED STATES HOLDERS. Non-United States holders must submit a
completed IRS Form W-8 or Form W-8BEN in order to qualify as an exempt
recipient. IRS Form W-8 or Form W-8BEN may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR MANUALLY SIGNED FACSIMILE
THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A
BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, AND
EITHER SHARE CERTIFICATES FOR TENDERED SHARES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER MUST BE RECEIVED BY THE DEPOSITARY, IN EACH CASE PRIOR TO THE
EXPIRATION DATE OF THE OFFER, WHICH IS 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
MONDAY, APRIL 17, 2000 (UNLESS OTHERWISE EXTENDED), OR THE TENDERING STOCKHOLDER
MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY.
9
<PAGE> 10
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8, signed under penalties of
perjury, attesting to such individual's exempt status. A Form W-8 can be
obtained from the Depositary. Exempt stockholders should furnish their TIN,
check the box and write "Exempt" in Part II of the Substitute Form W-9, and
sign, date and return the Substitute Form W-9 to the Depositary. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A stockholder should consult
his or her tax advisor as to such stockholder's qualification for an exemption
from backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the Federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% of all payments of the purchase price to such stockholder
until a TIN is provided to the Depositary.
10
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 11)
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES L.L.C., AS DEPOSITARY
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9 PART 1--Taxpayer Identification -------------------------------
Number -- Please provide your TIN in the Social Security Number
box at right and certify by signing and
dating below. If awaiting TIN, write OR
"Applied For."
-------------------------------
Employer Identification Number
---------------------------------------------------------------------------------------
Department of the PART 2--For Payees exempt from Backup Withholding--Check the box if you are NOT
Treasury, Internal subject to backup witholding. [ ]
Revenue Service --------------------------------------------------------------------------------
PAYOR'S REQUEST FOR PART 3--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND (1) The number shown on this form is my correct taxpayer identification number
CERTIFICATION (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item 2 above if you have been
notified by IRS that you are currently subject to backup withholding because you
have failed to report all interest and dividends on your tax return. However,
if, after being notified by the IRS that you were subject to backup withholding,
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item 2.
- --------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. IN ADDITION, FAILURE TO
PROVIDE SUCH INFORMATION MAY RESULT IN A PENALTY IMPOSED BY THE INTERNAL
REVENUE SERVICE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
INSTEAD OF A TIN IN THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld until I provide a number.
Signature Date
- -------------------------------------------------------------------------------
11
<PAGE> 12
MANUALLY SIGNED FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE
ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER
REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE
COMPANY OR SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR
OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE FIRST
PAGE.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent or the Dealer Manager at their respective telephone
numbers and locations listed below, and will be furnished at Purchaser's
expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie Logo]
156 Fifth Avenue
New York, New York 10010
Call Collect (212) 929-5500
Call Toll Free (800) 322-2885
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 646-4543
12
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
OF
CONNING CORPORATION
BY
CC MERGER SUB INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
METROPOLITAN LIFE INSURANCE COMPANY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery (or one substantially in the form
hereof) must be used to accept the Offer (as defined herein) if (a) certificates
representing shares of common stock, par value $0.01 per share (the "Shares"),
of Conning Corporation, a Missouri corporation ("Share Certificates"), are not
immediately available; (b) time will not permit all required documents to reach
ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), on or prior to the
Expiration Date (as defined in the Offer to Purchase) of the Offer; or (c) the
procedure for book-entry transfer, as set forth in the Offer to Purchase, cannot
be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or mail or transmitted by facsimile transmission to the
Depositary. See Section 3, "Procedures for Accepting the Offer and Tendering
Shares," of the Offer to Purchase.
The Depositary for the Offer is
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Stop -- Reorg
New York, NY 10271 Ridgefield Park, NJ 07660
By Facsimile Transmission: Telephone to Confirm Fax:
(201) 296-4293 (201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX IN THE LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CC Merger Sub Inc., a Missouri
corporation and an indirect wholly owned subsidiary of Metropolitan Life
Insurance Company, a New York life insurance company, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated March 20, 2000 (the
"Offer to Purchase"), and the related letter of transmittal (the "Letter of
Transmittal," which together with the Offer to Purchase, as amended or
supplemented from time to time, collectively constitute the "Offer"), receipt of
each of which is hereby acknowledged, the number of Shares indicated below
pursuant to the guaranteed delivery procedures set forth in Section 3,
"Procedures for Accepting the Offer and Tendering Shares," of the Offer to
Purchase:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------ -----------------------------------------------------------
-------------------------------------------------------- --------------------------------------------------------
NUMBER OF SHARES
-------------------------------------------------------- --------------------------------------------------------
NAMES(S) OF RECORD HOLDER(S) CERTIFICATE NOS. (IF AVAILABLE)
--------------------------------------------------------
ADDRESS(ES) Indicate account number at Book-Entry Transfer Facility if
Shares will be tendered by book-entry transfer:
--------------------------------------------------------
ZIP CODE
-------------------------------------------------------- --------------------------------------------------------
(AREA CODE) TELEPHONE NO. ACCOUNT NUMBER
X ------------------------------------------------------
DATED: -------------------------------------------, 2000
X ------------------------------------------------------
SIGNATURE(S) OF RECORD HOLDER(S)
- ------------------------------------------------------------ -----------------------------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program (an "Eligible Institution"), hereby guarantees delivery
to the Depositary, at one of its addresses set forth above, of Share
Certificates tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of Shares into the Depositary's account at The Depository
Trust Company, in either case together with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee, or an Agent's Message (as defined in the Offer to
Purchase), and any other documents required by the Letter of Transmittal, within
three trading days after the date of execution of this Notice of Guaranteed
Delivery.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period indicated herein. Failure
to do so may result in financial loss to such Eligible Institution.
<TABLE>
<S> <C>
---------------------------------------------------- X
----------------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
----------------------------------------------------
------------------------------------------------------
ADDRESS NAME (PLEASE PRINT)
----------------------------------------------------
------------------------------------------------------
ZIP CODE TITLE
---------------------------------------------------- DATED:---------------------------------------------, 2000
(AREA CODE) TELEPHONE NO.
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL
<PAGE> 1
[CREDIT SUISSE/FIRST BOSTON LOGO]
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison
Avenue Telephone 212 325
2000
New York, NY 10010-3629
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CONNING CORPORATION
AT
$12.50 NET PER SHARE
BY
CC MERGER SUB INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
METROPOLITAN LIFE INSURANCE COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
NEW YORK CITY TIME, ON MONDAY, APRIL 17, 2000, UNLESS THE OFFER IS EXTENDED.
March 20, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by CC Merger Sub Inc., a Missouri corporation
("Purchaser") and an indirect wholly owned subsidiary of Metropolitan Life
Insurance Company, a New York life insurance company ("Parent"), to act as
Dealer Manager in connection with the Purchaser's offer to purchase all
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
Conning Corporation, a Missouri corporation (the "Company"), at a purchase price
of $12.50 per Share, net to the seller in cash (less any required withholding
taxes), without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated March 20, 2000 (the "Offer to
Purchase") and in the related letter of transmittal (the "Letter of
Transmittal," which, together with the Offer to Purchase, as amended or
supplemented from time to time, collectively constitute the "Offer") enclosed
herewith.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer enough
Shares so that, including the Shares Parent already beneficially owns, Parent
would control at least two-thirds of the outstanding Shares. The Offer is also
subject to the other conditions contained in the Offer to Purchase. See Section
12, "Conditions of the Offer," of the Offer to Purchase.
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY HAS
DETERMINED THAT THE OFFER AND THE MERGER (AS DEFINED BELOW) ARE FAIR TO,
ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND HAS
VOTED TO RECOMMEND TO THE BOARD OF DIRECTORS OF THE COMPANY THAT IT RECOMMEND TO
THE CONNING STOCKHOLDERS ACCEPTANCE OF THE OFFER AND, IF NECESSARY, APPROVAL OF
THE MERGER AGREEMENT (AS DEFINED BELOW). THE BOARD OF DIRECTORS OF THE COMPANY
HAS DETERMINED THAT, BASED UPON THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND
OTHER CONSIDERATIONS, THE OFFER AND
<PAGE> 2
THE MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, AND HAS VOTED TO RECOMMEND TO THE CONNING STOCKHOLDERS
ACCEPTANCE OF THE OFFER AND, IF NECESSARY, APPROVAL OF THE MERGER AGREEMENT. THE
BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF NECESSARY, APPROVE THE MERGER
AGREEMENT.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 9, 2000 (the "Merger Agreement") among Parent, Purchaser and the
Company pursuant to which, following the consummation of the Offer and in
accordance with the Missouri General and Business Corporation Law, and subject
to the satisfaction or waiver of certain conditions, Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation and as an indirect, wholly owned subsidiary of Parent.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated March 20, 2000.
2. The Letter of Transmittal for your use to tender Shares and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates for Shares ("Share Certificates") and all other
required documents are not immediately available or cannot be delivered to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase) or if the procedure
for book-entry transfer cannot be completed by the Expiration Date.
5. A letter to stockholders from James L. Lipscomb, President and
Chief Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 17, 2000, UNLESS
THE OFFER IS EXTENDED.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry delivery of
Shares, and any other required documents should be sent to the Depositary and
either Share Certificates representing the tendered Shares should be delivered
to the Depositary, or Shares should be tendered by book-entry transfer into the
Depositary's account maintained at the Book Entry Transfer Facility (as
described in the Offer to Purchase), all in accordance with the instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3, "Procedures for Accepting the Offer and Tendering
Shares," of the Offer to Purchase.
Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Depositary, the Dealer Manager and the Information
Agent) for soliciting tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse you for customary clerical and mailing expenses
incurred by you in forwarding any of the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from, the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
Credit Suisse First Boston Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CONNING CORPORATION
AT
$12.50 NET PER SHARE
BY
CC MERGER SUB INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
METROPOLITAN LIFE INSURANCE COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON
MONDAY, APRIL 17, 2000, UNLESS THE OFFER IS EXTENDED.
March 20, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated March 20,
2000 (the "Offer to Purchase"), and the related letter of transmittal (the
"Letter of Transmittal," which together with the Offer to Purchase, as amended
or supplemented from time to time, collectively constitute the "Offer") relating
to the offer by CC Merger Sub Inc., a Missouri corporation ("Purchaser") and an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company, a New
York life insurance company ("Parent"), to purchase all outstanding shares of
Common Stock, par value $0.01 per share (the "Shares"), of Conning Corporation,
a Missouri corporation (the "Company"), at a purchase price of $12.50 per Share,
net to the seller in cash (less any required withholding taxes), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available, or who cannot deliver their Share
Certificates and all other required documents to ChaseMellon Shareholder
Services L.L.C. (the "Depositary") on or prior to the Expiration Date (as
defined in the Offer to Purchase), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $12.50 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
<PAGE> 2
2. The Offer is being made for all outstanding Shares.
3. The special committee of the Board of Directors of the Company has
determined that the Offer and the Merger are fair to, advisable and in the
best interests of the Company and its stockholders, and has recommended to
the Board of Directors of the Company that it recommend to the Conning
stockholders acceptance of the Offer and, if necessary, approval of the
Merger Agreement (as defined below). The Board of Directors of the Company
has determined that, based upon the recommendation of the special committee
and other considerations, the Offer and the Merger are fair to, advisable
and in the best interests of the Company and its stockholders and has voted
to recommend to the Conning stockholders acceptance of the Offer and, if
necessary, approval of the Merger Agreement. The Board of Directors of the
Company recommends that the Company's stockholders tender their Shares
pursuant to the Offer and, if necessary, approve the Merger Agreement.
4. The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of March 9, 2000 (the "Merger Agreement"), among Parent,
Purchaser and the Company pursuant to which, following the consummation of
the Offer and in accordance with the Missouri General and Business
Corporation Law, and subject to the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation and as
a wholly owned subsidiary of Parent.
5. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER ENOUGH SHARES SO THAT, INCLUDING THE SHARES PARENT ALREADY
BENEFICIALLY OWNS, PARENT WOULD CONTROL AT LEAST TWO-THIRDS OF THE
OUTSTANDING SHARES. THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET
FORTH IN THE OFFER TO PURCHASE. SEE SECTION 12, "CONDITIONS OF THE OFFER,"
OF THE OFFER TO PURCHASE.
6. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
7. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, April 17, 2000, unless the Offer is extended.
8. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) Share
Certificates or timely confirmation of the book-entry transfer of such
Shares into the account maintained by the Depositary at The Depository
Trust Company, pursuant to the procedures set forth in Section 3,
"Acceptance for Payment and Payment for Common Shares," of the Offer to
Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase), in connection with a
book-entry delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time, depending upon when Share Certificates or
confirmations of book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility are actually received by the
Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth on the back page of this letter. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified on the back page of this letter. An envelope to return your
instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser
will make a good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
Purchaser cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) holders of Shares in such
state. In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of Purchaser by Credit Suisse First Boston Corporation (the Dealer
Manager), or one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CONNING CORPORATION
BY
CC MERGER SUB INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
METROPOLITAN LIFE INSURANCE COMPANY
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase, dated March 20, 2000 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer") in connection with the offer by CC Merger Sub Inc., a Missouri
corporation ("Purchaser") and an indirect wholly owned subsidiary of
Metropolitan Life Insurance Company, a New York life insurance company, to
purchase all outstanding shares of Common Stock, par value $.01 per share (the
"Shares"), of Conning Corporation, a Missouri corporation, at a purchase price
of $12.50 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase.
This will instruct you to tender to Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to Be Tendered: Shares*
- --------------------------------------------------------------------------------
Sign Below
Account Number: Signature(s)
- --------------------------------------- ---------------------------------------
Dated:
- ---------------, 2000 ---------------------------------------
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT NAME(S)
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT ADDRESS(ES) HERE
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- ---------------
* Unless otherwise indicated, it will be assumed that you instruct us to tender
all Shares held by us for your account.
<PAGE> 1
Exhibit (a)(6)
[METROPOLITAN LIFE INSURANCE COMPANY LETTERHEAD]
January 14, 2000
By Hand
Board of Directors
Conning Corporation
700 Market Street
St. Louis, Missouri 63101
Gentlemen:
This letter will serve to set forth in writing the general
outline of the transaction we are proposing (the "Proposed Transaction") between
Metropolitan Life Insurance Company ("MetLife") and Conning Corporation
("Conning").
In conjunction with our acquisition of GenAmerica Corporation
("GenAmerica"), and therefore indirectly a controlling interest in Conning, we
have been considering the most effective way to partner with Conning going
forward, as well as how best to arrange for the management of the general
account assets of General American Life Insurance Company ("GALIC") currently
managed by Conning. With regard to the former, MetLife recognizes Conning's
premier position in the marketplace, and believes the addition of Conning will
further enhance MetLife's asset management capabilities. In connection with the
latter, we have determined that while MetLife has the highest regard for the
asset management expertise of Conning, MetLife will assume the management of the
general account assets of GALIC, as is its right under the investment management
agreement between GALIC and Conning. This action is consistent with MetLife's
general policy of managing the general account assets of its insurance
affiliates, which we consider to be a highly efficient approach.
As to the remainder of Conning's business, we have determined
that it would be desirable if Conning becomes a wholly owned subsidiary of
MetLife, and accordingly are proposing to acquire all of the publicly held
shares of common stock of Conning Corporation not currently held by GALIC.
Form of Transaction. The Proposed Transaction would include as
its first step a tender offer by a newly formed subsidiary of MetLife for up to
all of the outstanding shares of Conning common stock, other than those held
through GenAmerica, at a cash
<PAGE> 2
Board of Directors
January 13, 2000
Page 2
price per share of $10.50. This price represents a premium of 21% to the average
of the closing prices of Conning's stock over the past 20 days.
The offer would be conditioned on the valid tender and
non-withdrawal of sufficient shares of Conning common stock to increase
MetLife's ownership (including through GenAmerica) to in excess of two-thirds of
the fully diluted shares of Conning common stock. Promptly following
consummation of the tender offer, the remaining shares of Conning common stock
would be acquired at the same cash price per share as a result of a merger
between Conning and a subsidiary of MetLife.
The Proposed Transaction would be effected pursuant to a
merger agreement in form and substance customary for transactions of this sort,
which would be entered into only following approval and recommendation by the
unaffiliated members of the Conning Board of Directors, who we would expect to
serve as a Special Committee of the Board in connection with the consideration
of the Proposed Transaction, and only upon the receipt by Conning of an opinion
from your independent financial advisor as to the fairness from a financial
point of view of the Proposed Transaction to the shareholders of Conning
unaffiliated with MetLife or GenAmerica. Approval by MetLife's Board of
Directors would also be a condition to entering into the merger agreement.
Please understand also that MetLife is not interested, under
any circumstances, in selling its interest in Conning.
Management. We are keenly aware of the paramount importance of
management in the success of Conning to date, and we would necessarily be
counting on the existing management team to be firmly committed to Conning's
continuing prosperity. As a part of the Proposed Transaction, we would expect to
put in place arrangements with existing senior management of Conning to
incentivize them on a going-forward basis.
Financing. The Proposed Transaction is not subject to any
financing contingency. MetLife has sufficient funds immediately available to
complete the offer and the merger.
As you know, we and our financial and legal advisors (Credit
Suisse First Boston and Wachtell, Lipton, Rosen & Katz) are prepared to meet
with the Special Committee and its legal and financial advisors at your
convenience to review the Proposed Transaction and anything else that may be of
interest or assistance.
I look forward to continuing to work with you on the Proposed
Transaction.
Sincerely,
/s/ Gary Beller
Gary Beller
<PAGE> 1
EXHIBIT (a)(7)
Contact: Kevin Foley
212 578-4132
[email protected]
METLIFE PROPOSES TO ACQUIRE PUBLIC SHARES OF CONNING
FOR $10.50 PER SHARE IN CASH
New York, January 18, 2000 -- MetLife today announced that MetLife has
proposed to acquire all of the outstanding shares of Conning Corporation
(NASDAQ: CNNG) common stock not already controlled by MetLife for $10.50 per
share in cash, which would represent a premium of approximately 21% above the
average of the closing prices of the Conning stock over the past 20 trading
days. MetLife acquired its 61% interest in Conning as a result of its January 6
acquisition of GenAmerica Corporation, Conning's indirect majority owner.
The transaction would be subject to customary terms and conditions,
including regulatory approvals, and approval by the MetLife Board of Directors.
MetLife reserves the right to amend or withdraw the proposal at any time in its
sole discretion. MetLife stated in its proposal that it is not interested, under
any circumstances, in selling its interest in Conning.
"MetLife recognizes Conning's premier position in the marketplace and
believes it will make an important addition to the MetLife asset management
family," said Gary Beller, MetLife General Counsel and Senior Executive Vice
President. "We look forward to working with its highly skilled staff and
continuing to grow Conning's customer base while finding the right synergies
with our existing asset management operations," Mr. Beller added.
MetLife plans, pursuant to the investment management agreement with
Conning, to assume the management of the general account assets of General
American Life Insurance Company that are currently managed by Conning. "This is
consistent with MetLife's general policy of managing the general account assets
of its insurance affiliates which we consider to be a highly efficient
approach," added Mr. Beller.
Conning provides asset management services primarily to insurance companies
and institutional investors, manages private equity funds investing in insurance
and insurance-related companies, and conducts in-depth research on the insurance
industry.
Headquartered in New York City since 1868, MetLife is a leading provider of
insurance and financial products and services to a broad spectrum of individual
and group customers. The company, with $404.2 billion of assets under management
as of September 30, 1999 on a pro-forma basis, including the acquisition of
GenAmerica Corp., provides individual insurance and investment products to
approximately 9 million households in the U.S. In addition, the corporations and
institutions that MetLife provides with group insurance and investment products
have approximately 33 million employees and members. MetLife also has
international insurance operations in ten countries, with a focus on the
Asia/Pacific region, Latin America and selected European countries. For more
information about MetLife, please visit the company's Web site at
www.metlife.com.
* * *
This press release is not an offer or the solicitation of an offer to buy
any securities of Conning, and no such offer or solicitation will be made except
in compliance with applicable securities laws.
Certain of the above statements are forward-looking statements that involve
a number of risks and uncertainties. Such forward-looking statements are within
the meaning of that term in Section 27A of the Securities Act of 1933, as
amended, and the Securities Litigation Reform Act of 1995. Factors that could
have a material effect include the following: business conditions in Conning's
industry and in the general economy; actual and expected results of operations
of Conning and the other parties to any possible transaction; changes in the
financial or capital markets; and the risk factors listed from time to time in
Conning's reports filed with the Securities and Exchange Commission. Readers are
cautioned that such forward-looking statements are not guarantees of future
performance.
<PAGE> 1
Contact: METLIFE CONNING
Kevin Foley Investor Contact: Paul Kopsky, Jr.
212 578-4132 (314) 444-0715
[email protected]
Media Contact: David Garino
(314) 982-1700
METLIFE AND CONNING ANNOUNCE MERGER AGREEMENT
New York, March 9, 2000 -- Metropolitan Life Insurance Company (MetLife) and
Conning Corporation (NASDAQ:CNNG) today announced that they have entered into a
definitive merger agreement providing for the acquisition by MetLife of all of
the outstanding shares of Conning not already controlled by MetLife for $12.50
per share in cash. This is an increase from the $10.50 per share price
contained in MetLife's initial proposal announced January 18, 2000. MetLife
acquired its 61 percent interest in Conning as a result of its January 6, 2000
acquisition of GenAmerica Corporation, Conning's indirect majority owner. The
board of directors of each company has approved the merger agreement.
MetLife is expected to commence the tender offer for Conning's outstanding
shares by March 20, 2000. The tender offer will remain open for 20 business
days, unless extended pursuant to the merger agreement, and is conditioned upon
the tender of a sufficient number of shares to give MetLife and its affiliates
ownership of at least two-thirds of Conning's outstanding shares. Shares not
tendered will be converted into the right to receive the same $12.50 per share
in cash. The merger agreement contains customary closing conditions.
Conning provides asset management services primarily to insurance companies and
institutional investors, manages private equity funds investing in insurance
and insurance-related companies, and conducts in-depth research on the
insurance industry.
Headquartered in New York City since 1868, MetLife is a leading provider of
insurance and financial products and services to a broad spectrum of individual
and group customers. The company, with $404.2 billion of assets under
management as of September 30, 1999 on a pro-forma basis, including the
acquisition of GenAmerica Corp., provides individual insurance and investment
products to approximately 9 million households in the U.S. In addition, the
corporations and institutions that MetLife provides with group insurance and
investment products have approximately 33 million employees and members.
MetLife also has international insurance operations in ten countries, with a
focus on the Asia/Pacific region, Latin America and selected European
countries. For more information about MetLife, please visit the company's Web
site at www.metlife.com.
# # #
All stockholders should read the tender offer statement concerning the tender
offer that will be filed by MetLife with the Securities and Exchange Commission
(SEC) and mailed to stockholders. The tender offer statement will contain
important information that stockholders should consider before making any
decision regarding tendering their shares. You will be able to obtain the
tender offer statement, as well as other filings containing information about
MetLife and Conning, without charge, at the SEC's Internet site (www.sec.gov).
Copies of the tender offer statement and other SEC filings can also be
obtained, without charge, from the MetLife Secretary.
<PAGE> 1
EXHIBIT (a)(9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU)
TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two
hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals(joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust (grantor is also trustee) trustee(1)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
5. Sole proprietorship The owner(3)
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<C> <S> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number, obtain Form SS-5,
Application for a Social Security Card at the local Social Security
Administration office, or Form SS-4, Application for Employer Identification
Number, by calling 1 (800) TAX-FORM, and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from withholding include:
- An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7), if
the account satisfies the requirements of Section 401(f)(2).
- The United States or a state thereof, the District of Columbia, a possession
of the United States, or a political subdivision or wholly-owned agency or
instrumentality of any one or more of the foregoing.
- An international organization or any agency or instrumentality thereof.
- A foreign government and any political subdivision, agency or
instrumentality thereof.
Payees that may be exempt from backup withholding include:
- A corporation.
- A financial institution.
- A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A middleman known in the investment community as a nominee or custodian.
- A futures commission merchant registered with the Commodity Futures Trading
Commission.
- A foreign central bank of issue.
- A trust exempt from tax under Section 664 or described in Section 4947.
Payments of dividends and patronage dividends generally exempt from backup
withholding include:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) distributions made by an ESOP.
Payments of interest generally exempt from backup withholding include:
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- Payments described in Section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see Sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations thereunder.
EXEMPT PAYEES SHOULD COMPLETE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. Furnish your taxpayer identification number, write "EXEMPT"
on the form, sign and date the form and return it to the payer.
PRIVACY ACT NOTICE.--Section 6109 requires you to provide your correct taxpayer
identification number to payers who must report the payments to the IRS. The IRS
uses the numbers for identification purposes and to help verify the accuracy of
your return and may also provide this information to various government agencies
for tax enforcement or litigation purposes. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividend, and certain other payments
to a payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
pursuant to the Offer to Purchase, dated March 20, 2000, and the related Letter
of Transmittal (and any amendments or supplements thereto), and is being made to
all holders of Shares. Purchaser (as defined below) is not aware of any state
where the making of the Offer is prohibited by administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Purchaser shall make a good faith effort to comply with
such statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) holders of Shares in such state. In any jurisdiction where the
securities, "blue sky" or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by
Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or the
"Dealer Manager") or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CONNING CORPORATION
at
$12.50 NET PER SHARE
by
CC MERGER SUB INC.
an indirect wholly owned subsidiary of
METROPOLITAN LIFE INSURANCE COMPANY
CC Merger Sub Inc., a Missouri corporation ("Purchaser") and an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company, a New
York life insurance company ("Parent"), hereby offers to purchase all
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
Conning Corporation, a Missouri corporation (the "Company"), at a purchase price
of $12.50 per Share, net to the seller in cash (less any required withholding
taxes), without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated March 20, 2000 (the "Offer to
Purchase"), and in the related letter of transmittal (the "Letter of
Transmittal," which together with the Offer to Purchase, as amended or
supplemented from time to time, collectively constitute the "Offer").
Stockholders of record who tender directly to the Depositary (as defined below)
will not be obligated to pay brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the
purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold
their Shares through a broker or bank should consult such institution as to
whether it charges any service fees. Purchaser will pay all charges and expenses
of the Dealer Manager, ChaseMellon Shareholder Services L.L.C., which is acting
as depositary (the "Depositary"), and MacKenzie Partners, Inc., which is acting
as the information agent (the "Information Agent"), incurred in
<PAGE> 2
connection with the Offer. Following the consummation of the Offer, the
Purchaser intends to effect the Merger (as defined below) described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME ON MONDAY, APRIL 17, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER ENOUGH
SHARES SO THAT, INCLUDING THE SHARES PARENT ALREADY BENEFICIALLY OWNS, PARENT
WOULD CONTROL TWO-THIRDS OF THE OUTSTANDING SHARES (THE "MINIMUM CONDITION").
THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THE OFFER TO
PURCHASE. SEE SECTION 12, "CONDITIONS OF THE OFFER," OF THE OFFER TO PURCHASE.
The special committee of the Board of Directors of the Company has
determined that the Offer and the Merger are fair to, advisable and in the best
interests of the Company and its stockholders, and has recommended to the Board
of Directors of the Company that it recommend to the Conning stockholders
acceptance of the Offer and, if necessary, approval of the Merger Agreement (as
defined below) and the Offer. THE BOARD OF DIRECTORS OF THE COMPANY HAS
DETERMINED THAT, BASED UPON THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND
OTHER CONSIDERATIONS, THE OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND HAS VOTED TO RECOMMEND
TO THE CONNING STOCKHOLDERS ACCEPTANCE OF THE OFFER AND, IF NECESSARY, APPROVAL
OF THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT
THE COMPANY'S STOCKHOLDERS TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE
AND ADOPT THE MERGER AGREEMENT.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of March 9, 2000 (the "Merger Agreement"), among Parent, Purchaser and
the Company pursuant to which, following the consummation of the Offer and in
accordance with the Missouri General and Business Corporation Law, and subject
to the satisfaction or waiver of certain conditions, Purchaser will be merged
with and into the Company (the "Merger"), with the Company continuing as the
surviving corporation and as an indirect wholly owned subsidiary of Parent. The
purpose of the Offer and the Merger is to enable Parent to acquire control of
the entire equity interest in Conning. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares held by Parent, Purchaser, any direct or
indirect wholly owned subsidiary of Parent or Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company, and other than Shares,
if any, held by stockholders who validly perfect their appraisal rights under
Missouri law) will be converted into the right to receive $12.50 in cash,
without interest, or any higher price that is paid in the Offer (less any
withholding taxes required under applicable law). The Merger Agreement is more
fully described in the Offer to Purchase.
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares purchased pursuant to the Offer, including during any
subsequent offering period, will be made by deposit of the purchase price
therefor with the
2
<PAGE> 3
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to validly
tendering stockholders. Under no circumstances will interest on the purchase
price for Shares be paid by Purchaser, regardless of any extension of the Offer
or any delay in making such payment. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates representing Shares (the "Share Certificates") or
timely confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in Section 3, "Procedures for Accepting the Offer and
Tendering Shares," of the Offer to Purchase, (ii) the Letter of Transmittal (or
a manually signed facsimile thereof), delivered with the Offer to Purchase,
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer of Shares, and (iii) any other documents required by the
Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate
to the Purchaser's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Monday, April 17, 2000 (or any other time then
set as the Expiration Date), the Purchaser may, subject to the Merger Agreement,
elect to, (i) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended, (ii)
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission, accept for payment all Shares so tendered and not extend
the Offer, or (iii) terminate the Offer and not accept for payment any Shares
and return all tendered Shares to tendering shareholders. The term "Expiration
Date" means 12:00 Midnight, New York City time, on Monday, April 17, 2000,
unless the Purchaser shall have extended the period of time for which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by the Purchaser shall expire.
Subject to the terms and conditions set forth in the Offer to Purchase
and the provisions of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, to extend the period of time during which the Offer is open and thereby
to delay acceptance for payment of, and payment for, any Shares, if the
conditions to the Offer described in Section 12, "Conditions of the Offer," of
the Offer to Purchase have not been satisfied or earlier waived. During any such
extension, all Shares previously tendered and not properly withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw such stockholder's Shares.
Subject to the provisions of the Merger Agreement and the applicable
rules and regulations of the SEC, the Purchaser also reserves the right, in its
sole discretion, at any time or from time to time, to: (1) terminate the Offer
(whether or not any Shares have previously been purchased pursuant to the Offer)
if the conditions referred to in Section 12, "Conditions of the Offer," of the
Offer to Purchase has not been satisfied or earlier waived or upon the
occurrence of any event specified in such section; and (2) waive any such
unsatisfied condition; or (3) except as set forth in the Merger Agreement,
otherwise amend the Offer in any respect, in each case, by giving oral or
written notice of the termination, waiver or amendment to the Depositary and,
other than, in the case of any waiver, by making a public announcement thereof.
3
<PAGE> 4
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by a public announcement. An announcement in
the case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
In addition, following the Expiration Date (as it may be so extended)
and the purchase of Shares in the Offer, there may be a subsequent offering
period, lasting for at least three and not more than 20 business days;
stockholders who tender Shares during a subsequent offering period will not have
the right to withdraw their Shares during such subsequent offering period. THE
PURCHASER EXPECTS TO MAKE A SUBSEQUENT OFFERING PERIOD AVAILABLE, UNLESS THERE
ARE VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN ENOUGH SHARES SO THAT, INCLUDING
THE SHARES PARENT ALREADY BENEFICIALLY OWNS, PARENT WOULD CONTROL 90% OF THE
OUTSTANDING SHARES, IN WHICH CASE THE MERGER WILL BE CONSUMMATED AS SOON AS
POSSIBLE AFTER THE EXPIRATION DATE AND WITHOUT A VOTE OF COMPANY STOCKHOLDERS.
Conning stockholders who had not previously tendered their Shares will receive
the same price per Share upon completion of the merger.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer (except during any subsequent
offering period) may be withdrawn at any time on or prior to the Expiration Date
and, unless theretofore accepted for payment as provided in the Offer to
Purchase, may also be withdrawn at any time after May 19, 2000. In order for a
withdrawal to be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn, and (if Share Certificates have been tendered)
the name of the registered holder of the Shares as set forth in the Share
Certificate, if different from that of the person who tendered such Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, unless the Shares have been tendered by an Eligible
Institution (as defined in the Offer to Purchase), the tendering stockholder
must submit the serial numbers shown on the particular certificates evidencing
the Shares to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer as set forth in Section 3, "Procedures
for Accepting the Offer and Tendering Shares," of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility (as defined in the Offer to Purchase)
to be credited with the withdrawn Shares, in which case a notice of withdrawal
will be effective if delivered to the Depositary by any method of delivery
described in this paragraph. Withdrawals of Shares may not be rescinded. Any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3,
"Procedures for Accepting the Offer and Tendering Shares," of the Offer to
Purchase. All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination shall be final and binding.
The receipt of cash in exchange for Shares pursuant to the Offer (or
the Merger) will be a taxable transaction for U.S. federal income tax purposes
and may also be a taxable transaction under the applicable state, local or
foreign tax laws. Generally, a stockholder who receives cash in exchange for
Shares pursuant to the Offer (or the Merger) will recognize gain or loss for
U.S.
4
<PAGE> 5
federal income tax purposes equal to the difference between the amount of cash
received and such stockholder's adjusted tax basis in the Shares exchanged
therefor. Provided that such Shares constitute capital assets in the hands of
the stockholder, such gain or loss will be capital gain or loss, and will be
long-term capital gain or loss if the holder has held the Shares for more than
one year at the time of sale. The maximum U.S. federal income tax rate
applicable to individual taxpayers on long-term capital gain is 20%, and the
deductibility of capital losses is subject to limitations. ALL STOCKHOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES
OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF
THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX
LAWS AND OF CHANGES IN SUCH TAX LAWS. For a more complete description of certain
U.S. federal income tax consequences of the Offer and the Merger see Section II,
"Purpose of, Alternative to, Reasons for and Effects of the Tender Offer and the
Merger," of the Offer to Purchase.
The information required to be disclosed pursuant to Rules 14d-6(d)(1)
and 13e-4(d)(1) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase, and is
incorporated herein by reference.
The Company has provided Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant materials will be mailed to record holders of
Shares whose names appear on the stockholder list, and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the stockholder list or who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other tender offer materials may be directed to the Dealer Manager or the
Information Agent at their respective telephone numbers and addresses listed
below, and copies will be furnished at Purchaser's expense. Neither Parent nor
Purchaser will pay any fees or commissions to any broker, dealer or other person
other than the Depositary, the Dealer Manager and the Information Agent in
connection with soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
5
<PAGE> 6
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
[CREDIT SUISSE/FIRST BOSTON LOGO]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 646-4543
March 20, 2000
6
<PAGE> 1
Salomon Smith Barney
- --------------------
A member of Citigroup [logo]
March 9, 2000
Special Committee of the Board of Directors
Conning Corporation
700 Market Street
St. Louis, Missouri 63101
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock, par value $0.01 per share (the "Common
Stock"), of Conning Corporation (the "Company"), other than Metropolitan Life
Insurance Company ("Parent" or "MetLife") and its affiliates, of the
consideration to be received by such stockholders (the "Non-MetLife
Stockholders") in the proposed acquisition by Parent of the outstanding shares
of Common Stock owned by the Non-MetLife Stockholders (the "Proposed
Transaction") pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") to be entered into by and among Parent, CC Merger Sub Inc.
("Purchaser") and the Company. As more fully described in the Merger Agreement,
Purchaser will make a cash tender offer (the "Offer") to acquire all the issued
and outstanding shares of Common Stock not owned by Parent or its subsidiaries
for $12.50 per share (the "Offer Price"). We understand that consummation of the
Offer will be conditioned upon the tender of a number of shares of Common Stock
that, when aggregated with the number of shares of Common Stock currently owned
by Parent and its affiliates, represents at least two-thirds of the total number
of outstanding shares of Common Stock. We also understand that, following the
Offer, Purchaser would be merged with and into the Company and each outstanding
share of Common Stock not beneficially owned by Parent and its affiliates would
be converted into the right to receive the Offer Price.
In arriving at our opinion, we reviewed a draft of the Merger Agreement dated
March 7, 2000 and held discussions with certain senior officers, directors and
other representatives and advisors of the Company concerning the businesses,
operations and prospects of the Company. We examined certain publicly available
business and financial information relating to the Company as well as certain
financial forecasts and other information and data for the Company which were
provided to or otherwise discussed with us by the management of the Company. We
reviewed the financial terms of the Proposed Transaction as set forth in the
Merger Agreement in relation to, among other things: current and historical
market prices and trading volumes of the Common Stock; the historical and
projected earnings and other operating data of the Company; and the
capitalization and financial condition of the Company. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Proposed Transaction and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations we considered relevant in evaluating those of the Company. In
addition to the foregoing, we conducted such other analyses and examinations and
considered such other information and financial, economic and market criteria as
we deemed appropriate in arriving at our opinion.
<PAGE> 2
Special Committee of the Board of Directors
Conning Corporation
March 9, 2000
Page 2
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of the Company that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company.
We have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company nor have we
made any physical inspection of the properties or assets of the Company.
Representatives of the Company have advised us, and we have assumed, that the
final terms of the Merger Agreement will not vary materially from those set
forth in the draft reviewed by us. We have further assumed that the Proposed
Transaction will be consummated in accordance with the terms of the Merger
Agreement without waiver of any of the conditions precedent to the Proposed
Transaction contained in the Agreement. We note that Parent and its affiliates
hold approximately 61% of the outstanding Common Stock, and Parent has indicated
that it is not interested, under any circumstances, in selling its interest in
the Company. Accordingly, we were not requested to, and we did not, solicit
third party indications of interest in the possible acquisition of all or a part
of the Company, nor were we requested to consider, and our opinion does not
address, the relative merits of the Proposed Transaction as compared to any
alternative business strategies that might exist for the Company or the effect
of any other transaction in which the Company might engage. In addition, we
understand that Parent has stated its intention to terminate certain business
relationships it and its affiliates have with the Company, and has begun the
process of doing so. In arriving at our opinion, we have taken into account the
prospective effect on the Company's revenues, cash flow and earnings of such
termination of business and other potential loss of business derived from the
Company's relationship with Parent and its affiliates. Our opinion is
necessarily based upon information available to us, and financial, stock market
and other conditions and circumstances existing and disclosed to us, as of the
date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to the Special
Committee of the Board of Directors of the Company (the "Special Committee")
reviewing the Proposed Transaction, and in connection with it doing so, will
receive a fee for such services, a significant portion of which is contingent
upon the consummation of the Proposed Transaction. We have in the past provided
and are currently providing investment banking services to Parent unrelated to
the Proposed Transaction, for which services we will receive compensation. In
particular, we anticipate that Salomon Smith Barney Inc. will have a significant
role in MetLife's upcoming initial public offering. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities of
the Company and Parent for our own account or for the account of our customers
and, accordingly, may at any time hold a long or short position in such
securities. In addition, we and our affiliates (including Citigroup Inc. and its
affiliates) may maintain relationships with the Company, Parent and their
respective affiliates.
<PAGE> 3
Special Committee of the Board of Directors
Conning Corporation
March 9, 2000
Page 3
Our advisory services and the opinion expressed herein are provided for the
information of the Special Committee in its evaluation of the Proposed
Transaction, and our opinion is not intended to be and does not constitute a
recommendation to any Non-MetLife Stockholder as to whether such holder should
tender shares of Common Stock in the Offer. This letter may be attached in its
entirety as an exhibit to the Company's Schedule 14D-9 relating to the Offer.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Offer Price is fair, from a financial
point of view, to the Non-MetLife Stockholders.
Very truly yours,
/s/ Salomon Smith Barney
<PAGE> 1
[CREDIT SUISSE/FIRST BOSTON LOGO]
March 8, 2000
Board of Directors
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Dear Sirs and Mesdames:
You have asked us to advise you with respect to the fairness to the Metropolitan
Life Insurance Company (the "Acquiror") from a financial point of view of the
aggregate consideration to be paid by the Acquiror pursuant to the terms of the
Agreement and Plan of Merger (the "Acquisition Agreement"), among Conning
Corporation (the "Company"), the Acquiror and CC Merger Sub Inc., an indirect
wholly owned subsidiary of the Acquiror (the "Sub"). Pursuant to the Acquisition
Agreement, the Acquiror, through Sub, will make a cash tender offer (the
"Offer") for all of the issued and outstanding shares of common stock, par value
$0.01 per share of the Company, not already owned by the Acquiror or its
affiliates, at a price of $12.50 per share (the "Share Consideration"). Upon the
terms and subject to the conditions set forth in the Merger Agreement, following
consummation of the Offer, the Company will be merged with the Sub (the
"Merger"), the Company will become a wholly owned subsidiary of the Acquiror and
each outstanding share of common stock of the Company not owned by the Acquiror
will be converted into the right to receive the Share Consideration.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as a recent draft of
the Acquisition Agreement. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and the Acquiror,
and have met with the Company's and the Acquiror's management to discuss the
business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have been advised, and we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's and the Acquiror's managements as to
the future financial performance of the Company. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company, nor have we
been furnished with any such evaluations or appraisals. We have also assumed
with your consent, that the executed Acquisition Agreement and all of the terms
and conditions thereof will conform in all material respects with the draft of
the Acquisition Agreement reviewed by us and that the Offer and the Merger will
be consummated on the terms described in such draft. Our opinion is necessarily
based upon financial, economic, market and other conditions as they exist and
can be evaluated on the date hereof.
With respect to outstanding litigation involving the Company, including
litigation relating to the Offer and the Merger, in which significant damages
are alleged, you have instructed us to rely solely upon the judgment of the
management of the Company and its counsel that the outcome of the litigation
will not have a material adverse effect on the financial condition or results of
operations of the Company.
<PAGE> 2
We have acted as financial advisor to the Acquiror in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the past, we have performed and are currently providing certain
investment banking services for the Acquiror unrelated to the proposed Offer and
Merger, including acting as financial advisor in connection with the Acquiror's
proposed demutualization and joint-lead manager in the related initial public
offering, for which services we have received and expect to receive customary
fees. In connection with the proposed initial public offering of MetLife, Inc.,
Credit Suisse Group, the ultimate parent of Credit Suisse First Boston
Corporation, has agreed in principle that it or its affiliates will purchase, at
the initial public offering price, in a private placement from MetLife, Inc.,
common stock which could represent approximately 4.9% of the total number of
shares of MetLife, Inc.'s common stock outstanding upon consummation of the
initial public offering and the private placements. In addition, we note that
the Vice Chairman of the Acquiror is a member of the Board of Directors of
Credit Suisse Group and an officer of the Acquiror is a member of the investment
committee of Credit Suisse First Boston International Equity Partners, L.P. The
Acquiror is also a limited partner of certain limited partnerships affiliated
with Credit Suisse First Boston Corporation.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Acquiror for
our and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Acquiror in connection with its consideration of the Offer and
the Merger and is not to be quoted or referred to, in whole or in part, in any
registration statement, tender offer statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent. This opinion does not address the fairness of the
consideration to the public minority stockholders.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the aggregate consideration to be paid by the Acquiror in the Offer
and the Merger is fair to the Acquiror from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
<PAGE> 1
Confidential
Presentation regarding:
Project Spirit
PRESENTATION TO THE INDEPENDENT COMMITTEE
OF THE BOARD OF DIRECTORS
March 2, 2000
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 2
PROJECT SPIRIT
Disclaimer
These materials are based solely on information received from publicly
available documents and certain other information provided by the
management of C Co. ("C Co." or the "Company"). Salomon Smith Barney Inc.
("Salomon Smith Barney") has had discussions with certain senior officers
of C Co., but has not attempted independently to investigate or verify
such information, and Salomon Smith Barney does not assume responsibility
for the accuracy or completeness of such information. The projections
included in these materials have been prepared by the management of C Co.
Salomon Smith Barney has relied solely on such projections and, in
preparing these materials has assumed that such projections were
reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of C Co. Projections involve
elements of subjective judgment and analysis, and there can be no
assurance that such projections will be attained. Salomon Smith Barney
expresses no opinion with respect to such projections or the assumptions
underlying them. These materials are being furnished and should be
considered only in connection with the advice or opinion being provided by
Salomon Smith Barney in connection herewith.
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 3
PROJECT SPIRIT
Table of Contents
1 TRANSACTION SUMMARY
2 EQUITY MARKET REACTION AND UPDATE
3 HISTORICAL OPERATING PERFORMANCE
4 C CO. VALUATION ANALYSIS
A. Market Based Data
B. Discounted Cash Flow
APPENDIX
A. Projected Financial Statements
B. Public Comparable Mortgage Companies
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 4
PROJECT SPIRIT
1 TRANSACTION SUMMARY
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 5
PROJECT SPIRIT
Transaction Summary
<TABLE>
<CAPTION>
- ----------------------------------------------------- ----------------------------------------------
ITEM OFFER TERMS
- ----------------------------------------------------- ----------------------------------------------
<S> <C>
Transaction M Co. acquires the outstanding shares of C Co.
Price per Share $12.50
Total Transaction Value $174.6 million
Value of Minority Interest $68.1 million
Form of Consideration 100% cash
Price as a Multiple of:
2000 IBES EPS (as of 2/25/00) 11.2x
2000 Management Projections EPS 13.4
2000 Sensitivity Analysis EPS 17.3
Price Premium/(Discount) to:
52 Week High ($18.75) (33.3%)
52 Week Low ($6.75) 85.2
1-Day Prior to M Co. Initial Offer ($9.5625) 30.7
1-Month Prior to M Co. Initial Offer ($8.4375) 48.1
</TABLE>
SALOMON SMITH BARNEY
---------------------------
1 A member of citigroup[LOGO]
<PAGE> 6
PROJECT SPIRIT
2 EQUITY MARKET REACTION AND UPDATE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 7
PROJECT SPIRIT
C Co. Trading History
PRICE/VOLUME
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
2 A member of citigroup[LOGO]
<PAGE> 8
PROJECT SPIRIT
C Co. Relative Price Performance
PRICE PERFORMANCE
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
3 A member of citigroup[LOGO]
<PAGE> 9
PROJECT SPIRIT
C Co. Relative Price/Forward Earnings Ratio
RELATIVE PRICE/FORWARD EARNINGS
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
4 A member of citigroup[LOGO]
<PAGE> 10
PROJECT SPIRIT
Mortgage Business Relative Price Performance
MORTGAGE RELATED PRICE PERFORMANCE
Daily Data: IPO Date (December 17, 1997) through February 25, 2000
[GRAPHIC OMITTED]
SALOMON SMITH BARNEY
---------------------------
5 A member of citigroup[LOGO]
<PAGE> 11
PROJECT SPIRIT
C Co. Recent Trading History
PRICE/VOLUME
Daily Data: July 29, 1999 through February 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
6 A member of citigroup[LOGO]
<PAGE> 12
PROJECT SPIRIT
3 HISTORICAL OPERATING PERFORMANCE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 13
PROJECT SPIRIT
Historical AUM and Revenue Breakdown by Year
AFFILIATED VS. UNAFFILIATED BUSINESSES
($ in millions)
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------
------------ ------------ ------------ ------------ ------------
1996 1997 1998 1999(a) CAGR(b)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Affiliated Assets Under Management $10,600 $14,200 $17,200 $11,600 3.1%
Unaffiliated Assets Under Management 10,100 11,800 12,400 21,700 29.0
- ------------------------------------------------------------------------------------------------------------------
Total Assets Under Management $20,700 $26,000 $29,600 $33,300 17.2%
- ------------------------------------------------------------------------------------------------------------------
Affiliated Revenues $10.8 $12.1 $16.1 $16.3 14.7%
Unaffiliated Revenues 41.8 52.9 63.5 73.1 20.4
Other Revenues 1.1 1.6 2.6 1.6 14.3
- ------------------------------------------------------------------------------------------------------------------
Total Revenues $53.7 $66.6 $82.2 $90.9 19.2%
- ------------------------------------------------------------------------------------------------------------------
Affiliated Pre-Tax Income $2.4 $2.6 $4.1 $4.6 24.2%
Unaffiliated Pre-Tax Income 8.7 12.5 18.6 17.6 26.5
- ------------------------------------------------------------------------------------------------------------------
Total Pre-Tax Income $11.1 $15.1 $22.7 $22.2 26.0%
- ------------------------------------------------------------------------------------------------------------------
Affiliated
Pre-Tax Income/Revenues 22.2% 21.6% 25.5% 28.2%
Pre-Tax Income/Average AUM 0.6bp 0.5bp 0.7bp 0.8bp
Unaffiliated
Pre-Tax Income/Revenues 20.8% 23.7% 29.3% 24.1%
Pre-Tax Income/Average AUM 2.3bp 2.9bp 3.9bp 2.6bp
Mortgage Revenues as a % of Total 28.5% 24.8% 28.2% 28.2%
</TABLE>
(a) The decrease in affiliated AUM in 1999 is due to the loss of assets
related to stable value products and the increase in unaffiliated AUM in
1999 is due to the conversion of a large advisory client to a
discretionary client and the acquisition of TCW's high-grade fixed income
management unit serving insurance companies.
(b) Represents a CAGR from 1996-1999.
SALOMON SMITH BARNEY
---------------------------
7 A member of citigroup[LOGO]
<PAGE> 14
PROJECT SPIRIT
Historical AUM and Revenue Breakdown by Quarter
AFFILIATED VS. UNAFFILIATED BUSINESSES
($ in millions)
<TABLE>
<CAPTION>
1999
----------------------------------------------------------
------------ ------------ ------------ ------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Affiliated Assets Under Management $17,100 $17,300 $11,800 $11,600
Unaffiliated Assets Under Management 12,300 15,100 22,200 21,700
- --------------------------------------------------------------------------------------------------
Total Assets Under Management $29,400 $32,400 $34,000 $33,300
- --------------------------------------------------------------------------------------------------
Affiliated Revenues $4.0 $4.1 $4.3 $3.9
Unaffiliated Revenues 18.5 19.5 16.9 18.1
Other Revenues 0.5 0.4 0.3 0.4
- --------------------------------------------------------------------------------------------------
Total Revenues $23.0 $24.0 $21.5 $22.4
- --------------------------------------------------------------------------------------------------
Affiliated Pre-Tax Income $1.2 $1.2 $1.2 $1.0
Unaffiliated Pre-Tax Income 5.1 5.4 3.1 4.0
- --------------------------------------------------------------------------------------------------
Total Pre-Tax Income $6.3 $6.6 $4.3 $5.0
- --------------------------------------------------------------------------------------------------
Affiliated
Pre-Tax Income/Revenues 30.0% 29.3% 27.9% 25.6%
Pre-Tax Income/Average AUM (a) 0.7bp 0.7bp 0.8bp 0.9bp
Unaffiliated
Pre-Tax Income/Revenues 27.6% 27.7% 18.3% 22.1%
Pre-Tax Income/Average AUM (a) 4.1bp 3.9bp 1.7bp 1.8bp
</TABLE>
(a) Annualized
SALOMON SMITH BARNEY
---------------------------
8 A member of citigroup[LOGO]
<PAGE> 15
PROJECT SPIRIT
Historical Operating Statistics vs. Peer Group
<TABLE>
<CAPTION>
------ ------ ------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Revenue Growth
C CO. 24.1% 23.4% 10.5%
Peer Group 22.7 25.2 11.8
Net Income Growth
C CO. 43.5% 47.1% 1.6%
Peer Group 12.5 14.6 18.1
AUM Growth
C CO. 25.6% 13.8% 12.5%
Peer Group 33.5 21.6 13.1
Advisory Revenue/Total Revenue
C CO. 50.1% 49.0% 43.8%
Peer Group 87.4 94.1 96.4
Mortgage Revenue/Total Revenue
C CO. 24.8% 28.2% 28.2%
Peer Group -- -- --
Comp. Expense/Total Revenue
C CO. 50.0% 46.5% 47.3%
Peer Group 40.6 39.9 36.1
Total Revenue/AUM
C CO. 0.26% 0.28% 0.27%
Peer Group 0.46 0.47 0.53
Advisory Revenue/AUM
C CO. 0.13% 0.14% 0.12%
Peer Group 0.41 0.46 0.48
EBITDA Margin
C CO. 27.6% 31.1% 27.6%
Peer Group 35.7 42.2 40.3
Price/Forward Net Income
C CO. NA 19.4x 14.1x (a)
Peer Group 18.8 19.2 16.9 (a)
</TABLE>
Note: Data for the peer group is based on the median of the historical operating
statistics.
Peer group includes FII, BLK, JNC, AMG, UAM and GBL.
(a) Through 8/9/99.
SALOMON SMITH BARNEY
---------------------------
9 A member of citigroup[LOGO]
<PAGE> 16
PROJECT SPIRIT
Business Mix vs. Peer Group
(As of September 30, 1999)
<TABLE>
<CAPTION>
Assets Under Management
-----------------------------------------------------------------------
Client Type Asset Type Region
-------------------- -------------------- ------------------
Retail Inst'l Equity FI Dom. Int'l
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C Co. - Management Projections -- 100.0% 12.0% 88.0% 100.0% --
C Co. - Sensitivity Analysis -- 100.0 13.5 86.5 100.0 --
PUBLIC ASSET MANAGERS
Federated Investors, Inc. 88.0% 12.0% 15.0% 85.0% 98.0% 2.0%
BlackRock Inc. 39.9 60.1 10.3 89.7 98.0 2.0
John Nuveen 66.7 33.3 25.1 74.9 100.0 --
Affiliated Managers Group 7.0 93.0 67.0 33.0 64.0 36.0
United Asset Management 4.0 96.0 87.0 13.0 86.0 14.0
Gabelli Asset Management Inc. 50.3 49.7 88.0 12.0 100.0 --
- -----------------------------------------------------------------------------------------------------------
High 88.0% 96.0% 88.0% 89.7% 100.0% 36.0%
Median 45.1 54.9 46.0 54.0 98.0 2.0
Low 4.0 12.0 10.3 12.0 64.0 --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SALOMON SMITH BARNEY
---------------------------
10 A member of citigroup[LOGO]
<PAGE> 17
PROJECT SPIRIT
4 C CO. VALUATION ANALYSIS
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 18
PROJECT SPIRIT
A. Market Based Data
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 19
PROJECT SPIRIT
Valuation Summary - Market Based Data
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------------
Current C Co.
Market Price:
$10.69
-------------
|
V
------------- ------------- -------------
M Co. Initial M Co. First M Co. Second
Offer Price: Revised Offer Revised Offer
$10.50 Price: $11.50 Price: $12.50
------------- ------------- -------------
| | |
V V V
Valuation Methodology $6.50 $7.50 $8.50 $9.50 $10.50 $11.50 $12.50 $13.50
- ------------------------------------------------------------------------------------------------------------------------------------
Management Projections
---------------------------
Summary Component Valuation $8.50-10.50
---------------------------
------------------------------
Public Asset Managers (a) $9.25-$12.00
------------------------------
Sensitivity Analysis
----------------------
Summary Component Valuation $6.50-8.00
----------------------
---------------------
Public Asset Managers (a) $7.25-9.25
---------------------
Squeeze Out Analysis
---------------------
1-Day Prior Premium to M Co.'s Initial Offer $10.75-12.50
---------------------
------------------
1-Month Prior Premium to M Co.'s Initial Offer $9.75-11.75
------------------
<CAPTION>
Valuation Multiples $6.50 $7.50 $8.50 $9.50 $10.50 $11.50 $12.50 $13.50
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premium/Market Price (February 25, 2000)(b) (39.2)% (29.8)% (20.5)% (11.1)% (1.8)% 7.6% 17.0% 26.3%
Premium/Market Price (January 14, 2000)(c) (32.0) (21.6) (11.1) (0.7) 9.8 20.3 30.7 41.2
Premium/Market Price (December 14, 1999) (d) (23.0) (11.1) 0.7 12.6 24.4 36.3 48.1 60.0
Premium/Market Price (August 9, 1999) (e) (59.7) (53.5) (47.3) (41.1) (34.9) (28.7) (22.5) (16.3)
Firm Value/Management Projections 1999 EBITDA 0.9x 1.5x 2.1x 2.7x 3.4x 4.0x 4.6x 5.3x
Firm Value/Sensitivity Analysis 1999 EBITDA 1.1 1.9 2.8 3.6 4.4 5.2 6.1 6.9
Price/Management Projections 1999 Net Income 7.9 9.1 10.3 11.5 12.7 13.9 15.1 16.3
Price/Sensitivity Analysis 1999 Net Income 10.2 11.7 13.3 14.9 16.4 18.0 19.6 21.1
Price/Management Projections 2000E Net Income (f) 7.0 8.0 9.1 10.2 11.2 12.3 13.4 14.4
Price/Sensitivity Analysis 2000E Net Income (g) 9.0 10.4 11.8 13.1 14.5 15.9 17.3 18.7
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public asset managers consist of FII, BLK, JNC, AMG, UAM, GBL.
(b) Price as of close of M Co.'s first and second revised offer (2/25/00):
$10.6875
(c) Price 1-day prior to M Co.'s initial offer (1/14/00): $9.5625
(d) Price 1-month prior to M Co.'s initial offer (12/14/99): $8.4375
(e) Price prior to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management projections of $0.93 for 2000 and 13.97 million shares
outstanding.
(g) Based on a sensitivity analysis of $0.72 for 2000 and 13.97 million shares
outstanding.
SALOMON SMITH BARNEY
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11 A member of citigroup[LOGO]
<PAGE> 20
PROJECT SPIRIT
Summary Component Valuation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
2000E Net
Income Per P/2000E Multiple Implied
Business Line Share Median Valuation Valuation Range
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Projections
Unaffiliated AUM (a) $0.56 11.6x -- 14.2x $6.45 -- $ 7.88
Affiliated AUM (Retained) (a) 0.04 11.6 -- 14.2 0.52 -- 0.64
Mortgage (b) 0.33 4.7 -- 5.8 1.59 -- 1.94
-------- -------------------- ----------------
- ----------------------------------------------------------------------------------------------------
Total C Co. $0.93 9.1x -- 11.2x $8.55 -- $10.46
- ----------------------------------------------------------------------------------------------------
Sensitivity Analysis
Unaffiliated AUM (a) $0.45 11.6x -- 14.2x $5.21 -- $ 6.36
Mortgage (b) 0.28 4.7 -- 5.8 1.30 -- 1.59
-------- -------------------- ----------------
- ----------------------------------------------------------------------------------------------------
Total C. Co. $0.72 9.0x -- 11.0x $6.51 -- $ 7.96
- ----------------------------------------------------------------------------------------------------
</TABLE>
N.B. Management Projections.
(a) Represents median of P/2000E estimates adjusted by +/- 10% for an index of
public asset managers companies (FII, BLK, JNC, AMG, UAM and GBL).
(b) Represents median of P/2000E estimates adjusted by +/- 10% for an index of
residential and commercial mortgage REIT companies (NDE, AHR, RWT, AMMB,
RAS and LMM).
SALOMON SMITH BARNEY
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12 A member of citigroup[LOGO]
<PAGE> 21
PROJECT SPIRIT
Public Asset Managers
FINANCIAL INFORMATION AS OF OR FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999.
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Market Cap.
as a Multiple of:
-------------------------------------
2/25/00 Calendar:
Market LTM -------------------
Cap. AUM Net.Inc.(b) 00EE(c) 01EE(c)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C Co. - Management Projections $149 $24,400 12.9x 11.4x 9.6x
C Co. - Sensitivity Analysis 149 21,700 16.7 14.8 11.0
PUBLIC ASSET MANAGERS
Federated Investors, Inc. $1,910 $124,820 15.4x 13.4x 11.7x
BlackRock Inc. 1,201 161,500 20.2 15.1 12.7
John Nuveen 1,053 59,784 10.8 10.7 9.7
Affiliated Managers Group 830 82,041 11.5 14.7 11.8
United Asset Management 828 202,600 13.5 12.4 10.7
Gabelli Asset Management Inc. (a) 495 18,629 12.0 10.0 8.4
<CAPTION>
------------------------------------------------------------------
<S> <C> <C> <C> <C>
High $202,600 20.2x 15.1x 12.7x
Median 103,431 12.8 12.9 11.2
Low 18,629 10.8 10.0 8.4
------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
C Co. Management Projections Implied Price Per Share:
<S> <C> <C> <C>
Median $10.56 $12.06 $12.50
Low 8.95 9.31 9.37
------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
C Co. Sensitivity Analysis Implied Price Per Share:
<S> <C> <C> <C>
Median $8.17 $ 9.33 $10.92
Low 6.92 7.20 8.18
------------------------------------------------------------------
</TABLE>
N.B. Financial data excludes certain non-recurring and extraordinary items.
(a) LTM data is as of 9/30/99
(b) C Co. is restated based on management estimates.
(c) Public asset managers' earnings estimates are from IBES as of 2/25/00. C
Co. earnings based on management projections.
SALOMON SMITH BARNEY
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13 A member of citigroup[LOGO]
<PAGE> 22
PROJECT SPIRIT
Premium Analysis: Going Private Transactions
- --------------------------------------------------------------------------------
Premiums Paid to Non-Control Public Interest in a Going Private Transaction,
1995 to February 25, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Number of Implied C Co. Implied C Co.
Transactions Median Price(a) Median Price(b)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Consideration 77 25.0% $10.55 19.7% $11.45
Stock Consideration 14 16.0 9.79 4.6 10.00
Mixed Consideration 4 18.0 9.95 17.2 11.20
- ---------------------------------------------------------------------------------------------------
Median 24.2 10.48 18.9 11.37
- ---------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
All Going Private Transactions, 1995 to February 25, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Number of Median Implied C Co. Median Implied C Co.
Transactions Premium Price(a) Premium Price(b)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Transaction Value > $500 million 10 20.7% $10.19 21.8% $11.64
Transaction Value $100-499 million 42 24.9 10.54 17.2 11.20
Transaction Value < $99 million 43 25.0 10.55 19.0 11.38
- -------------------------------------------------------------------------------------------------------------
Median 24.2 10.48 18.9 11.37
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
1-Month Market Premium 1-Day Market Premium
to Initial M Co. Offer to Initial M Co. Offer
------------------------- -----------------------
Median Implied C Co. Median Implied C Co.
Premium Price(a) Premium Price(b)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25th Percentile 16.0% $9.79 11.1% $10.63
50th Percentile 24.2 10.48 18.9 11.37
75th Percentile 40.2 11.83 31.7 12.59
- -----------------------------------------------------------------------------------------------
</TABLE>
Source: Securities Data Corp.
(a) Based on closing price of $8.438 on 12/14/99.
(b) Based on closing price of $9.563 on 1/14/00.
SALOMON SMITH BARNEY
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14 A member of citigroup[LOGO]
<PAGE> 23
PROJECT SPIRIT
B. Discounted Cash Flow
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 24
PROJECT SPIRIT
Discounted Cash Flow Analysis - Management Projections
($ in millions)
<TABLE>
<CAPTION>
Management
----------------------------------
----- ----- ----- ----- -----
CAGR
1999 2000 2001 2002 99-02
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Income $11.2 $13.1 $15.6 $18.5 18.1%
Plus: Amortization 2.5 2.7 2.9 3.1 7.6
----- ----- ----- ----- ----
Interim Cash Flows 13.7 15.8 18.5 21.6 16.3%
Terminal Value (a) 0.0 0.0 0.0 184.6 NM
----- ----- ----- ----- ----
Total Cash Flows $13.7 $15.8 $18.5 $206.1 NM
----- ----- ----- ----- ----
<CAPTION>
Multiple of 2002 Net Income (b)
--------------------------------------
9.0x 9.5x 10.0x 10.5x
--------------------------------------
5.0% $8.56 $8.89 $9.22 $9.55
Net Income 10.0 9.65 10.03 10.41 10.79
Growth Rate (c) 15.0 10.85 11.28 11.71 12.15
20.0 12.14 12.63 13.12 13.62
</TABLE>
N.B. Management projections and restated 1999 information based on management
estimates.
(a) Based on a 10.0 x multiple of 2002 net income.
(b) Assumes 13.97 million diluted shares.
(c) Discount rate of 12% was calculated by using a median beta comprised of
public asset managers, an equity risk premium of 5.50% and the 30 year
risk free rate.
SALOMON SMITH BARNEY
---------------------------
15 A member of citigroup[LOGO]
<PAGE> 25
PROJECT SPIRIT
Discounted Cash Flow Analysis - Sensitivity Analysis
($ in millions)
<TABLE>
<CAPTION>
Management
----------------------------------
----- ----- ----- ----- -----
CAGR
1999 2000 2001 2002 99-02
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Income $8.9 $10.1 $13.6 $16.0 21.4%
Plus: Amortization 1.7 2.7 2.9 3.1 21.9
----- ----- ----- ----- ----
Interim Cash Flows 10.6 12.8 16.5 19.1 21.5%
Terminal Value (a) 0.0 0.0 0.0 159.8 NM
----- ----- ----- ----- ----
Total Cash Flows $10.6 $12.8 $16.5 $178.9 NM
----- ----- ----- ----- ----
Multiple of 2002 Net Income (b)
--------------------------------------
9.0x 9.5x 10.0x 10.5x
--------------------------------------
5.0% $6.93 $7.19 $7.45 $7.72
Net Income 10.0 7.80 8.10 8.40 8.71
Growth Rate (c) 15.0 8.75 9.09 9.44 9.79
20.0 9.78 10.17 10.56 10.96
</TABLE>
N.B. Based on management's projections and adjusted for other potential loss of
business derived from C Co.'s relationship with Parent.
(a) Based on a 10.0 x multiple of 2002 net income.
(b) Assumes 13.97 million diluted shares.
(c) Discount rate of 12% was calculated by using a median beta comprised of
public asset managers, an equity risk premium of 5.50% and the 30 year
risk free rate.
SALOMON SMITH BARNEY
---------------------------
16 A member of citigroup[LOGO]
<PAGE> 26
PROJECT SPIRIT
APPENDIX
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 27
PROJECT SPIRIT
A. Projected Financial Statements
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 28
PROJECT SPIRIT
Projected Income Statement - Management Projections
1999 - 2002 PROJECTIONS
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
--------- --------- --------- --------- ---------
1999-2002
1999 2000 2001 2002 CAGR
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total Revenues $82.1 $94.8 $104.3 $114.8 11.8%
Expenses
Employee Compensation and Benefits 41.6 46.6 49.9 53.5 8.8
Amortization of Goodwill 2.6 2.7 2.9 3.1 5.6
Other Expenses (a) 18.3 23.2 24.9 26.7 13.4
--------- --------- --------- --------- ---------
Total Expenses $62.6 $72.5 $77.7 $83.3 10.0%
Operating Income $19.5 $22.3 $26.6 $31.4 17.2%
Interest Expense 0.2 0.2 0.2 0.1 (15.4)
--------- --------- --------- --------- ---------
Pre-Tax Income $19.3 $22.1 $26.4 $31.3 17.5%
Taxes 7.7 9.0 10.8 12.8 18.4
--------- --------- --------- --------- ---------
Net Income $11.5 $13.1 $15.6 $18.5 16.9%
========= ========= ========= ========= =========
Diluted EPS (b) $0.83 $0.93 $1.12 $1.32 16.9%
Operating Margin 23.8% 23.5% 25.5% 27.4%
Assets Under Management $24,400 $29,135 $32,569 $36,385 14.2%
Total Revenues as a % of Average AUM 0.39% 0.40% 0.38% 0.37% --
Net Income as a % of Average AUM 0.06 0.04 0.04 0.04 --
</TABLE>
N.B. Management estimates for 1999 and projections for 2000 - 2002. Includes
estimated cost savings, including eliminations of allocated overhead,
resulting from M Co.'s retraction of the general account assets managed by
C Co.
(a) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(b) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
17 A member of citigroup[LOGO]
<PAGE> 29
PROJECT SPIRIT
Projected Income Statement - Sensitivity Analysis
1999 - 2002 PROJECTIONS
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
--------- --------- --------- --------- ---------
1999-2002
1999 2000 2001 2002 CAGR
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total Revenues $60.9 $74.0 $83.6 $91.5 11.2%
Expenses
Employee Compensation and Benefits 29.4 36.5 38.3 40.2 3.3
Amortization of Goodwill 1.7 2.7 2.9 3.1 4.6
Other Expenses (a) 14.6 17.4 19.1 20.9 6.2
--------- --------- --------- --------- ---------
Total Expenses $45.7 $56.7 $60.3 $64.2 6.5%
Operating Income $15.2 $17.3 $23.3 $27.2 25.3%
Interest Expense 0.1 0.2 0.2 0.1 (13.2)
--------- --------- --------- --------- ---------
Pre-Tax Income $15.1 $17.1 $23.1 $27.1 25.8%
Taxes 6.2 7.0 9.5 11.1 16.5
--------- --------- --------- --------- ---------
Net Income $8.9 $10.1 $13.6 $16.0 25.8%
========= ========= ========= ========= =========
Diluted EPS (b) $0.64 $0.72 $0.97 $1.14 25.8%
Operating Margin 25.0% 23.4% 27.8% 29.8%
Assets Under Management $21,700 $25,978 $29,157 $32,672 12.1%
Total Revenues as a % of Average AUM 0.36% 0.26% 0.25% 0.24% --
Net Income as a % of Average AUM 0.05 0.03 0.03 0.04 --
</TABLE>
N.B. Based on management's projections and adjusted for other potential loss of
business derived from C Co.'s relationship with Parent.
(a) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(b) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
18 A member of citigroup[LOGO]
<PAGE> 30
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2000 PROJECTIONS
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $15.1 $62.9 $23.7 $101.7 ($6.9) $94.8
Expenses
Employee Compensation and Benefits 6.9 31.5 9.6 48.0 (1.4) 46.6
Amortization of Goodwill (a) 0.0 1.6 1.1 2.7 0.0 2.7
Other Expenses (b) 4.2 16.4 5.1 25.8 (2.6) 23.2
---------- ------------ -------- ------------ ---------- --------
Total Expenses $11.1 $49.6 $15.8 $76.5 ($4.0) $72.5
Operating Income $4.0 $13.3 $7.9 $25.2 ($2.9) $22.3
Interest Expense (a) 0.0 0.2 0.0 0.2 0.0 0.2
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $4.0 $13.1 $7.9 $25.0 ($2.9) $22.1
Taxes 1.6 5.4 3.2 10.2 (1.2) 9.0
---------- ------------ -------- ------------ ---------- --------
Net Income $2.3 $7.8 $4.7 $14.8 ($1.7) $13.1
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.17 $0.56 $0.33 $1.06 ($0.12) $0.93
Operating Margin 26.2% 21.2% 33.4% 24.8% 42.0% 23.5%
Assets Under Management $12,357 $25,978 NM $38,335 ($9,200) $29,135
Total Revenues as a % of Average AUM 0.13% 0.26% NM 0.20% 0.08% 0.40%
Net Income as a % of Average AUM 0.02 0.03 NM 0.04 0.02 0.04
------------ --------
</TABLE>
N.B. Management projections for 2000. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co.'s
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million shares outstanding.
SALOMON SMITH BARNEY
---------------------------
19 A member of citigroup[LOGO]
<PAGE> 31
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2001 PROJECTIONS
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $16.6 $68.6 $26.7 $111.9 ($7.6) $104.3
Expenses
Employee Compensation and Benefits 7.7 33.0 10.8 51.4 (1.4) 49.9
Amortization of Goodwill (a) 0.0 1.8 1.1 2.9 0.0 2.9
Other Expenses (b) 4.3 18.0 5.3 27.6 (2.7) 24.9
---------- ------------ -------- ------------ ---------- --------
Total Expenses $11.9 $52.8 $17.2 $81.8 ($4.1) $77.7
Operating Income $4.7 $15.8 $9.5 $30.1 ($3.5) $26.6
Interest Expense (a) 0.0 0.2 0.0 0.2 0.0 0.2
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $4.7 $15.6 $9.5 $29.9 ($3.5) $26.4
Taxes 1.9 6.4 3.9 12.3 (1.4) 10.8
---------- ------------ -------- ------------ ---------- --------
Net Income $2.8 $9.2 $5.6 $17.6 ($2.0) $15.6
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.20 $0.66 $0.40 $1.26 ($0.15) $1.12
Operating Margin 28.4% 23.1% 35.7% 26.9% 45.7% 25.5%
Assets Under Management $13,011 $29,157 NM $42,169 ($9,600) $32,569
Total Revenues as a % of Average AUM 0.13% 0.25% NM 0.20% 0.08% 0.38%
Net Income as a % of Average AUM 0.02 0.03 NM 0.04 0.02 0.04
------------ --------
</TABLE>
N.B. Management projections for 2001. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co's
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
20 A member of citigroup[LOGO]
<PAGE> 32
PROJECT SPIRIT
Projected Operating Results by Segment - Management Projections
2002 PROJECTIONS
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
---------- ------------ -------- ------------ ---------- --------
Expense
Affiliated Unaffiliated Mortgage Consolidated Reductions Total
---------- ------------ -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $18.3 $75.0 $29.8 $123.1 ($8.3) $114.8
Expenses
Employee Compensation and Benefits 8.4 34.5 12.0 55.0 (1.5) 53.5
Amortization of Goodwill (a) 0.0 2.0 1.1 3.1 0.0 3.1
Other Expenses (b) 4.3 19.7 5.4 29.5 (2.8) 26.7
---------- ------------ -------- ------------ ---------- --------
Total Expenses $12.7 $56.3 $18.6 $87.6 ($4.2) $83.3
Operating Income $5.6 $18.7 $11.2 $35.5 ($4.1) $31.4
Interest Expense (a) 0.0 0.1 0.0 0.1 0.0 0.1
---------- ------------ -------- ------------ ---------- --------
Pre-Tax Income $5.6 $18.6 $11.2 $35.4 ($4.1) $31.3
Taxes 2.3 7.6 4.6 14.5 (1.7) 12.8
---------- ------------ -------- ------------ ---------- --------
Net Income $3.3 $11.0 $6.6 $20.9 ($2.4) $18.5
========== ============ ======== ============ ========== ========
Diluted EPS (c) $0.23 $0.79 $0.47 $1.49 ($0.17) $1.32
Operating Margin 30.4% 25.0% 37.7% 28.9% 49.2% 27.4%
Assets Under Management $13,714 $32,672 NM $46,385 $10,000 $36,385
Total Revenues as a % of Average AUM 0.14% 0.24% NM 0.20% 0.08% 0.37%
Net Income as a % of Average AUM 0.02 0.04 NM 0.05 0.02 0.04
------------ --------
</TABLE>
N.B. Management projections for 2002. Includes estimated cost savings,
including eliminations of allocated overhead, resulting from M Co's
retraction of the general account assets managed by C Co.
(a) Affiliated businesses assumed to have 0% of annual goodwill amortization
and interest expense beginning in 2000.
(b) Includes occupancy and equipment costs, marketing and production costs and
professional services.
(c) Based on 13.97 million diluted shares outstanding.
SALOMON SMITH BARNEY
---------------------------
21 A member of citigroup[LOGO]
<PAGE> 33
PROJECT SPIRIT
B. Public Comparable Mortgage Companies
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 34
PROJECT SPIRIT
Mortgage Unit Valuation Analysis
FINANCIAL INFORMATION AS OF DECEMBER 31, 1999.
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Price as a Multiple of:
Price 52-Week Range Current as -----------------------
Market as of ---------------- a % of 2000E Book
Name Cap. 2/25/00 High Low 52-Wk High EPS (a) Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C Co. Management Projections $149 $10.69 $18.75 $6.75 57.0% 11.4x NA
C Co. Sensitivity Analysis 149 10.69 18.75 6.75 57.0 14.8 NA
RESIDENTIAL AND COMMERCIAL MORTGAGE REITS
Indymac Mortgage Holdings, Inc. $872 $11.38 $17.44 $9.88 65.2% 8.8x 1.05x
Anthracite Capital, Inc. 134 6.38 7.88 6.00 81.0 5.0 0.79
Redwood Trust, Inc. (b) 105 12.00 17.88 11.25 67.1 6.3 0.47
AMRESCO, Inc. (b) 66 1.34 10.56 1.00 12.7 3.4 0.11
Resource Asset Inv. Trust 63 10.13 13.44 9.94 75.3 4.3 0.73
LASER Mortgage Management, Inc. (b) 59 3.94 5.63 3.13 70.0 5.5 0.79
<CAPTION>
---------------------------------------------------------
<S> <C> <C> <C>
High 81.0% 8.8x 1.05x
Median 68.6 5.3 0.76
Low 12.7 3.4 0.11
---------------------------------------------------------
<CAPTION>
---------------------------------------------------------
C Co. Management Projections Implied Price Per Share (c):
<S> <C> <C>
Median $1.76 NA
Low 1.15 NA
---------------------------------------------------------
<CAPTION>
---------------------------------------------------------
C Co. Sensitivity Analysis Implied Price Per Share (d):
<S> <C> <C>
Median $1.45 NA
Low 0.95 NA
---------------------------------------------------------
</TABLE>
(a) Earnings estimates based on median IBES estimates as of 2/25/00.
(b) Financial data as of 9/30/99.
(c) Based on management's forecasts for the mortgage business management
projections of $0.33 per share for 2000.
(d) Based on management's forecasts for the mortgage business sensitivity
analysis of $0.28 per share for 2000.
SALOMON SMITH BARNEY
---------------------------
22 A member of citigroup[LOGO]
<PAGE> 35
PROJECT SPIRIT
AMRESCO Case Study
CASE STUDY: LEND LEASE CORP. ACQUIRES FIVE OF AMRESCO'S BUSINESSES
o Target Description - AMRESCO Inc. specializes in real estate lending,
commercial finance and the acquisition, resolution and servicing of
commercial loans. Based in Dallas, AMRESCO has offices nationwide as well
as in Canada, the United Kingdom, Mexico and Asia. Businesses sold focused
on commercial mortgage and banking services, real estate lending and asset
management included: AMRESCO Capital Ltd., Holliday Fenoglio Fowler LP,
Real Estate Structured Finance, AMRESCO Services Ltd., and Asset
Management.
AMRESCO TRANSACTION DETAILS
<TABLE>
<S> <C> <C> <C>
Announcement date December 8, 1999 Price / LTM Income NM
Transaction value $257.5 million Price / Servicing Portfolio 0.59%
Form of consideration Cash plus Promissory note, and $10.0 Total Servicing Portfolio $44,000 million
million retention pool
</TABLE>
EQUIVALENT VALUE FOR C CO.
<TABLE>
<S> <C> <C> <C>
Implied transaction value $25.2 million ($1.80 per C Co. share) Total Servicing Portfolio $4,300 million
</TABLE>
SALOMON SMITH BARNEY
---------------------------
23 A member of citigroup[LOGO]
<PAGE> 36
Confidential
Presentation regarding:
Project Spirit
UPDATED VALUATION ANALYSIS
January 27, 2000
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 37
Table of Contents PROJECT SPIRT
1 EQUITY MARKET REACTION AND UPDATE
2 C CO. VALUATION ANALYSIS
3 ADDITIONAL VALUATION CONSIDERATIONS
APPENDIX
A. Projected Financial Statements
B. Public Comparable Asset Management Companies
C. Public Comparable Mortgage Companies
D. Weighted Average Cost of Capital and Trading History
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 38
PROJECT SPIRIT
1 EQUITY MARKET REACTION AND UPDATE
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 39
PROJECT SPIRIT
C Co. Relative Price Performance
PRICE PERFORMANCE
Daily Data: January 1, 1999 through January 25, 2000
C Co.'s stock price under-performed its peers in 1999, in large part due to
uncertainty around the Parent situation beginning in the third quarter.
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
1 A member of citigroup[LOGO]
<PAGE> 40
PROJECT SPIRIT
C Co. Trading History
PRICE PERFORMANCE
Although the Parent's situation was successfully resolved in August, C Co.'s
stock price has not yet recovered to pre-announcement levels.
Daily Data: July 29, 1999 through January 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
2 A member of citigroup[LOGO]
<PAGE> 41
PROJECT SPIRIT
C Co. Trading History
PRICE PERFORMANCE
C Co.'s stock price was at $9.5625 per share when the $10.50 per share offer was
announced.
Daily Data: January 1, 2000 through January 25, 2000
[GRAPHIC OMITTED]
(a) 01/18/00: M Co. offers to purchase outstanding C Co. shares for $10.50 per
share.
SALOMON SMITH BARNEY
---------------------------
3 A member of citigroup[LOGO]
<PAGE> 42
PROJECT SPIRIT
C Co. Relative Price/Earnings Performance
PRICE/EARNINGS PERFORMANCE
Although C Co.'s P/E closely tracked the Peer Index through August, C Co.'s P/E
currently represents a 30% discount to the Peer Index.
Daily Data: January 1, 1999 through January 25, 2000
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: IBES consensus estimates, C Co. Earnings Estimates, Salomon Smith
Barney.
SALOMON SMITH BARNEY
---------------------------
4 A member of citigroup[LOGO]
<PAGE> 43
PROJECT SPIRIT
C Co. Earnings Estimates
FIRST CALL ESTIMATES FOR THE ROLLING 12 MONTHS FORWARD
C Co.'s median 2000 earnings estimate of $1.10 has declined approximately 20%
from its July high of $1.35.
[GRAPHIC OMITTED]
(a) 07/29/99: A Co. announces a loss of $179 million.
(b) 08/09/99: Parent is downgraded by Moody's from A3 to Ba1 and then to B1 on
8/12/99.
(c) 08/26/99: M Co. acquires Parent for $1.2 billion in cash.
(d) 10/07/99: C Co. warns that 3rd quarter earnings may be up to 43% below
consensus estimates.
(e) 01/18/00: M Co. offers to acquire outstanding C Co. shares for $10.50 per
share.
Source: First Call consensus estimates.
SALOMON SMITH BARNEY
---------------------------
5 A member of citigroup[LOGO]
<PAGE> 44
PROJECT SPIRIT
C Co. Research Coverage
CURRENT IBES RESEARCH COVERAGE
<TABLE>
<CAPTION>
- -------------------------- ----------------- ------------------- -------------
2000E
------------------- Last
Firm Opinion Current Previous Estimate Date
- -------------------------- ----------------- ------------------- -------------
<S> <C> <C> <C> <C>
A.G. Edwards Maintain Position $1.10 $1.10 12/20/99
Donaldson Lufkin & Jenrette Market Perform 1.10 1.10 10/13/99
Putnam, Lovell, de Guardiola Hold 1.15 1.15 9/2/99
- ----------------------------------------------------------------------------------------
Median $1.10 $1.10
- ----------------------------------------------------------------------------------------
IBES Mean Estimates $1.12 $1.12
- ----------------------------------------------------------------------------------------
Management Estimates $1.06 $1.06
========================================================================================
</TABLE>
Source: Bloomberg.
SALOMON SMITH BARNEY
---------------------------
6 A member of citigroup[LOGO]
<PAGE> 45
PROJECT SPIRIT
Investor Community Reaction to Recent Events
PRICE/EARNINGS IMPACT
Prior to the offer, the market had been applying very little value to C Co.'s
affilated businesses.
<TABLE>
<CAPTION>
------------ ------------
Day Prior to Day Prior to
Parent M Co.
Announcement Announcement
(8/9/99) (1/14/00)
------------ ------------
<S> <C> <C>
Share Price $16.13 $9.56
2000E EPS(a) 1.41 1.06
Price / 2000E EPS for C Co. 11.5x 9.0x
Price / 2000E EPS for Unaffiliated AUM(b) 11.5x 11.5x
Unaffiliated EPS(c) $1.20 $0.89
------------ ------------
Contribution $13.81 $10.18
Price / 2000E EPS for Affiliated AUM 11.5x (3.7)x
Affiliated EPS(c) $0.20 $0.17
------------ ------------
Contribution $2.32 ($0.62)
Total $16.13 $9.56
</TABLE>
Source: Company documents
(a) Reflects IBES estimates as of August 9, 1999, and current management
estimates.
(b) Assumes that the market's valuation of the earnings from the unaffiliated
AUM is unchanged at 11.5x.
(c) Reflects annualized weighted-average profitability from the six months
ended June 30, 1999, and current management estimates.
SALOMON SMITH BARNEY
---------------------------
7 A member of citigroup[LOGO]
7
<PAGE> 46
PROJECT SPIRT
C Co. Public Ownership
The weighted average basis of the positions of all current shareholders is
$16.94.
(Shares in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Top 13F Institutional Holders Shares Held % of Total % of Non Weighted Average
(000's) Held Parent Shares Purchase Price(a)
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1 David L. Babson & Co. Inc. 686 5.0% 12.9% $18.32
2 MFS Investment Management 516 3.8 9.7 17.33
3 Dimensional FD Advisors, Inc. 264 1.9 5.0 13.78
4 Sterling Capital Management Co. 216 1.6 4.1 16.08
5 Wellington Management Co. LLP 186 1.4 3.5 15.20
6 PaineWebber Group Inc. 180 1.3 3.4 19.07
7 AXA Financial, Inc. 175 1.3 3.3 16.52
8 Barclays Bank plc 68 0.5 1.3 17.99
9 John A. Levin & Company, Inc. 65 0.5 1.2 13.78
10 State Street Bank & Trust Co. Boston 60 0.4 1.1 19.77
11 Mellon Private Asset Management 56 0.4 1.0 19.11
12 Fleet Boston Corporation 55 0.4 1.0 17.50
13 College Retire Equities 52 0.4 1.0 18.26
14 Hartford Investment Mgmt Co. Inc. 45 0.3 0.8 14.08
15 Frank Russell Co. 31 0.2 0.6 15.60
16 Bankers Trust NY Corp. 31 0.2 0.6 13.33
17 First Source Bank 30 0.2 0.6 13.78
18 Wilmington Trust Company 24 0.2 0.4 16.55
19 Westcap Investors, LLC 21 0.2 0.4 16.43
20 Northern Trust Company 16 0.1 0.3 18.26
21 Citigroup Investments Inc. 15 0.1 0.3 18.65
22 Firstar Investment Research & Mgmt Co. 14 0.1 0.3 15.84
23 World Asset Management 4 0.0 0.1 17.85
-------------------------------------- ------ ----- ----- ------
Total Top 13F Institutional Holders 2,810 20.6% 52.9% $16.94
Insiders/Management 654 4.8 12.3
Parent 8,305 61.0 --
Implied Retail 1,844 13.5 34.7
-------------------------------------- ------ ----- -----
Total Shares Outstanding 13,613 100.0% 100.0%
====================================== ====== ===== =====
</TABLE>
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) Estimate of holders basis in c Co. shares; applies a FIFO inventory to
shares sold.
Note: The following institutions have sold their entire holdings in C Co. since
the 6/30/99 report: American General Corporation, Bank One Corporation,
Chase Manhattan Corp., Credit Suisse First Boston Corp., Morgan Stanley
Dean Witter Advisors, and Prospector Partners, LLC.
SALOMON SMITH BARNEY
---------------------------
8 A member of citigroup[LOGO]
<PAGE> 47
PROJECT SPIRIT
Shareholder Analysis
(Shares in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Holdings (O00s) as of: (a)
Top 13F InstItutional Holders Change 12-31-97 Change 12-31-98 Change 3-31-99 Change 6-30-99 Change 9-30-99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Davd L. Babson & Co. Inc. -- -- 546 546 10 556 22 577 109 686
2 MFS Investment Management -- -- 313 313 7 319 8 327 189 516
3 Dimensional FD Advisors, Inc. -- -- -- -- -- -- -- -- 264 264
4 Sterling Capital Management Co. 54 54 86 141 64 204 4 208 7 216
5 Wellington Management Co. LLP -- -- 81 81 168 249 55 304 (118) 186
6 PaineWebber Group Inc. -- -- 225 225 -- 225 -- 225 (45) 180
7 AXA Financial, Inc. -- -- -- -- 14 14 310 323 (149) 175
8 Barclays Bank plc -- -- 49 49 10 59 1 60 9 68
9 John A. Levin & Company, Inc. -- -- -- -- -- -- -- -- 65 65
10 State Street Bank & Trust Co.
Boston -- -- 52 52 1 53 (1) 53 8 60
11 Mellon Private Asset Management -- -- 50 50 (3) 47 1 48 8 56
12 Fleet Boston Corporations -- -- 35 35 -- 35 -- 35 20 55
13 College Retire Equities -- -- 53 53 -- 53 (4) 50 3 52
14 Hartford Investment Mgmt.
Co. Inc. -- -- 32 32 -- 32 13 45 -- 45
15 Frank Russell Co. 17 17 6 26 20 43 -- 43 (12) 31
16 Bankers Trust NY Corp. -- -- 37 37 5 42 (3) 39 (8) 31
17 First Source Bank 19 19 (19) -- -- -- -- -- 30 30
18 Wilmington Trust Company -- -- -- -- -- -- 24 24 -- 24
19 Westcap Investors, LLC -- -- -- -- -- -- 21 21 -- 21
20 Northern Trust Company -- -- 12 12 -- 12 -- 12 5 16
21 Citigroup Investments Inc. -- -- 52 52 (4) 48 (33) 15 -- 15
22 Firstar Investment Research &
Mgmt. Co. -- -- 90 90 9 98 -- 98 (84) 14
23 World Asset Management 1 1 2 3 -- 3 -- 3 1 4
-------------------------------------------------------------------------------------------------------------------------------
Total Top 13F Institutional
Holders 91 91 1,700 1,792 300 2,091 417 2,509 301 2,810
Top 13F Institutional
Holders as of a % of Total 0.7% 13.8% 15.6% 18.5% 100.0%
Total 13F Institutional Holders 713 2,552 2,769 2,874 2,810
13F Institutional as a % of Total 5.5% 19.7% 20.7% 21.2% 20.6%
Total Shares Outstanding 12,875 12,939 13,375 13,534 13,613
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: CDA Spectrum. Holdings as of September 30, 1999.
(a) 13F Institutions excludes Parent's majority share in C Co.
SALOMON SMITH BARNEY
---------------------------
9 A member of citigroup[LOGO]
<PAGE> 48
PROJECT SPIRIT
2 C CO. VALUATION ANALYSIS
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
<PAGE> 49
PROJECT SPIRIT
Valuation Summary (Base Case)
<TABLE>
<CAPTION>
------------ ------------- --------------------
M Co. Current C Co. C Co Prices.
Offer Price: Market Price: Cumulative Wtd. Avg.
$10.50 $11.06 $14.17(g)
------------ ------------- --------------------
Valuation Methodology $6.00 $7.50 $9.00 $10.50 $12.00 $13.50 $15.00 $16.50 $18.00 $19.50
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C><C> <C>
Whole Company
-----------
Summary Component Valuation $9.00-11.00
-----------
-----------
Public Market Comparables(a) $8.75-11.25
-----------
------------
Precedent Transaction Analysis $13.00-14.50
------------
-------
Squeeze Out Analysis (1 Day Prior) $12.25-
13.00
-------
------
Squeeze Out Analysis (1 Month Prior) $9.50-
10.25
------
------------
DCF Analysis $15.00-18.75
------------
Unaffiliated Operations
----------
Summary Component valuation $7.50-9.25
----------
----------
Public Market Comparabiles(a) $7.25-9.25
----------
-------
Precedent Transaction Analysis $10.75-
11.50
-------
------------
DCF Analysis $12.75-16.25
------------
<CAPTION>
Valuation Multiples $6.00 $7.50 $9.00 $10.50 $12.00 $13.50 $15.00
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000)(b) (45.8)% (32.2)% (18.6)% (5.1)% 8.5% 22.0% 35.6%
Premium / Market Price (January 19, 2000)(c) (44.8) (31.0) (17.2) (3.4) 10.3 24.1 37.9
Premium / Market Price (December 27, 1999)(d) (26.7) (8.4) 9.9 28.2 46.6 64.9 83.2
Premium / Market Price (August 9, 1999)(e) (62.8) (53.5) (44.2) (34.9) (25.6) (16.3) (7.0)
Firm value / Total Assets Under Mgmt.(%) 0.04 0.10 0.16 0.22 0.29 0.35 0.41
Firm Value / Unaffiliated Assets Under Mgmt.(%) 0.06 0.15 0.25 0.34 0.44 0.54 0.63
Firm Value / LTM Revenues 0.1x 0.4x 0.0x 0.8x 1.1x 1.3x 1.5x
Firm value / LTM EBITDA 0.5 1.3 2.1 3.0 3.8 4.6 5.5
Price / LTM Net Income 6.3 7.9 9.5 11.0 12.6 14.2 15.8
Price / 1999E Earnings(f) 6.3 7.9 9.5 11.0 12.6 14.2 15.8
Price / 2000E Earnings(f) 5.7 7.1 8.5 10.0 11.4 12.8 14.2
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Valuation Multiples $16.50 $18.00 $19.50
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Premium / Market Price (January 25, 2000)(b) 49.2% 62.7% 76.3%
Premium / Market Price (January 19, 2000)(c) 51.7 65.5 79.3
Premium / Market Price (December 27, 1999)(d) 101.5 119.8 138.2
Premium / Market Price (August 9, 1999)(e) 2.3 11.6 20.9
Firm value / Total Assets Under Mgmt.(%) 0.69 0.76 0.82
Firm Value / Unaffiliated Assets Under Mgmt.(%) 1.06 1.16 1.26
Firm Value / LTM Revenues 2.5x 2.8x 3.0x
Firm value / LTM EBITDA 9.2 10.0 10.8
Price / LTM Net Income 17.3 18.9 20.5
Price / 1999E Earnings(f) 17.3 18.9 20.5
Price / 2000E Earnings(f) 15.6 17.1 18.5
- ----------------------------------------------------------------------------
</TABLE>
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., Black Rock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/00): $8.1875
(e) Price price to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
SALOMON SMITH BARNEY
---------------------------
10 A member of citigroup[LOGO]
<PAGE> 50
PROJECT SPIRIT
Valuation Summary (Optimal Case)
<TABLE>
<CAPTION>
------------ ------------- --------------------
M Co. Current C Co. C Co Prices.
Offer Price: Market Price: Cumulative Wtd. Avg.
$10.50 $11.06 $14.17(g)
------------ ------------- --------------------
Valuation Methodology $9.00 $10.S0 $12.00 $13.50 $15.00 $16.50 $18.00 $19.50 $21.00 $22.50
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C><C> <C>
Whole Company
------------
Summary Component Valuation $12.75-15.75
------------
------------
Public Market Comparables(a) $11.25-16.75
------------
------------
Precedent Transaction Analysis $18.00-22.50
------------
-------------
Squeeze Out Analysis (1 Day Prior) $13.00-14.50
-------------
------------
Squeeze Out Analysis (1 Month Prior) $10.25-11.50
------------
------------
DCF Analysis $16.00-20.25
------------
Unaffiliated Operations
-------------
Summary Component valuation $10.50-13.00
-------------
-----------
Public Market Comparabiles(a) $9.25-13.75
-----------
------------
Precedent Transaction Analysis $14.50-15.50
------------
------------
DCF Analysis $13.75-17.50
------------
</TABLE>
<TABLE>
<CAPTION>
Valuation Multiples $9.00 $1040 $12.00 $13.50 $15.00 $16.50 $18.00
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Premium / Market Price (January 25, 2000)(b) (18.6)% (5.1)% 8.5% 22.0% 35.6% 49.2% 62.7%
Premium / Market Price (January 19. 2000)(c) (17.2) (3.4) 10.3 24.1 37.9 51.7 65.5
Premium / Market Price (December 27,19991(d) 9.9 28.2 46.6 64.9 83.2 101.5 119.8
Premium / Market Price (August 9,1999)(e) (44.2) (34.9) (25.6) (16.3) (7.0) 2.3 11.6
Firm Value / Total Assets Under Mgmt.(%) 0.16 0.22 0.29 0.35 0.41 0.48 0.54
Firm Value / Unaffiliated Assets Under Mgmt.(%) 0.25 0.34 0.44 0.54 0.63 0.73 0.83
Firm Value / LTM Revenues 0.6x 0.8x 1.1x 1.3x 1.5x 1.7x 2.0x
Firm Value / LTM EBITDA 2.1 3.0 3.8 4.0 5.5 6.3 7.2
Price / LTM Net Income 9.5 11.0 12.6 14.2 15.8 17.3 18.9
Price / 1999E Earnings(f) 9.5 11.0 12.6 14.2 15.8 17.3 18.9
Price / 2000E Earnings(f) 8.5 10.0 11.4 12.8 14.2 15.6 17.1
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Valuation Multiples $19.50 $21.00 $22.50
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Premium / Market Price (January 25, 2000)(b) 76.3% 89.8% 103.4%
Premium / Market Price (January 19. 2000)(c) 79.3 93.1 106.9
Premium / Market Price (December 27,19991(d) 138.2 156.5 174.8
Premium / Market Price (August 9,1999)(e) 20.9 30.2 39.5
Firm Value / Total Assets Under Mgmt.(%) 0.82 0.88 0.94
Firm Value / Unaffiliated Assets Under Mgmt.(%) 1.21 1.35 1.45
Firm Value / LTM Revenues 3.0x 3.2x 3.5x
Firm Value / LTM EBITDA 10.8 11.7 12.5
Price / LTM Net Income 20.5 22.1 23.6
Price / 1999E Earnings(f) 20.5 22.1 23.1
Price / 2000E Earnings(f) 18.5 19.9 21.3
- -----------------------------------------------------------------------------
</TABLE>
(a) Public market comparables consist of Federated Investors, John Nuveen,
Eaton Vance Corp., Black Rock Inc., Neuberger Berman and Gabelli Asset
Mgmt.
(b) Price as of close (1/25/00): $11.0625
(c) Price as of close (1/19/00): $10.875
(d) Price as of close (12/27/00): $8.1875
(e) Price price to Parent ratings downgrade announcement (8/9/99): $16.125
(f) Based on management forecasts of $0.95 and $1.06 for 1999 and 2000,
respectively, and 13.97 million shares outstanding.
(g) Cumulative weighted average price from 12/16/97 to 1/25/00.
SALOMON SMITH BARNEY
---------------------------
11 A member of citigroup[LOGO]
<PAGE> 1
EXHIBIT (d)(1)
AGREEMENT AND PLAN OF MERGER
by and among
METROPOLITAN LIFE INSURANCE COMPANY
CC MERGER SUB INC.
and
CONNING CORPORATION
dated as of
March 9, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE OFFER
Section 1.1 The Offer.............................................................................. 2
Section 1.2 Company Actions........................................................................ 3
Section 1.3 Actions by Parent and Purchaser........................................................ 4
ARTICLE II
THE MERGER
Section 2.1 The Merger............................................................................. 5
Section 2.2 Effective Time......................................................................... 5
Section 2.3 Effects of the Merger.................................................................. 6
Section 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation..................... 6
Section 2.5 Directors.............................................................................. 6
Section 2.6 Officers............................................................................... 6
Section 2.7 Conversion of Common Shares............................................................ 6
Section 2.8 Conversion of Purchaser Common Stock................................................... 7
Section 2.9 Options; Stock Plans................................................................... 7
Section 2.10 Stockholders' Meeting.................................................................. 7
Section 2.11 Merger without Meeting of Stockholders................................................. 8
ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
Section 3.1 Dissenting Shares...................................................................... 9
Section 3.2 Payment for Common Shares.............................................................. 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization and Qualification; Subsidiaries........................................... 11
Section 4.2 Capitalization of the Company and its Subsidiaries..................................... 12
Section 4.3 Authority Relative to This Agreement; Consents and Approvals........................... 12
Section 4.4 SEC Reports; Financial Statements...................................................... 13
Section 4.5 Proxy Statement; Offer Documents....................................................... 14
Section 4.6 Consents and Approvals; No Violations.................................................. 14
Section 4.7 No Default............................................................................. 15
Section 4.8 No Undisclosed Liabilities............................................................. 15
Section 4.9 Litigation............................................................................. 15
Section 4.10 Permits................................................................................ 15
Section 4.11 Employee Benefit Matters............................................................... 16
Section 4.12 Brokers................................................................................ 17
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.13 Absence of Certain Changes............................................................. 17
Section 4.14 Taxes.................................................................................. 17
Section 4.15 Intellectual Property.................................................................. 18
Section 4.16 Opinion of Financial Advisor........................................................... 19
Section 4.17 Material Contracts..................................................................... 19
Section 4.18 Insurance.............................................................................. 19
Section 4.19 Affiliated Transactions................................................................ 19
Section 4.20 Investment Contracts, Funds and Clients................................................ 20
Section 4.21 Company Broker/Dealers................................................................. 20
Section 4.22 Takeover Statutes; Charter............................................................. 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Section 5.1 Organization and Qualification Subsidiaries............................................ 21
Section 5.2 Authority Relative to This Agreement................................................... 21
Section 5.3 Consents and Approvals; No Violations.................................................. 22
Section 5.4 Proxy Statement; Schedule 14D-9........................................................ 22
Section 5.5 Financing.............................................................................. 23
Section 5.6 Ownership of Company Capital Stock..................................................... 23
Section 5.7 Conduct of Business of Purchaser....................................................... 23
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company..................................................... 23
Section 6.2 Acquisition Proposals.................................................................. 26
Section 6.3 Access to Information.................................................................. 26
Section 6.4 Additional Agreements; Reasonable Efforts.............................................. 26
Section 6.5 Consents............................................................................... 27
Section 6.6 Public Announcements................................................................... 27
Section 6.7 Indemnification........................................................................ 27
Section 6.8 Employee Benefit Arrangements.......................................................... 28
Section 6.9 Notification of Certain Matters........................................................ 30
Section 6.10 State Takeover Laws.................................................................... 30
Section 6.11 Stockholder Litigation................................................................. 30
Section 6.12 Further Action......................................................................... 30
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger............................. 30
Section 7.2 Conditions to Obligations of Parent and Purchaser...................................... 31
Section 7.3 Conditions to Obligations of the Company............................................... 31
Section 7.4 Frustration of Closing Conditions...................................................... 32
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
Section 8.1 Termination............................................................................ 32
Section 8.2 Effect of Termination.................................................................. 34
Section 8.3 Amendment.............................................................................. 34
Section 8.4 Waiver................................................................................. 34
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties.......................................... 34
Section 9.2 Entire Agreement; Assignment........................................................... 34
Section 9.3 Validity............................................................................... 34
Section 9.4 Notices................................................................................ 35
Section 9.4 Governing Law.......................................................................... 36
Section 9.6 Descriptive Headings................................................................... 36
Section 9.7 Parties in Interest.................................................................... 36
Section 9.8 Counterparts........................................................................... 36
Section 9.9 Fees and Expenses...................................................................... 36
Section 9.10 Specific Performance................................................................... 36
Section 9.11 Interpretation; Absence of Presumption................................................. 36
ANNEX I Conditions to the Offer
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
March 9, 2000, by and among Metropolitan Life Insurance Company ("Parent"), a
New York life insurance company, CC Merger Sub Inc., a Missouri corporation and
an indirect wholly owned subsidiary of Parent ("Purchaser"), and Conning
Corporation, a Missouri corporation (the "Company").
WHEREAS, Parent beneficially owns 8,304,995 shares of the
common stock, par value $0.01 par share, of the Company (the "Common Shares");
WHEREAS, it is proposed that Purchaser acquire all of the
issued and outstanding Common Shares not beneficially owned by Parent or
Purchaser (references to the Parent shall, where the context so requires, be
deemed to refer to Purchaser as well);
WHEREAS, it is proposed that Purchaser will make a cash tender
offer (the "Offer") in compliance with Section 14(d)(1) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations promulgated thereunder to acquire all the issued and outstanding
shares of Common Stock for $12.50 per share (such amount, or any greater amount
per share paid pursuant to the Offer, being hereinafter referred to as the
"Offer Price"), net to the seller in cash, upon the terms and subject to the
conditions of this Agreement and Annex I hereto; and that the Offer will be
followed by the merger (the "Merger") of Purchaser with and into the Company,
with the Company being the surviving corporation, in accordance with the
Missouri General and Business Corporation Law ("MGBCL"), pursuant to which each
issued and outstanding Common Share not beneficially owned by Parent will be
converted into the right to receive the Offer Price upon the terms and subject
to the conditions provided herein and in Annex I hereto;
WHEREAS, a special committee (the "Special Committee") of the
Board of Directors of the Company (the "Company Board") has received the written
opinion of Salomon Smith Barney Inc. (the "Financial Advisor") to the effect
that, based on, and subject to, the various assumptions and qualifications set
forth in such opinion, as of the date of such opinion, the Offer Price to be
received by the holders of the Common Shares (other than Parent and its
affiliates) pursuant to the Offer and the Merger is fair to such holders from a
financial point of view;
WHEREAS, the Special Committee has determined that this
Agreement, and the Offer and the other transactions contemplated hereby, taken
as a whole, are in the best interests of the Company and its stockholders, and
has voted to recommend to the Company Board that the Company Board approve this
Agreement, and the Offer and the other transactions contemplated hereby;
WHEREAS, the Company Board has determined that this Agreement,
the Offer and the other transactions contemplated hereby, taken as a whole, are
in the best interests of the Company and its stockholders and has voted to
approve this Agreement, and the Offer and the other transactions contemplated
hereby; and
<PAGE> 6
WHEREAS, Parent, Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, Parent, Purchaser
and the Company agree as follows:
ARTICLE I
THE OFFER
Section 1.1. The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article VIII and none of the conditions set forth
in Annex I hereto (the "Tender Offer Conditions") shall exist after the date
hereof and prior to the commencement of the Offer, as promptly as practicable,
but not later than March 20, 2000, Purchaser shall, and Parent shall cause
Purchaser to, commence (within the meaning of Rule 14d-2 under the Exchange Act)
an offer to purchase all outstanding Common Shares at the Offer Price and shall
take the actions set forth in Section 1.3 below and shall take all other actions
as required by any order, writ, injunction, judgment, arbitration award, agency
requirement, decree, law, statute, ordinance, rule or regulation (each a "Law").
The obligation of Purchaser to accept for payment or pay for any Common Shares
tendered pursuant thereto will be subject only to the satisfaction of the Tender
Offer Conditions.
(b) Without the prior written consent of the Special Committee
and the Company Board, Purchaser shall not (i) impose conditions to the Offer in
addition to the Tender Offer Conditions, (ii) modify or amend the Tender Offer
Conditions or any other term of the Offer in a manner adverse to the holders of
Common Shares, (iii) reduce the number of Common Shares subject to the Offer,
(iv) reduce the Offer Price, (v) except as provided in the following sentence,
extend the Offer if all of the Tender Offer Conditions are satisfied or waived,
or (vi) change the form of consideration payable in the Offer. Notwithstanding
the foregoing, Purchaser may, in accordance with applicable Law, and without the
consent of the Special Committee, extend the Offer at any time, and from time to
time, (i) if at the then-scheduled expiration date of the Offer, any of the
conditions to Purchaser's obligation to accept for payment and pay for all
Common Shares shall not have been satisfied or waived; (ii) for any period
required by any rule, regulation, interpretation or position of the SEC or its
staff applicable to the Offer; or (iii) if all Tender Offer Conditions are
satisfied or waived but the number of Common Shares tendered, together with
Common Shares already beneficially owned by Parent, is at least equal to
66 2/3%, but less than 90%, of the then-outstanding number of Common Shares, for
an aggregate period of not more than 20 business days (for all such extensions)
beyond the latest expiration date that would be permitted under clause (i) or
(ii) of this sentence (such aggregate period, the "Subsequent Offering Period").
So long as this Agreement is in effect, the Offer has been commenced and the
Tender Offer Conditions have not been satisfied or waived, Purchaser shall, and
Parent shall cause Purchaser to, cause the Offer not to expire, subject,
however, to Purchaser's and Parent's
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<PAGE> 7
rights of termination under this Agreement. Parent and Purchaser shall comply
with the obligations respecting prompt payment and announcement under the
Exchange Act. There shall be no withdrawal rights during the Subsequent Offering
Period.
(c) Parent and Purchaser represent that the Offer Documents
(as defined in Section 1.3(a)) will comply in all material respects with the
provisions of applicable federal securities Laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or Purchaser with respect to information supplied by the Company in writing for
inclusion in the Offer Documents. Each of Parent and Purchaser, on the one hand,
and the Company, on the other hand, agrees to correct promptly any information
provided by it for use in the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect and Purchaser further
agrees to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to stockholders of the Company,
in each case, as and to the extent required by applicable federal securities
Laws.
Section 1.2. Company Actions.
(a) The Company shall file with the SEC and mail to the
holders of Common Shares, on or as promptly as practical after the date of the
filing by Parent and Purchaser of the Offer Documents, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "Schedule 14D-9") reflecting the
recommendations of the Company Board and the Special Committee that holders of
Common Shares tender their Common Shares pursuant to the Offer, and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents that the Company Board and the Special Committee, at meetings duly
called and held, have (i) determined by unanimous vote of its directors, other
than directors who abstained, that the Offer and the Merger are fair to,
advisable and in the best interests of the Company and its stockholders, (ii)
approved the Offer and this Agreement and the transactions contemplated hereby
in accordance with the MGBCL, (iii) resolved to recommend acceptance of the
Offer and approval of this Agreement by the Company's stockholders, and (iv)
taken all action in their control necessary to render Sections 351.407, 351.459
and 409.500 to 409.566 of the MGBCL inapplicable to the Offer and the Merger;
provided, however, that such recommendations and approvals may be withdrawn,
modified or amended to the extent that the Company Board or the Special
Committee determines in good faith and on a reasonable basis, after consultation
with outside counsel, that such action is required in the exercise of the
Company Board's fiduciary duties or the Special Committee's fiduciary duties,
respectively, under applicable Law. The Company further represents that, prior
to the execution hereof, the Financial Advisor has delivered to the Special
Committee the Fairness Opinion (as defined below), to the effect that, based on,
and subject to, the various assumptions and qualifications set forth in such
opinion, as of the date of such opinion, the Offer Price to be received by the
holders of Common Shares (other than Parent or any of its affiliates, including
Conning and its wholly owned Subsidiaries (as defined in Section 4.1)) pursuant
to the Offer and the Merger is fair to such holders from a financial point of
view. The Company further represents and warrants that it has been
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<PAGE> 8
authorized by the Financial Advisor to reproduce the Fairness Opinion in full,
and may also include references to the Opinion and to the Financial Advisor and
its relationship with the Special Committee and the Company (in each case in
form and substance as the Financial Advisor shall reasonably approve), in any
statement on Schedule 14D-9 or proxy statement relating to the transactions
contemplated hereby that the Company is required to file or distribute to its
shareholders under the Securities Exchange Act of 1934 or other applicable Law.
The Company further represents that it will file such other documentation and
take such other actions as required by Law to effect the purposes of this
Agreement. The Company hereby consents to the inclusion in the Offer Documents
of the recommendations of the Company Board and the Special Committee described
in this Section 1.2(a).
(b) The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities Laws, and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Purchaser in writing for inclusion in the Schedule 14D-9. Each of the
Company, on the one hand, and Parent and Purchaser, on the other hand, agrees
promptly to correct any information provided by either of them for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Common Shares, in each case, as and to the extent
required by applicable federal securities Law.
(c) In connection with the Offer, the Company will promptly,
or shall cause its transfer agent to promptly, furnish Purchaser with mailing
labels, security position listings, any non-objecting beneficial owner lists and
any available listing containing the names and addresses of the record holders
of Common Shares as of the most recent practicable date and shall furnish
Purchaser with such additional information (including, but not limited to,
updated lists of holders of Common Shares and their addresses, mailing labels
and lists of security positions and non-objecting beneficial owner lists) and
such other assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial stockholders.
Subject to the requirements of applicable Law, and except for such steps as are
appropriate to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Purchaser and their affiliates, associates,
agents and advisors shall use the information contained in any such labels,
listings and files only in connection with the Offer and the Merger, and, if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
Section 1.3. Actions by Parent and Purchaser. Provided that
this Agreement shall not have been terminated in accordance with Article VIII
and none of the Tender Offer Conditions exists after the date hereof and prior
to the commencement of the Offer, as promptly as practicable, but no later than
March 20, 2000:
(a) Parent and Purchaser shall file with the SEC a Tender
Offer Statement and a Rule 13e-3 Transaction Statement on Schedule TO, including
all exhibits thereto (together with
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all amendments and supplements thereto, the "Schedule TO") with respect to the
Offer, the Merger and the other transactions contemplated hereby. The Schedule
TO shall contain or incorporate by reference an offer to purchase (the "Offer to
Purchase") and forms of the related letter of transmittal and any related
documents (the Schedule TO, the Offer to Purchase and such other documents,
together with all supplements or amendments thereto, collectively, the "Offer
Documents"). The Offer Documents shall comply in all material respects with the
requirements of the Exchange Act. On the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, the Offer
Documents shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by Parent or
Purchaser with respect to information supplied by the Company for inclusion in
the Offer Documents. Each of Parent and Purchaser agrees to correct promptly,
and the Company agrees to notify Parent promptly as to, any information provided
by it for use in the Offer Documents, if and to the extent such information
shall have become false or misleading in any material respect, and each of
Parent and Purchaser further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to all of the holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Parent and Purchaser agree to provide the
Company and the Special Committee and their respective counsel in writing any
comments Parent, Purchaser or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments. Parent and Purchaser shall use their respective reasonable best
efforts to respond to such comments promptly and shall provide the Company
copies of any written responses and telephonic notification of any verbal
responses by Parent, Purchaser or their counsel.
(b) Parent shall provide or cause to be provided to Purchaser
all of the funds necessary to purchase any Shares that Purchaser becomes
obligated to purchase pursuant to the Offer.
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the MGBCL, at the Effective Time (as
defined below) Purchaser shall be merged with and into the Company. Following
the Merger, the separate corporate existence of Purchaser shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation"). Parent may, upon notice to the Company, modify the structure of
the Merger if Parent determines it advisable to do so because of tax or other
considerations, and the Company shall promptly enter into any amendment to this
Agreement necessary or desirable to accomplish such structure modification;
provided that no such amendment shall reduce the Offer Price, change the form of
consideration payable in the Offer, or otherwise adversely affect the Company or
its shareholders or delay or hinder the transactions contemplated hereby.
Section 2.2. Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the Company
and Purchaser shall cause articles
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of merger to be executed, verified and filed with, and deliver to, in the manner
required by the MGBCL, the Secretary of State of the State of Missouri, and the
parties shall take such other and further actions as may be required by Law to
make the Merger effective. The time at which the Merger becomes effective in
accordance with applicable Law is referred to as the "Effective Time." Prior to
the filing referred to in this Section 2.2, the closing will be held at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York 10019 (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing.
Section 2.3. Effects of the Merger. From and after the
Effective Time, the Merger shall have the effects set forth in the MGBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 2.4. Articles of Incorporation and By-Laws of the
Surviving Corporation.
(a) The articles of incorporation of Purchaser as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation until thereafter amended in accordance with the
provisions thereof and applicable Law, except that Article I of the articles of
incorporation of the Surviving Corporation shall read until thereafter amended:
"The name of the corporation (which is hereinafter referred to as the
"Corporation") is `Conning Corporation.'"
(b) Subject to the provisions of Section 6.7, the by-laws of
Purchaser in effect at the Effective Time shall be the by-laws of the Surviving
Corporation until amended in accordance with the provisions thereof, the
articles of incorporation and applicable Law.
Section 2.5. Directors. Subject to applicable Law, the
directors of the Company immediately prior to the Effective Time and three
directors to be determined by Parent in its sole discretion shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected or appointed and qualified, or their
earlier death, resignation or removal in accordance with the articles of
incorporation and the by-laws of the Surviving Corporation.
Section 2.6. Officers. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected or appointed and qualified, or their earlier death, resignation or
removal in accordance with the articles of incorporation and the by-laws of the
Surviving Corporation.
Section 2.7. Conversion of Common Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of the holders
thereof, each Common Share issued and outstanding immediately prior to the
Effective Time, including any shares of restricted stock issued pursuant to the
Stock Plans (as defined below) (other than (i) any Common Shares held by Parent,
Purchaser, any direct or indirect wholly owned Subsidiary of Parent or Purchaser
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<PAGE> 11
(the "Parent Shares"), in the treasury of the Company or by any wholly owned
Subsidiary of the Company, which Common Shares shall remain outstanding or in
the treasury of the Company, as the case may be, and (ii) Dissenting Shares (as
defined herein)), shall by virtue of the Merger be cancelled and retired and
shall be converted into the right to receive pursuant to Section 3.2 the Offer
Price, payable to the holder thereof, without interest thereon, upon surrender
of the certificate formerly representing such Common Share or any replacement
certificates representing such Common Shares as may be obtained from the
transfer agent of the Company.
Section 2.8. Conversion of Purchaser Common Stock. Purchaser
has outstanding 100 shares of common stock, par value $0.01 per share, all of
which shares are entitled to vote with respect to approval and adoption of this
Agreement. At the Effective Time, each share of common stock, par value $0.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become [54,483.64] validly issued,
fully paid and non-assessable shares of common stock, par value $0.01 per share,
of the Surviving Corporation.
Section 2.9. Options; Stock Plans.
(a) Prior to the consummation of the Offer, the Company Board
(or, if appropriate, any committee thereof) shall adopt appropriate resolutions
and take all other actions necessary to provide for the cancellation, effective
at the Effective Time, of all the outstanding stock options, all of which are
listed in Section 2.9 of the Company Disclosure Schedule (as defined below) (the
"Stock Options"), heretofore granted under any stock option or similar plan or
agreement of the Company (such stock option or similar plans or agreements being
collectively referred to herein as the "Stock Plans"). Such cancellation shall
occur without any payment therefor except as provided in Section 6.8 with
respect to the substitution therefor of Replacement Awards (as defined below).
(b) The Company shall take all actions necessary to provide
that, effective as of the Effective Time, (i) each of the Stock Plans shall be
terminated, and (ii) the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its Subsidiaries shall be deleted.
Section 2.10. Stockholders' Meeting.
(a) If required by applicable Law in order to consummate the
Merger, the Company, acting through the Company Board, shall, in accordance with
applicable Law, and provided that this Agreement shall not have been terminated:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") to be held as soon as
practicable following the acceptance for purchase of and payment for Common
Shares by Purchaser pursuant to the Offer for the purpose of considering and
taking action upon this Agreement;
(ii) together with Parent, prepare and file with the SEC a
preliminary proxy statement relating to this Agreement, and use reasonable best
efforts (A) to obtain and furnish the information required to be included by the
SEC in the Proxy Statement (as defined herein) and, after consultation with each
other, to respond as soon as practicable to any comments made by
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the SEC with respect to the preliminary proxy statement and cause a definitive
proxy statement (the "Proxy Statement"), which the parties agree shall comply as
to form in all material respects with all applicable Law, to be mailed to its
stockholders at the earliest practicable date following expiration or
termination of the Offer, and (B) subject to the fiduciary duties of the Company
Board and the Special Committee under applicable Law, to obtain the necessary
approvals of the Merger and this Agreement by the Company stockholders; and
(iii) subject to the fiduciary duties of the Company Board and
the Special Committee under applicable Law, include in the Proxy Statement (x)
the recommendations of the Company Board and the Special Committee that
stockholders of the Company vote in favor of the approval of the Merger and of
this Agreement (except as set forth in the proviso to Section 1.2(a)) and (y)
the Fairness Opinion in accordance with the provisions of Section 1.2(a).
(b) Parent agrees that it will vote, or cause to be voted, all
Common Shares then owned by it, Purchaser or any of Parent's other Subsidiaries
in favor of the approval of this Agreement.
(c) Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, Parent or the
Company, as the case may be, shall promptly inform the other of each such
occurrence and cooperate in the filing with the SEC and/or mailing to the
Company stockholders of such amendment or supplement. Each of the parties agree
that the information provided by it for inclusion in the Proxy Statement and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the Special Meeting, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. If, at any time prior to the Effective Time, any
information pertaining to one of the parties or, to such party's knowledge, any
of its affiliates or its officers or directors, contained in or omitted from the
Proxy Statement makes statements contained therein materially false or
misleading, such party shall promptly so advise the other parties and provide
such other parties with the information necessary to make the statements
contained therein not false or misleading. In the event of such advice being
given pursuant to the preceding sentence, the Company and Parent shall cooperate
to promptly file with the SEC (after reasonable opportunity to Parent and the
Company to review and comment thereon) any required amendments or supplements to
the Proxy Statement and, to the extent required by law, disseminate such
amendments or supplements to the Company stockholders.
Section 2.11. Merger without Meeting of Stockholders.
Notwithstanding Section 2.10, in the event that Purchaser shall acquire pursuant
to the Offer such number of Common Shares (the "Threshold Number of Common
Shares") which, when aggregated with the number of Common Shares currently
beneficially owned by Parent, represents 90% of the total number of outstanding
Common Shares on and after giving effect to the date of purchase, the parties
hereto agree to take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the acceptance for payment of and
payment for Common Shares by Purchaser pursuant to the Offer without a meeting
of stockholders of the Company, in accordance with and to the extent permitted
by Section 351.447 of the MGBCL.
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ARTICLE III
DISSENTING SHARES; PAYMENT FOR COMMON SHARES
Section 3.1. Dissenting Shares. Notwithstanding Section 2.7 or
3.2, Common Shares outstanding immediately prior to the Effective Time and held
by a holder who has not voted in favor of the Merger or consented thereto in
writing and who has timely demanded and perfected the right, if any, for
appraisal for such Common Shares in accordance with Sections 351.447 and 351.455
of the MGBCL ("Dissenting Shares") shall not be converted into the right to
receive the Offer Price, unless such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal. If, after the Effective Time,
such holder fails to perfect or withdraws or loses such holder's right to
appraisal, such Common Shares shall be treated as if they had been converted as
of the Effective Time into a right to receive the Offer Price. The Company shall
give Parent prompt notice of any demands received by the Company for appraisal
of Common Shares, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, or otherwise negotiate, any such
demands.
Section 3.2. Payment for Common Shares.
(a) Prior to the Effective Time, Purchaser shall designate a
bank or trust company reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") in effecting the payment of the Offer Price in
respect of certificates that, immediately prior to the Effective Time, represent
Common Shares (the "Certificates") entitled to payment of the Offer Price
pursuant to Section 2.7. At the Effective Time, Parent or Purchaser shall
deposit, or cause to be deposited, in trust with the Paying Agent the aggregate
Offer Price to which holders of Common Shares shall be entitled at the Effective
Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of Certificates a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Offer Price in respect thereof. Upon the surrender of each such
Certificate, together with a duly executed letter of transmittal and any other
required documents, the Paying Agent shall, as soon as practicable, pay the
holder of such Certificate an amount equal to the product of (x) the Offer Price
multiplied by (y) the number of Common Shares formerly represented by such
Certificate, in consideration therefor, and such Certificate shall forthwith be
cancelled. Until so surrendered, each such Certificate (other than Certificates
representing Common Shares held by Parent or Purchaser, any wholly owned
Subsidiary of Parent or Purchaser, in the treasury of the Company or by any
wholly owned Subsidiary of the Company or Dissenting Shares) shall represent
solely the right to receive the aggregate Offer Price relating thereto. No
interest or dividends shall be paid or accrued on the Offer Price. If the Offer
Price (or any portion thereof) is to be delivered to any individual,
corporation, trust, association, unincorporated association, estate,
partnership, joint venture, limited liability company, Governmental Entity (as
defined in Section 4.6) or other legal entity (each, a "Person"), other than the
Person in whose name the Certificate surrendered is registered, it shall be a
condition to such right to receive such
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<PAGE> 14
Offer Price that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer, that the signatures on the Certificate
shall be properly guaranteed, and that the Person surrendering such Common
Shares shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of the Offer Price to a Person other than the registered
holder of the Certificate surrendered, or shall establish to the satisfaction of
the Paying Agent that such taxes have been paid or are not applicable. In the
event any Certificate shall have been lost, stolen or destroyed, the Paying
Agent shall be required to pay the full Offer Price in respect of any Common
Shares represented by such Certificate; however, Parent may require the owner of
such lost, stolen or destroyed Certificate to execute and deliver to the Paying
Agent a form of affidavit claiming such Certificate to be lost, stolen or
destroyed in form and substance reasonably satisfactory to Parent, and the
posting by such owner of a bond in such amount as Parent may determine is
reasonably necessary as indemnity against any claim that may be made against
Parent or the Paying Agent.
(c) Promptly following the date which is 135 days after the
Effective Time, the Paying Agent shall deliver to the Surviving Corporation all
cash, Certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar Laws) receive in consideration therefor the aggregate Offer Price
relating thereto, without any interest or dividends thereon, except as required
under applicable Law. Notwithstanding the foregoing, none of Parent, Purchaser,
the Company or the Paying Agent shall be liable to any Person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. If any Certificates shall not have been
surrendered immediately prior to such date on which any payment pursuant to this
Article III would otherwise escheat to or become the property of any
Governmental Entity (as defined herein), the cash payment in respect of such
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any Person previously entitled thereto.
(d) Immediately prior to the Effective Time, the stock
transfer books of the Company shall be closed, and, after the Effective Time,
there shall be no transfers on the stock transfer books of the Surviving
Corporation of any Common Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Offer Price relating
thereto, as provided in this Article III.
(e) From and after the Effective Time, the holders of
Certificates evidencing ownership of Common Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such Common
Shares except as otherwise provided herein or by applicable Law. Such holders
shall have no rights, after the Effective Time, with respect to such Common
Shares except to surrender such Certificates in exchange for the Offer Price
pursuant to this Agreement or to perfect any rights of appraisal as a holder of
Dissenting Shares that such holders may have pursuant to Sections 351.447 and
351.455 of the MGBCL.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to the Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule"),
the Company hereby represents and warrants to Purchaser and Parent as follows:
Section 4.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its Subsidiaries (as defined
below) is a corporation or other legal entity duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its businesses as now being conducted and
is qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership, leasing or operation of its properties or
assets or conduct of its business requires such qualification, except where the
failure to be so qualified or in good standing or to have such power or
authority, would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect (as defined below). The Company has
heretofore delivered or made available to Purchaser accurate and complete copies
of the articles of incorporation and by-laws and other organizational documents,
as currently in effect, of the Company and each of its Subsidiaries. As used in
this Agreement, "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated or
domestic or foreign to the United States of which (i) such party or any other
Subsidiary of such party is a general partner or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is, directly or
indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries, excluding
all investment funds (whether organized as partnerships, corporations, limited
liability companies or any other type of entity) for which the Company or any
entity, directly or indirectly, controlled by the Company acts as general
partner, investment advisor or investment manager (collectively, "Conning
Investment Funds"). The term "Company Material Adverse Effect" means any event,
change in or effect on the business of the Company or its Subsidiaries, taken as
a whole, that is or would reasonably be expected to be materially adverse to (i)
the business, results of operations, properties (including intangible
properties), financial condition, assets, agreements or employee base of the
Company and its Subsidiaries, taken as a whole, or (ii) the ability of the
Company to consummate the transactions contemplated hereby or to perform its
obligations under this Agreement, except in the case of either clause (i) or
clause (ii) any change or effect arising out of (x) a decline or deterioration
in the economy in general or the asset management or capital markets in which
the Company and its Subsidiaries operate, (y) this Agreement or the transactions
contemplated hereby or the announcement thereof, or (z) any event caused
primarily by any actions of Parent or its affiliates. Section 4.1(a) of the
Company Disclosure Schedule sets forth a complete list of the Company's
Subsidiaries.
(b) Except as set forth in Section 4.1(b) of the Company
Disclosure Schedule, the Company does not own (i) any equity interest in any
corporation or other entity, or (ii) market-
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<PAGE> 16
able securities where the Company's equity interest in any entity exceeds 5% of
the outstanding equity of such entity on the date hereof.
Section 4.2. Capitalization of the Company and its
Subsidiaries.
(a) The authorized capital stock of the Company consists of:
50,000,000 Common Shares and 20,000,000 shares of preferred stock, par value
$0.01 per share ("Preferred Shares"). As of March 3, 2000, 13,753,359 Common
Shares were issued and outstanding and no Preferred Shares were outstanding. All
Common Shares have been duly authorized, validly issued, and are fully paid,
nonassessable and free of preemptive rights or other similar rights (except for
vesting and transfer restrictions on restricted shares issued under the Stock
Plans). The Company has no commitments to issue or deliver any Common Shares or
Preferred Shares except that, as of the date hereof, a total of 2,185,713 Common
Shares are reserved for issuance pursuant to outstanding Options under the Stock
Plans. Since March 3, 2000, no shares of the Company's capital stock have been
issued other than pursuant to Options already in existence on such date, and no
Options have been granted. Section 4.2 of the Company Disclosure Schedule
contains a correct and complete list of each outstanding Option, including the
holder, date of grant, exercise price and number of Shares subject thereto. Each
of the outstanding shares of capital stock or other securities of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or by a direct or indirect wholly owned
Subsidiary of the Company, free and clear of any Lien (as defined below). Except
as set forth above or in Section 4.2 of the Company Disclosure Schedule, there
are no Common Shares or Preferred Shares authorized, reserved, issued or
outstanding and there are no preemptive or other outstanding rights,
subscriptions, options, warrants, stock appreciation rights, redemption rights,
repurchase rights, convertible, exercisable, or exchangeable securities or other
agreements, arrangements or commitments of any character relating to the issued
or unissued share capital or other ownership interest of the Company or any of
its Subsidiaries or any other securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of the Company or its Subsidiaries, and no
securities evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. For purposes of this Agreement,
"Lien" means, with respect to any asset (including any security) any option,
claim, mortgage, lien, pledge, charge, security interest or encumbrance or
restrictions of any kind in respect of such asset.
(b) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of the
Subsidiaries.
Section 4.3. Authority Relative to This Agreement; Consents
and Approvals.
(a) The Company has all the necessary corporate power and
authority, and has taken all corporate action necessary, to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby in
accordance with the terms hereof, subject only to the matters set forth in
Section 4.6 and to obtaining the necessary approval of this Agreement
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<PAGE> 17
by the holders of at least two-thirds of the outstanding Common Shares entitled
to vote on the matter (provided, however, that no vote of the Company
stockholders shall be necessary if Parent shall acquire pursuant to the Offer,
the Threshold Number of Common Shares). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by each of Parent and Purchaser, constitutes a
valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as may be subject to applicable
bankruptcy, insolvency or other similar Laws, now or hereafter in effect,
affecting creditors' rights generally.
(b) Each of the Special Committee and the Company Board have
duly and validly approved this Agreement and the Special Committee has received
the Fairness Opinion from the Financial Advisor.
Section 4.4. SEC Reports; Financial Statements.
(a) Since December 11, 1997, except as set forth in Section
4.4(a) of the Company Disclosure Schedule, the Company and its Subsidiaries have
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Act of 1933,
as amended (including the rules and regulations promulgated thereunder the
"Securities Act") and the Exchange Act (any such documents filed prior to the
date hereof being collectively, the "Company SEC Documents"). The Company SEC
Documents, including any financial statements or schedules included therein, at
the time filed, or in the case of registration statements on their respective
effective dates, (i) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
(ii) did not at the time filed (or, in the case of registration statements, at
the time of effectiveness), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The financial statements included in the
Company SEC Documents (the "Financial Statements"), (i) have been prepared from,
and are in accordance with, the books and records of the Company and its
Subsidiaries, (ii) complied in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, (iii) have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis ("GAAP")
during the periods involved (except as may be indicated in the notes thereto),
and (iv) fairly present the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its Subsidiaries as of the times and for the periods referred
to therein, except that any such Financial Statements that are unaudited,
interim financial statements are subject to normal and recurring year-end
adjustments.
(b) The Company has heretofore delivered or made available to
Purchaser, in the form filed with the SEC (including any amendments thereto),
(i) its Annual Reports on Form 10-K for each of the three fiscal years ended
December 31, 1997 and 1998, (ii) all definitive proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 1998, and (iii) all other reports (other than Quarterly Reports on
Form 10-Q) or registration statements filed by the Company with the SEC since
December 11, 1997.
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<PAGE> 18
(c) The Company has heretofore delivered or made available to
Purchaser a complete and correct copy of any amendments or modifications, which
have not yet been filed by the Company with the SEC, to all agreements,
documents or other instruments which previously had been so filed by the Company
and are currently in effect.
Section 4.5. Proxy Statement; Offer Documents. The Proxy
Statement will comply in all material respects with the Securities Act and the
Exchange Act, except that no representation is made by the Company with respect
to information supplied by Parent for inclusion in the Proxy Statement. None of
the information supplied by the Company in writing for inclusion in the Offer
Documents or provided by the Company in the Schedule 14D-9 will, at the
respective times that the Offer Documents and the Schedule 14D-9 are filed with
the SEC and are first published or sent or given to holders of Common Shares,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.6. Consents and Approvals; No Violations. No filing
with or notice to, and no permit, authorization, registration, consent or
approval of, any court or tribunal or administrative, governmental or regulatory
body, agency, authority or other entity (a "Governmental Entity") is required on
the part of the Company or any of its Subsidiaries for the execution, delivery
and performance by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, except (i) as set forth in
Section 4.6 of the Company Disclosure Schedule, (ii) pursuant to the applicable
requirements of the Securities Act, the Exchange Act and the Investment Advisors
Act of 1940, as amended (the "Advisors Act"), (iii) the delivery of the articles
of merger pursuant to the MGBCL, (iv) to comply with state securities or
"blue-sky" Laws, or (v) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not reasonably be expected to have a Company Material Adverse
Effect. Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will (A) conflict with or result in any breach, violation or infringement
of any provision of the respective articles of incorporation or by-laws (or
similar governing documents) of the Company or of any its Subsidiaries, (B)
except as set forth in Section 4.6 of the Company Disclosure Schedule, result in
a breach, violation or infringement of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to the creation of any
Lien or any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation, whether written or oral (each a "Contract"), to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, (C) change the rights or
obligations of any party under any Contract, or (D) violate or infringe any Law
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, except in the case of (B), (C) or (D) for breaches,
violations, infringements, defaults or changes which would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. Section 4.6 of the Company Disclosure Schedule sets forth a list,
correct and complete in all material respects, of material Contracts of the
Company and its Subsidiaries pursuant to which consents or waivers are or may be
required prior to consummation of the transactions contemplated by this
Agreement (whether or not subject to the exception set forth with respect to
clauses (B), (C) and (D) above).
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<PAGE> 19
Section 4.7. No Default. None of the Company or any of its
Subsidiaries is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its articles of incorporation or by-laws
(or similar governing documents), (ii) any Contract to which the Company or any
of its Subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound, or (iii) any Law applicable to the
Company, any of its Subsidiaries or any of their respective properties or
assets, except in the case of clause (ii) or (iii) of this sentence for
violations, breaches or defaults that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.8. No Undisclosed Liabilities. Except as set forth
in the Company SEC Documents, neither the Company nor any of its Subsidiaries
has incurred any, or has knowledge of any facts or circumstances that could give
rise to any, liabilities or obligations of any nature, whether or not accrued,
contingent, fixed, matured or otherwise, and whether or not required to be
disclosed, that have, or would reasonably be expected to have, a Company
Material Adverse Effect.
Section 4.9. Litigation. Except as set forth in Section 4.9 of
the Company Disclosure Schedule, there is no civil, criminal or administrative
suit, claim, hearing, inquiry, action, proceeding or investigation (each an
"Action") pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their respective properties or
assets, or which would make the Company or any of its Subsidiaries a party in
such Action, except as would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect. Except as disclosed in
Section 4.9 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is subject to any outstanding order, writ, injunction or
decree, except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
Section 4.10. Permits. Except as set forth in Section 4.10 of
the Company Disclosure Schedule, the Company and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and other authorizations,
consents and approvals of all Governmental Entities necessary for the conduct of
their respective businesses as presently conducted (the "Company Permits"),
except for failures to hold such Company Permits which would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in Section 4.10 of the Company Disclosure Schedule,
the Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not reasonably be expected
to have a Company Material Adverse Effect. Except as set forth in Section 4.10
of the Company Disclosure Schedule, the businesses of the Company and its
Subsidiaries are not being, and have not been, conducted in violation of any Law
except for violations which individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 4.10 of the Company Disclosure Schedule, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company, threatened nor, to
the knowledge of the Company, has any Governmental Entity indicated an intention
to conduct the same, except where such investigation or review would not
reasonably be expected to have a Material Adverse Effect.
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<PAGE> 20
Section 4.11. Employee Benefit Matters.
(a) For purposes of this Agreement, "Company Employee Benefit
Plans" means all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other material employee benefit or compensation arrangements, including, any
such arrangements providing severance pay, sick leave, vacation pay, salary
continuation for disability, retirement benefits, deferred compensation, bonus
pay, incentive pay, stock options (including those held by directors, employees,
and consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, in each case that are maintained by the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is obligated to contribute thereunder for current or former
directors, employees, independent contractors, consultants and leased employees
of the Company or any of its Subsidiaries.
(b) Except as set forth in Section 4.11 of the Company
Disclosure Schedule or as otherwise contemplated by this Agreement, (i) the
execution of, and performance of the transactions contemplated in this Agreement
will not, either alone or upon the occurrence of subsequent events, result in
any material payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee or Company Employee
Benefit Plan, and (ii) there are no material employment or severance agreements
or material severance policies applicable to the Company or any of its
Subsidiaries.
(c) The Company Employee Benefit Plans have been maintained in
all material respects in accordance with their terms and with all provisions of
ERISA and the Internal Revenue Code of 1986, as amended (including rules and
regulations thereunder) (the "Code") and all other applicable federal and state
laws and regulations, except for failures to so maintain which, individually or
in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
(d) Except for matters which, individually or in the
aggregate, could not reasonably be expected to have a Company Material Adverse
Effect, there is no (i) unfair labor practice, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries relating to any of their businesses, (ii) activity or proceeding by
a labor union or representative thereof to organize any employees of the Company
or any of its Subsidiaries, or (iii) lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such employees. The Company
is in compliance with all Laws regarding employment, employment practices, terms
and conditions of employment and wages, except for such noncompliance which,
either individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect.
(e) Each material Company Employee Benefit Plan is listed in
Section 4.11 of the Company Disclosure Schedule and has been made available to
Parent.
(f) Except as set forth in Section 4.11 of the Company
Disclosure Schedule, each material Company Benefit Plan is set forth in a
written plan document.
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<PAGE> 21
Section 4.12. Brokers. No broker, finder or investment banker
(other than the Financial Advisor, a true and correct copy of whose engagement
agreement has been provided to Purchaser) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company. Except as
set forth in Section 4.12 of the Company Disclosure Schedule no material
financial advisory, legal, accounting, consulting or other fees and expenses are
payable by or on behalf of the Company or any of its Subsidiaries in connection
with this Agreement.
Section 4.13. Absence of Certain Changes. Except as set forth
in Section 4.13 of the Company Disclosure Schedule, since September 30, 1999,
the Company and each of its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material transaction other than
according to, the ordinary course of business and consistent with past practice,
and (i) there has not been any change, development or combination of changes or
developments that, individually or in the aggregate, has had or could reasonably
be expected to have a Company Material Adverse Effect; (ii) there has not been
any damage, destruction, theft or other casualty loss with respect to any
material asset or property owned, leased or otherwise used by the Company or any
of its Subsidiaries, whether or not covered by insurance, except for such
damage, destruction, theft or other casualty loss which would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect; and (iii) the Company has not taken any of the actions set forth in
paragraphs (a) through (p) of Section 6.1.
Section 4.14. Taxes.
(a) Except as set forth in Section 4.14 of the Company
Disclosure Schedule each of the Company and its Subsidiaries have timely filed
(or have had timely filed on their behalf) or will timely file or cause to be
timely filed all Tax Returns required by applicable Law to be filed by any of
them prior to or as of the Effective Time. All such Tax Returns and amendments
thereto are or will be true, complete and correct in all material respects.
(b) Each of the Company and its Subsidiaries have paid (or
have had paid on their behalf), or, where payment is not yet due, have
established an adequate accrual on the books and records of the Company and its
Subsidiaries for the payment of, all Taxes due with respect to any period (or
portion thereof) ending on or prior to the Effective Time.
(c) To the Company's knowledge, except as set forth in Section
4.14(c) of the Company Disclosure Schedule, no audit by a Tax authority is
pending or threatened with respect to any Tax Returns filed by, or Taxes due
from, the Company or its Subsidiaries. No issue has been raised by a Tax
authority in any audit of the Company or any of its Subsidiaries that if raised
with respect to any other period not so audited could be expected to result in a
proposed deficiency for any period not so audited. To the Company's knowledge,
no claim has ever been made by an authority in a jurisdiction in which the
Company or any of its Subsidiaries does not file Tax Returns that the Company or
such Subsidiary is or may be subject to taxation by that jurisdiction. No
deficiency or adjustment for any Taxes has been threatened, proposed, asserted
or assessed against the Company or its Subsidiaries. There are no Liens for
Taxes upon the assets of the Company or its Subsidiaries, except Liens for
current Taxes not yet due for which adequate reserves have been established in
accordance with GAAP. The federal income Tax Returns of the Company and each of
its Subsidiaries consolidated in such returns have been ex-
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<PAGE> 22
amined by and settled with the IRS for all years through 1994. The Company has
made available to Parent true and complete copies of all federal, and all
material state, local and foreign, income Tax Returns filed by the Company or
any of its Subsidiaries for any of the taxable periods that remains open, as of
the date hereof, for examination or assessment of Tax.
(d) Neither the Company nor any of its Subsidiaries has given
or been requested to give any waiver of statutes of limitations relating to the
payment of any Taxes or have executed powers of attorney with respect to any Tax
matters, which will be outstanding as of the Effective Time.
(e) Neither the Company nor any of its Subsidiaries is a party
to, or is bound by, any Tax sharing, Tax indemnity, cost sharing, or similar
agreement or policy relating to Taxes.
(f) None of the Company or any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(g) Neither the Company nor any Subsidiary has any liability
for Taxes of any Person (other than the Company and its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any comparable provision of state,
local or foreign Law) as a transferee or successor, by contract or otherwise.
(h) For purposes of this Agreement, the term "Taxes" means all
taxes, charges, fees, levies or other assessments, including income, gross
receipts, excise, property, sales, use, transfer, license, payroll, withholding,
export, import, customs, capital stock and franchise taxes or duties, imposed by
the United States or any state, local or foreign government or subdivision or
agency thereof, including any interest, penalties or additions thereto. For
purposes of this Agreement, the term "Tax Return" means any report, return or
other information or document required to be supplied to a Tax authority in
connection with Taxes.
Section 4.15. Intellectual Property.
(a) Except as disclosed in Company Reports filed prior to the
date hereof or as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect: To the Company's knowledge,
there do not exist any grounds for any bona fide claims (A) to the effect that
the use of any product as now used by the Company or any of its Subsidiaries,
infringes on any copyright, patent, trademark, trade name, service mark or trade
secret; (B) against the use by the Company or any of its Subsidiaries, of any
copyrights, patents, trademarks, trade names, service marks, trade secrets,
technology, know-how or computer software programs and applications used in the
business of the Company or any of its Subsidiaries as currently conducted; (C)
challenging the ownership, validity or effectiveness of any of the material
Company Intellectual Property Rights or other trade secret material to the
Company; or (D) challenging the license or legally enforceable right to use of
the material Third-Party Intellectual Rights by the Company or any of its
Subsidiaries.
(b) As used in this Agreement, the term (x) "Intellectual
Property" means all patents, trademarks, trade names, service marks, copyrights
and any applications therefor, technology, know-how, trade secret, computer
software programs or applications, and tangible or intangible proprietary
information or materials; (y) "Third-Party Intellectual Property Rights" means
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<PAGE> 23
any third-party patents, trademarks, trade names, service marks and copyrights;
and (z) "Company Intellectual Property Rights" means the patents, registered and
material unregistered trademarks, trade names and service marks, registered
copyrights, and any applications therefor owned by or licensed to the Company or
any of its Subsidiaries.
Section 4.16. Opinion of Financial Advisor. The Financial
Advisor has delivered its written opinion (the "Fairness Opinion") to the
Special Committee to the effect that, based on, and subject to, the various
assumptions and qualifications set forth in such opinion, as of the date of such
opinion, the Offer Price to be received in the transactions contemplated hereby
by the holders of Common Shares (other than Parent and its affiliates, including
the Company and its wholly owned Subsidiaries) is fair from a financial point of
view to such holders, and such opinion has not been withdrawn or modified prior
to consummation of the Offer or prior to the Effective Time, a copy of which
opinion has been delivered to Purchaser.
Section 4.17. Material Contracts. Except as disclosed in
Section 4.17 of the Company Disclosure Schedule, all of the Contracts of the
Company and its Subsidiaries that are required to be described in the Company
SEC Documents or to be filed as exhibits thereto are described in the Company
SEC Documents or filed as exhibits thereto, respectively, and are in full force
and effect and, upon consummation of the Offer and the Merger, shall continue in
full force and effect without penalty, acceleration, termination, repurchase
right or other adverse consequence, except where such failure to continue in
full force and effect would not reasonably be expected to have a Material
Adverse Effect. Promptly following the date of this Agreement, true and complete
copies of all such Contracts will be delivered or made available by the Company
to Parent. Neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, any other party is in breach of or in default under any such
Contract except for such breaches and defaults as would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.18. Insurance. Section 4.18 of the Company
Disclosure Schedule lists the Company's and its Subsidiaries' material insurance
policies or bonds in effect prior to January 6, 2000 (the "Prior Insurance
Policies"). There is no material claim pending under any of the Company's or any
of its Subsidiary's Prior Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such Prior Insurance
Policies. All premiums due and payable under all such Prior Insurance Policies
have been paid and the Company and its Subsidiaries are otherwise in compliance
in all material respects with the terms of such Prior Insurance Policies. The
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any such Prior Insurance Policies.
Section 4.19. Affiliated Transactions. Neither the Company nor
any of its Subsidiaries nor any of their respective officers, directors,
employees or affiliates (nor any individual related by blood, marriage or
adoption to any such individual) is a party to any agreement, contract,
commitment, transaction or understanding with or binding upon the Company or any
of its Subsidiaries or any of their respective assets or has engaged in any
transaction with any of the foregoing within the last 12 months, except (x) for
such agreements, contracts, commitments, transactions or understandings with or
binding upon Parent or any of its Subsidiaries, and (y) as set forth on Section
4.11 and Section 4.19 of the Company Disclosure Schedule and except for
customary payments to employees, officers or directors in the ordinary course of
business con-
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sistent with past practice for services rendered in their capacity as employees,
officers or directors.
Section 4.20. Investment Contracts, Funds and Clients.
(a) None of the Company's Subsidiaries provides investment
management, investment advisory, sub advisory, administration, distribution or
certain other services to any Person which is registered as an investment
company under the Investment Company Act of 1940 (the "1940 Act") and which has
been sponsored by the Company or one of its Subsidiaries.
(b) Each of the Company's domestic Subsidiaries (each an
"Advisory Entity" and, collectively "Advisory Entities"), a complete list of
which has previously been made available by the Company to the Parent, that
provides investment management, investment advisory or sub-advisory services to
any Person (each an "Advisory Client") is duly registered with the SEC or an
appropriate state regulatory authority as an investment adviser and is in
compliance with all applicable provisions of the Investment Advisers Act of
1940, as amended (the "Advisers Act"), except for such non-compliance or would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company is not an Advisory Entity.
(c) Each Advisory Entity has operated and is currently
operating in compliance with all Laws applicable to it or its business except
for such noncompliance as would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect. Each Advisory
Entity has been and is in compliance with each Investment Contract to which it
is a party, except as would not, individually or in the aggregate, be reasonably
expected to have a Company Material Adverse Effect.
(d) Except as would not individually or in the aggregate,
reasonably be expected to have a Company Material Adverser Effect, the accounts
of each Advisory Client subject to ERISA have been managed by the applicable
Company Subsidiary in compliance in all material respects with the applicable
requirements of ERISA.
Section 4.21. Company Broker/Dealers.
(a) Certain of the Company's Subsidiaries operate
broker/dealer operations (collectively, the "Company Broker/Dealers"). Each
Company Broker/Dealer that is required to be registered as a broker-dealer with
the SEC or under applicable state Laws, is so registered and is registered with
each other Governmental Entity with which it is required to register in order to
conduct its business as now conducted, and is and has been since January 1, 1997
in full compliance with all applicable Laws thereunder, except for any failures
to register or comply which would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect. Each Company
Broker/Dealer is a member organization in good standing of the NASD and such
other organizations in which its membership is required in order to conduct its
business as now conducted except such failures to be in good standing or such
memberships the failure to have or maintain which would not, individually or in
the aggregate, be reasonably expected to have a Company Material Adverse Effect.
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(i) Except as would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect, (x) no Company
Broker/Dealer is, nor is any "associated person" of it, subject to a "statutory
disqualification" (as such terms are defined in the Exchange Act) or 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 the Company 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, (y) to the Company's
knowledge, there are no proceedings or investigations pending by any
Governmental Entity or self-regulatory organization that is reasonably likely to
result in any such censure, limitations, suspension or revocation.
(ii)Except as would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect, since its
inception, each Company Broker/Dealer has had net capital (as such term is
defined in Rule 15c3-1 under the Exchange Act) that satisfies the minimum net
capital requirements of the Exchange Act and of the Laws of any jurisdiction in
which such company conducts business.
Section 4.22. Takeover Statutes; Charter. The Company has
taken, all necessary action within its control to exempt the Merger, the Offer
and the other transactions contemplated by this Agreement from any restrictive
provision of any "fair price," "moratorium," "control share acquisition,"
"interested shareholder" or other anti-takeover statute or regulation (each a
"Takeover Statute") or any restrictive provision of any applicable anti-takeover
provision in the Company's charter and by-laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as
follows:
Section 5.1. Organization and Qualification; Subsidiaries.
Parent is a life insurance company duly organized, validly existing and in good
standing under the Laws of the State of New York, and Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Missouri, and each of Parent and Purchaser has all requisite power and
authority to own, lease and operate its properties and assets, and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not reasonably be expected to have in the aggregate a Purchaser Material
Adverse Effect (as defined below) on Purchaser or Parent. When used in
connection with Purchaser or Parent, the term "Purchaser Material Adverse
Effect" means any change or effect that is materially adverse to the ability of
each of Purchaser or Parent to consummate the transactions contemplated hereby
or to perform its obligations under this Agreement.
Section 5.2. Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary power and authority, and has taken all
action necessary, to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby in
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accordance with the terms hereof. This Agreement constitutes a valid, legal and
binding agreement of each of Parent and Purchaser, enforceable against each of
Parent and Purchaser in accordance with its terms, except as may be subject to
applicable bankruptcy, insolvency or other similar Laws, now or hereafter in
effect, affecting creditors' rights generally.
Section 5.3. Consents and Approvals; No Violations. (a) No
filing with or notice to, and no permit, authorization, registration, consent or
approval of, any Governmental Entity is required on the part of Parent or
Purchaser for the execution, delivery and performance by the Parent and
Purchaser of this Agreement or the consummation by the Parent and Purchaser of
the transactions contemplated hereby, except (i) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, (ii) the delivery of
the articles of merger pursuant to the MGBCL, (iii) to comply with state
securities or "blue-sky" Laws, (iv) required to be made with the NASD and other
applicable self-regulatory organizations, or (v) where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings or
give such notice would not reasonably be expected to have a Parent Material
Adverse Effect. Neither the execution, delivery and performance of this
Agreement by each of Parent and Purchaser nor the consummation by each of Parent
and Purchaser of the transactions contemplated hereby will (A) conflict with or
result in any breach, violation or infringement of any provision of the
respective articles of incorporation or by-laws (or similar governing documents)
of Parent, Purchaser or any of their respective Subsidiaries, (B) result in a
breach, violation or infringement of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to the creation of any Lien or
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any Contract to which Parent, Purchaser
or any of their respective Subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or (C) violate any Law
applicable to Parent, Purchaser or any of their respective Subsidiaries or any
of their respective properties or assets, except in the case of clauses (B) or
(C) for breaches, violations, infringements or defaults which would not,
individually or in the aggregate, reasonably be expected to have a Purchaser
Material Adverse Effect.
(b) Upon consummation of the transactions contemplated hereby,
each of Parent and the Surviving Corporation (i) will not become insolvent, (ii)
will not be left with unreasonably small capital, (iii) will not have incurred
debts beyond its ability to pay all of its debts as they mature, and (iv) will
not have its capital impaired.
Section 5.4. Proxy Statement; Schedule 14D-9. None of the
information supplied or to be supplied by Parent or Purchaser in writing for
inclusion in the Proxy Statement, if any, the Schedule 14D-9 or other filings
with the SEC required to effectuate the transactions contemplated by this
Agreement will, at the respective times that the Proxy Statement, if any, the
Schedule 14D-9 or such other filings are filed with the SEC and are first
published or sent or given to holders of Common Shares, and in the case of the
Proxy Statement, if any, at the time that it or any amendment or supplement
thereto is mailed to the Company's stockholders, at the time of the Special
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. All information to be supplied by
Parent and Purchaser to the Company will be supplied promptly and without delay.
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Section 5.5. Financing. Parent has available, and will provide
Purchaser with all funds necessary to consummate the Merger and the transactions
contemplated by this Agreement. In no event shall the receipt or availability of
any funds or financing by Parent or any affiliate or any other financing or
other transactions be a condition to any of Parent's obligations hereunder or to
the consummation of the Merger.
Section 5.6. Ownership of Company Capital Stock. Except for
the Parent's Common Shares and except as listed on Section 5.6 of the Parent
Disclosure Schedule, neither Parent nor, to its knowledge, any of its
subsidiaries or affiliates (other than the Company), (i) beneficially owns
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company.
Section 5.7. Conduct of Business of Purchaser. Purchaser was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of the Company. Except (i) as
set forth in Section 6.1 of the Disclosure Schedule, (ii) as expressly
contemplated by this Agreement, (iii) as agreed in writing by Purchaser, during
the period from the date hereof to the Effective Time, the Company will, and
will cause each of its Subsidiaries to, conduct its and their respective
operations only in the ordinary course of business consistent with past practice
and will use its reasonable best efforts, and will cause each of its
Subsidiaries to use its reasonable best efforts, to preserve intact its current
business organization of the Company and each of its Subsidiaries, to keep
available the services of its and their present officers and key employees, and
to preserve its business relationships including customers.
Without limiting the generality of the foregoing, and except
as expressly provided otherwise in this Agreement or as set forth in Section 6.1
of the Company Disclosure Schedule, after the date hereof and prior to the
earlier of the (i) Effective time or (ii) termination of this Agreement, the
Company will not and will cause its subsidiaries not to, without the prior
written consent of Parent (and Parent shall, in the event any such consent is
requested by the Company, respond within seven days):
(a) amend or propose to amend its articles of incorporation or
by-laws or other organizational documents;
(b) (i) issue, reissue or sell, or authorize the issuance,
reissuance or sale of (A) additional shares of capital stock of any class, or
securities convertible into or exercisable or exchangeable for any capital stock
of any class, or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issuance of Common Shares, in
accordance with the terms of the instruments governing such issuance on the date
hereof, pursuant to the ex-
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ercise or conversion of Options outstanding on the date hereof, or (B) any other
securities in respect of, in lieu of, or in substitution for, Common Shares or
any other capital stock of any class outstanding on the date hereof; (ii) make
any other changes in its capital structure;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock (other than regular quarterly dividends consistent in timing with past
practice and not to exceed $0.05 per share per quarter), or redeem or otherwise
acquire any of its securities or any securities of its Subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or
issue any debt securities, except for borrowings under existing lines of credit
in the ordinary course of business consistent with past practice ; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except in the
ordinary course of business consistent with past practice , and except for
obligations of wholly owned Subsidiaries of the Company to the Company or to
other wholly owned Subsidiaries of the Company; (iii) except for a capital
commitment of $20 million to Conning Capital Partners VI L.P. and capital
contributions to other Conning Investment Funds that have been committed as of
the date hereof or are made in the ordinary course of business as set forth in
Section 6.1 of the Company Disclosure Schedule (in amounts not to exceed the
amounts so scheduled), make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company or customary loans or advances to employees in the ordinary course of
business consistent with past practice) or make any change in its existing
borrowing or lending arrangements for or on behalf of any such Person, whether
pursuant to an employee benefit plan or otherwise; (iv) pledge or otherwise
encumber shares of capital stock of the Company or any of its Subsidiaries; or
(v) mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to exist any material Lien thereupon;
(e) adopt a plan providing for the complete or partial
liquidation, dissolution, consolidation, merger, restructuring or
recapitalization of the Company or any of its Subsidiaries, or any resolutions
relating to any of the foregoing;
(f) increase in any manner the compensation or fringe benefits
payable or to become payable to any director, officer or, employee, except, in
the case of employees, only for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to the Company, or pay
or award any benefit not required by any existing plan or arrangement to any
officer, director or employee (including the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units pursuant to
the Stock Plans or otherwise), or grant any severance or termination pay to any
officer, director or other employee of the Company or any of its Subsidiaries,
or enter into any employment or severance agreement with any director, officer
or other employee of the Company or any of its Subsidiaries or establish, adopt,
enter into, amend, or waive any performance or vesting criteria under any plan
for the benefit or welfare of any current or former directors, officers or
employees of the Company or its Subsidiaries or their beneficiaries or
dependents (any of the foregoing being an "Employee Benefit Arrangement"),
except, in each case, to the extent required by applicable Law;
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<PAGE> 29
(g) acquire, sell, transfer, lease, encumber or dispose of (i)
any assets outside the ordinary course of business consistent with past practice
or (ii) any assets which in the aggregate are material to the Company and its
Subsidiaries taken as a whole, or enter into any commitment or transaction
outside the ordinary course of business consistent with past practice which
would be material to the Company and its Subsidiaries taken as a whole;
(h) except as may be required as a result of a change in Law
or in GAAP, change any of the accounting principles, practices or methods used
by the Company or any of its Subsidiaries;
(i) revalue in any material respect any of the Company's or
any of its Subsidiaries' assets, including writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
(j) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice which would be material to the Company and its Subsidiaries taken as a
whole; (iii) authorize any new capital expenditure(s) which, individually, is in
excess of $100,000 or, in the aggregate, are in excess of $300,000; or (iv)
enter into or amend any Contract providing for the taking of any action that
would be prohibited hereunder;
(k) make any Tax election (unless required by Law), settle or
compromise any Tax liability of the Company or any of its Subsidiaries or any
pending or threatened suit, action or claim relating to any potential or actual
Tax liability of the Company or any of its Subsidiaries, change any method of
accounting for Tax purposes or file (other than in a manner consistent with past
practice or as required by Law) any Tax Return;
(l) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto) of
the Company and its Subsidiaries or incurred in the ordinary course of business
consistent with past practice;
(m) enter into any obligation to indemnify any officer or
director of the Company or any Subsidiary not otherwise provided under a current
charter, by-law or other similar governing instrument or indemnity agreement in
existence on January 6, 2000;
(n) settle or compromise any pending or threatened suit,
action or claim (i) relating to the transactions contemplated hereby, or (ii)
any other pending or threatened material suit, action or claim other than in the
ordinary course of business;
(o) enter into any agreement of a nature that would be
required to be filed as an exhibit to Form 10-K or 10-Q under the Exchange Act;
and
(p) take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.1(a) through 6.1(o).
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Section 6.2. Acquisition Proposals. From and after the
execution of this Agreement, the Company shall promptly advise Parent in
reasonable detail of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations or proposals relating to a merger, liquidation,
recapitalization, consolidation or other business combination involving the
Company or its Subsidiaries or acquisition of any capital stock or any material
portion of the assets of the Company or its Subsidiaries, or any combination of
the foregoing (an "Acquisition Transaction"), including identifying the offeror
and the terms of any proposal relating to an Acquisition Transaction. The
Company shall promptly advise Parent of any material development relating to
such proposal, including the results of any discussions or negotiations with
respect thereto. Neither the Company nor any of its Subsidiaries shall provide
any non-public information to any third party (other than Parent, Purchaser or
any of their respective affiliates or advisors) without having entered into a
customary confidentiality agreement with respect to such information.
Section 6.3. Access to Information. Between the date hereof
and the consummation of the Offer and/or Effective Time, as the case may be, the
Company will give Parent and Purchaser and their authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and properties and to all books and records of the Company and its
Subsidiaries, will permit Purchaser to make such inspections as Purchaser
reasonably request and will cause the Company's officers and those of its
Subsidiaries to furnish Purchaser with such financial and operating data and
other information with respect to the business and properties of the Company and
any of its Subsidiaries as Purchaser may from time to time reasonably request.
The Company shall furnish promptly to Parent and Purchaser a copy of each
report, schedule, registration statement and other document filed by it or its
Subsidiaries during such period pursuant to the requirements of federal or state
or foreign securities Laws.
Section 6.4. Additional Agreements; Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this
Agreement, each of Parent, Purchaser and the Company agree to use its reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable under any applicable Laws to
consummate and make effective the transactions contemplated hereby as promptly
as practicable including, but not limited to, (i) the preparation and filing of
all forms, registrations and notices required to be filed to consummate the
transactions contemplated hereby and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, (ii) the satisfaction of the other
parties' conditions to the consummation of the Offer or the Merger, and (iii)
contesting any legal proceeding challenging the Merger, and (iv) the execution
of any additional instruments, including the Articles of Merger, necessary to
consummate the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, each party hereto agrees to use reasonable best
efforts to cause the Effective Time to occur as soon as practicable after the
stockholder vote, if any, with respect to the Merger. In case at any time after
the Effective Time any further action is necessary to carry out the purposes of
this Agreement, the proper officers and directors of each party hereto shall use
reasonable best efforts to take all such necessary action. In addition, no party
hereto shall take any action after the date hereof that would reasonably be
expected to delay materially the obtaining of, or result in not obtaining, any
permission, approval or consent from any Governmental Entity necessary to be
obtained prior to the consummation of the Offer or the Merger.
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<PAGE> 31
(b) Each party shall promptly consult with the other parties
hereto with respect to, provide any necessary information with respect to and
provide the other (or its counsel) copies of, all filings made by such party
with any Governmental Entity or any other information supplied by such party to
a Governmental Entity in connection with this Agreement and the transactions
contemplated hereby. Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated hereby. If any party hereto or affiliate thereof receives a request
for additional information or documentary material from any such Governmental
Entity with respect to the transactions contemplated hereby, then such party
will endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request. To the extent that transfers of Company Permits
are required as a result of execution of this Agreement or consummation of the
transactions contemplated hereby, the Company shall use its best efforts to
effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require Purchaser to (i) enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring
Purchaser to hold separate or divest, or to restrict the dominion or control of
Purchaser or any of its affiliates over, any of the assets, properties or
businesses of Purchaser, its affiliates or the Company, in each case, as in
existence on the date hereof, or (ii) defend against any litigation brought by
any Governmental Entity seeking to prevent the consummation of the transactions
contemplated hereby.
(d) Each of the Company, on the one hand, and Parent and
Purchaser, on the other hand, shall not, and shall use commercially reasonable
efforts to cause their respective Subsidiaries not to, take any action that
would result in (i) any representations and warranties of such party (without
giving effect to any "knowledge" qualification) set forth in this Agreement
becoming untrue, or (ii) any of the conditions to the Merger set forth in
Article VII or Annex I not being satisfied.
Section 6.5. Consents. Parent, Purchaser and the Company each
will use all reasonable efforts to obtain consents of all third parties and
Governmental Entities necessary, proper or advisable for the consummation of the
transactions contemplated hereby.
Section 6.6. Public Announcements. Parent, Purchaser and the
Company, as the case may be, will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any national securities exchange or The
Nasdaq Stock Market, as determined in good faith by Purchaser or the Company, as
the case may be.
Section 6.7. Indemnification.
(a) The Surviving Corporation agrees that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its Subsidiaries as provided in their
respective certificates or articles of incorporation or by-laws or otherwise in
effect as of the date hereof with respect to matters occurring prior to the
Effective
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<PAGE> 32
Time shall survive the Effective Time and shall continue in full force and
effect. To the maximum extent permitted by Law, such indemnification shall be
mandatory rather than permissive, and the Company or the Surviving Corporation,
as the case may be, shall advance expenses in connection with such
indemnification.
(b) From and after the Effective Time, Parent and the
Surviving Corporation shall jointly and severally, to the fullest extent
permitted by applicable Law, indemnify, defend and hold harmless each Person who
is now or who becomes prior to the Effective Time a director of the Company
against all losses, expenses (including reasonable attorney's fees and
expenses), claims, damages, liabilities and, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, to the extent they are based on
or arise out of or pertain to the transactions contemplated by this Agreement.
In the event of any such loss, expense, claim, damage, liability, or settlement
(whether or not arising before the Effective Time), (i) Parent and the Surviving
Corporation shall pay the reasonable fees and expenses of counsel selected by
the director seeking indemnification pursuant to this Section 6.7(b), which
counsel shall be reasonably satisfactory to Parent and the Surviving
Corporation, promptly after statements therefor are received and otherwise
advance to such directors upon request reimbursement of documented expenses
reasonably incurred, (ii) any determination required to be made with respect to
whether such directors' conduct complies with the standards set forth in the
MGBCL and the Company's articles of incorporation and by-laws shall be made by
independent counsel mutually acceptable to Parent, the Surviving Corporation and
such directors; provided, however, that neither Parent nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). The directors
seeking indemnification pursuant to this Section 6.7(b) as a group may retain
only one law firm with respect to each related matter except to the extent there
is, in the opinion of counsel to a director, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such director and any other director seeking indemnification pursuant to this
Section 6.7(b).
(c) The Surviving Corporation, shall maintain in effect for
not less than six (6) years from the Effective Time, the policies of the
directors' and officers' liability and fiduciary insurance most recently
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof so long
as such substitution does not result in gaps or lapses in coverage) with respect
to matters occurring prior to the Effective Time to the extent available.
(d) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or any substantial
portion of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors and assigns of such party
assume the obligations of such party as contemplated by this Section 6.7.
Section 6.8. Employee Benefit Arrangements. (a) The Company
will not take any action which could prevent or impede the termination of the
Stock Plans and any other plans, programs or arrangements providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary of the Company in each case effective prior
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to the Effective Time. The Company, as instructed by Parent, shall take all
steps necessary or appropriate so that as of the Effective Time, each person who
holds a Stock Option that is cancelled pursuant to Section 2.9(a) shall receive
in substitution therefor, in accordance with the provisions of the Stock Plans,
an incentive compensation award to replace such Stock Option (a "Replacement
Award"), on terms and conditions consistent with those set forth in Section 6.8
of the Company Disclosure Schedule, with such changes as the parties may
mutually agree.
(b) Subject to Section 6.8(c), Purchaser and the Company and
its Subsidiaries shall honor, without modification, all contracts, agreements,
collective bargaining agreements and other commitments of the parties prior to
the date hereof which apply to any current or former employee or current or
former director of the Company or its Subsidiaries; provided, however, that this
undertaking shall not prevent Parent, Purchaser or the Company or its
Subsidiaries from enforcing or complying with any such commitments in accordance
with its terms, including, exercising any right permitted thereunder or under
applicable law to amend, modify, suspend, revoke or terminate any such
commitment in whole or in part. Any workforce reductions carried out following
the Effective Time by Parent or the Company or any of its Subsidiaries with
respect to employees of the Company and its Subsidiaries shall be carried out in
accordance with all laws and regulations governing the employment relationship
and termination thereof, including the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder and any analogous state
or local law.
(c) Each of the Company Employee Benefit Plans (other than the
Stock Plans) in effect as of the date hereof shall be maintained in effect with
respect to the employees or former employees of the Company and its Subsidiaries
who are covered by any such Company Employee Benefit Plan immediately prior to
the Effective Time (the "Affiliated Employees") until Parent, Purchaser or the
Company or its Subsidiaries otherwise determines after the Effective Time;
provided, however, that nothing herein contained shall limit any right contained
in any such Company Employee Benefit Plan or under applicable law to amend,
modify, suspend, revoke or terminate any such Company Employee Benefit Plan; and
provided, further, however, that Parent, Purchaser or the Company or their
Subsidiaries shall cause the Affiliated Employees to be provided with employee
benefits for a period of not less than one year following the Effective Time
which are no less favorable in the aggregate than those provided to similarly
situated employees of Parent and its Affiliates. Without limiting the foregoing,
with respect to any benefit plan established to replace any Company Employee
Benefit Plan (other than the Stock Plans) (each such plan, a "New Plan"), each
participant in any such Company Employee Benefit Plan shall receive credit for
purposes of eligibility to participate and vesting under such New Plan for
service credited for the corresponding purpose under such Company Employee
Benefit Plan; provided, however, that such crediting of service shall not
operate to duplicate any benefit to any such participant or the funding for any
such benefit or cause any such Company Employee Benefit Plan or New Plan to fail
to comply with the applicable provisions of the Code or ERISA.
(d) With respect to any New Plan which is a welfare benefit
plan, other than limitations, exclusions or waiting periods that are already in
effect with respect to Affiliated Employees and that have not been satisfied as
of the Effective Time, such New Plan shall waive all limitations to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements and provide each Affiliated Employee with full credit for
co-
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payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements applicable to the same
calendar year under such New Plan.
Section 6.9. Notification of Certain Matters. Parent,
Purchaser and the Company shall promptly notify each other of (i) the occurrence
or non-occurrence of any fact or event which would be reasonably likely (A) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (B) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied in any material respect and (ii)
any failure of the Company, Parent or Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder. Each of the Company,
Parent and Purchaser shall give prompt notice to the other parties hereof of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
Section 6.10. State Takeover Laws. Prior to the Effective
Time, the Company shall, upon the request of Purchaser, take all reasonable
steps to assist in any challenge by Purchaser to the validity or applicability
of any state takeover Law to the transactions contemplated by this Agreement,
including the Offer and the Merger.
Section 6.11. Stockholder Litigation. The Company shall give
Parent reasonable opportunity to participate in the defense of any stockholder
litigation against the Company and/or its officers and directors relating to the
transactions contemplated hereby.
Section 6.12. Further Action. Each party hereto shall, subject
to the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the
transactions contemplated hereby, including the Merger.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of Parent, Purchaser and the Company to
consummate the Merger and the transactions contemplated hereby are subject to
the satisfaction or waiver, at or before the Effective Time, of each of the
following conditions:
(a) Stockholder Approval. The Company shall have obtained the
necessary approval of this Agreement by the holders of at least two-thirds of
the outstanding Common Shares entitled to vote on the matter; provided, however,
that no vote of the Company stockholders shall be necessary if Parent shall
acquire, pursuant to the Offer, the Threshold Number of Common Shares.
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(b) Purchase of Common Shares. Purchaser shall have accepted
for payment Common Shares pursuant to the Offer in accordance with the terms
hereof.
(c) Injunctions; Illegality. The consummation of the Merger
shall not be restrained, enjoined or prohibited by any Law or ruling of a court
of competent jurisdiction or any Governmental Entity, and there shall not have
been any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any Governmental Entity which prevents the consummation of the
Merger or has the effect of making the purchase of Common Shares illegal. Each
party agrees that, in the event that any such Law shall have been enacted,
entered, promulgated or enforced, such party shall use its reasonable best
efforts to cause such Law to be complied with, lifted or vacated, subject to the
limitations set forth in Section 6.4(c).
Section 7.2. Conditions to Obligations of Parent and
Purchaser. The obligations of Parent and Purchaser to effect the Merger are also
subject to the satisfaction or waiver by Parent, at or 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
(without giving effect to any qualifications as to "Company Material Adverse
Effect," "material" or similar qualifications) as of the date of this Agreement
and on and as of the Effective Time as though made on and as of the Effective
Time (except to the extent any such representation or warranty expressly speaks
as of an earlier or different date, and except for changes contemplated or
permitted by the terms hereof) except, in either case, where the failure of such
representations and warranties to be so true and correct (without giving effect
to any qualifications as to "Company Material Adverse Effect," "material" or
similar qualifications) would not, in the aggregate, be reasonably expected to
have a Company Material Adverse Effect, and the Company shall have delivered to
Parent a certificate signed on behalf of the Company by an executive officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, except for such non-performance as
would not, in the aggregate, reasonably be expected to have either a Company
Material Adverse Effect or prevent or prohibit consummation of the Merger, and
Parent shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) Termination of Stock Options. No holder of Stock Options
or other options, warrants, rights or agreements will have any right to receive
any shares of capital stock of the Company or, if applicable, the Surviving
Corporation, upon exercise of any such Stock Option or other option, warrant,
right or agreement.
Section 7.3. Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company, at or prior to the Effective Time, of
each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and correct
(without giving effect to any qualifications as to "Parent Material Adverse
Effect," "material" or similar qualifications) as of the date of this
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Agreement and on and as of the Effective Time as though made on and as of the
Effective Time (except to the extent any such representation or warranty
expressly speaks as of an earlier or different date, and except for changes
contemplated or permitted by the terms hereof) except, in either case, where the
failure of such representations and warranties to be so true and correct
(without giving effect to any qualifications as to "Parent Material Adverse
Effect," "material" or similar qualifications) would not, in the aggregate, be
reasonably expected to have a Parent Material Adverse Effect, and Parent shall
have delivered to the Company a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, except for such non-performance as would not, in
the aggregate, reasonably be expected to have either a Company Material Adverse
Effect or prevent or prohibit consummation of the Merger, and the Company shall
have received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
Section 7.4. Frustration of Closing Conditions. Neither
Parent, Purchaser nor the Company may rely on the failure of any condition set
forth in Sections 7.1 through 7.3 to be satisfied if such failure was caused
solely by such party's own failure to use reasonable best efforts to consummate
the Merger and the transactions contemplated hereby, as required by and subject
to Section 6.4.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
Section 8.1. Termination. This Agreement may be terminated and
the Offer and the Merger may be abandoned at any time prior to the Effective
Time notwithstanding any requisite approval of this Agreement by the
stockholders of the Company (with any termination by Parent also being an
effective termination by Purchaser):
(a) by mutual written consent of Parent and the Company;
(b) by Parent or the Company if (i) the consummation of the
Merger shall have been restrained, enjoined or prohibited by any Law or ruling
of a court of competent jurisdiction or any Governmental Entity, or there shall
have been any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the purchase of Common
Shares illegal; or (ii) the Effective Time shall not have occurred on or before
the date which is six months from the date hereof; provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by Parent if, due to an occurrence or circumstance which
would result in a failure to satisfy any of the Tender Offer Conditions,
Purchaser shall have (i) failed to commence the Offer within the time period
prescribed in Section 1.1(a), (ii) terminated the Offer without
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having accepted any Common Shares for payment thereunder, or (iii) failed to pay
for Common Shares pursuant to the Offer by the date which is four months from
the date hereof, unless, in each case, such failure to satisfy any of the Tender
Offer Conditions shall have been caused by or resulted from a material breach of
any of Parent's or Purchaser's representations, warranties or covenants;
(d) by the Company if, due to an occurrence or circumstance
which would result in a failure to satisfy any of the Tender Offer Conditions,
Purchaser shall have (A) failed to commence the Offer within the time period
prescribed in Section 1.1(a), (B) terminated the Offer without having accepted
any Common Shares for payment or (C) failed to pay for Common Shares pursuant to
the Offer by the date which is four months from the date hereof, unless, in each
case, such failure to satisfy any of the Tender Offer Conditions shall have been
caused by or resulted from a material breach of any of the Company's
representations, warranties or covenants;
(e) by the Company if, prior to the purchase of Common Shares
pursuant to the Offer in accordance with the terms of this Agreement, the
Special Committee approves or recommends another offer or an agreement to effect
a proposal made by a third party (other than an affiliate of Parent) to effect
an Acquisition Transaction having terms which the Special Committee has
determined in good faith (i) based upon the advice of a nationally recognized
investment banker, to be more favorable to the Company and its Stockholders
(other than Parent and Purchaser) than the Offer and the Merger and (ii) based
upon the advice from its outside counsel, that failure to approve such third
party proposal and terminate this Agreement would constitute a breach of
fiduciary duties of the Special Committee under applicable Law;
(f) by Parent if the Special Committee (i) shall have
withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner
adverse to Purchaser its approval or recommendation of the Offer, this Agreement
or the Merger, (ii) shall have approved or recommended another offer or an
agreement to effect a proposal made by a third party (other than an affiliate of
Parent) to effect an Acquisition Transaction or (iii) shall have resolved to
effect any of the foregoing;
(g) by Parent if the Minimum Condition (as defined in Annex I)
shall not have been satisfied by the initially scheduled expiration date of the
Offer and on or prior to such date any Person (other than Parent or Purchaser or
any affiliate thereof) shall have made a proposal or public announcement or
communication to the Company with respect to an Acquisition Transaction; or
(h) by Parent or by the Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein), as the case may be, in the event of any of
(A) a breach by the other party of any representation or warranty contained
herein (subject to the standard set forth in Section 7.2(a) or 7.3(a), as the
case may be), which breach cannot be or has not been cured within 20 business
days after the giving of written notice to the breaching party of such breach;
(B) a material breach by the other party of any of the obligations or agreements
contained herein, which breach cannot be or has not been cured within 20
business days after the giving of written notice to the breaching party of such
breach; or (C) a Company Material Adverse Effect exists (in which case
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Parent may terminate this Agreement) or a Parent Material Adverse Effect exists
(in which case the Company may terminate this Agreement).
Section 8.2. Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or shareholders, other than
the provisions of this Section 8.2 and Section 9.9, which shall survive any such
termination. Nothing contained in this Section 8.2 shall relieve any party from
any liability for any breach of this Agreement.
Section 8.3. Amendment. Subject to applicable Law, this
Agreement may be amended by action taken by the Company, Parent and Purchaser at
any time before or after approval of this Agreement by the stockholders of the
Company (if required by applicable Law) but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable Law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
Section 8.4. Waiver. At any time prior to the Effective Time,
any party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto, or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Nonsurvival of Representations and Warranties.
The representations, warranties and covenants made herein shall not survive
beyond the Effective Time. Notwithstanding the foregoing, the agreements set
forth in Section 2.3, Section 2.9, Article III, Section 6.7 and Section 6.8
shall survive the Effective Time indefinitely (except to the extent a shorter
period of time is explicitly specified therein).
Section 9.2. Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof, and (ii) shall not be assigned by operation of Law or
otherwise; provided, however, that Purchaser may assign any or all of its rights
and obligations under this Agreement to any Subsidiary or affiliate of
Purchaser, but no such assignment shall relieve Purchaser or Parent of its
obligations hereunder if such assignee does not perform such obligations.
Section 9.3. Validity. If any provision of this Agreement, or
the application thereof to any Person or circumstance, is held invalid or
unenforceable, such provision shall be
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enforced to the maximum extent permissible in the circumstances, and the
remainder of this Agreement, and the application of such provision to other
Persons or circumstances, shall not be affected thereby, and to such end, shall
be enforced to the greatest extent permitted by applicable Law. The provisions
of this Agreement are thus agreed to be severable.
Section 9.4. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing (including by facsimile
with written confirmation thereof) and unless otherwise expressly provided
herein, shall be delivered during normal business hours by hand, by Federal
Express, United Parcel Service or other nationally recognized overnight
commercial delivery service, or by facsimile notice, confirmation of receipt
received, addressed as follows, or to such other address as may be hereafter
notified by the respective parties hereto:
(a) If to Metropolitan Life Insurance Company or CC Merger Sub Inc.:
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Attention: Terence Lennon
Facsimile Number: (212) 251-1664
With a copy, which will not constitute notice, to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Facsimile Number: (212) 403-2234
(b) If to Conning Corporation:
Conning Corporation
700 Market Street
St. Louis, Missouri 63101
Attention: John A. Fibiger
Facsimile Number: (314) 444-0726
With copies, which will not constitute notice, to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Allen I. Isaacson, P.C.
Facsimile Number: (212) 859-8587
and
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
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New York, New York 10022-4697
Attention: Thomas L. Fairfield, Esq.
Facsimile Number: (212) 319-4090
Section 9.5. Governing Law. This Agreement shall be governed
by and construed in accordance with the Laws of the State of New York, without
regard to the principles of conflicts of Law thereof. The parties hereto hereby
agree and consent to be subject to the exclusive jurisdiction of the federal and
state courts in the State of New York in any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by Law,
(i) any objection that it may now or hereafter have to laying venue of any suit,
action or proceeding brought in such courts, and (ii) any claim that any suit,
action or proceeding brought in such courts has been brought in an inconvenient
forum.
Section 9.6. Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 9.7. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and its
successors and permitted assigns, and except as provided in Section 6.7, nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 9.8. Counterparts. This Agreement may be executed in
two or more counterparts (including by facsimile), each of which shall be deemed
to be an original, but all of which shall constitute one and the same agreement.
Section 9.9. Fees and Expenses. Whether or not the Merger is
consummated, except as otherwise specifically provided herein, all costs and
expenses incurred in connection with the Offer, this Agreement and the Merger
shall be paid by the party incurring such expenses.
Section 9.10. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at Law or in equity, provided, that this
Section 9.10 shall have no force and effect from and after the termination of
this Agreement in accordance with Section 8.1.
Section 9.11. Interpretation; Absence of Presumption. (a) For
the purposes hereof, (1) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
gender as the context requires, (2) the terms "hereof", "herein", and "herewith"
and words of similar import shall, unless otherwise stated, be
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construed to refer to this Agreement as a whole (including all of the Exhibits
hereto) and not to any particular provision of this Agreement, and Article,
Section, paragraph and Exhibit references are to the Articles, Sections,
paragraphs and Exhibits to this Agreement unless otherwise specified, (3) the
word "including" and words of similar import when used in this Agreement shall
mean "including without limitation" unless the context otherwise requires or
unless otherwise specified, (4) the word "or" shall not be exclusive, (5)
provisions shall apply, when appropriate, to successive events and transactions,
and (6) all references to any period of days shall be deemed to be to the
relevant number of calendar days unless otherwise specified.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
METROPOLITAN LIFE
INSURANCE COMPANY
By: /s/Gary A. Beller
Name: Gary A. Beller
Title:
Senior Executive Vice President
and General Counsel
CC MERGER SUB INC.
By: /s/Gary A. Beller
Name: Gary A. Beller
Title: President
CONNING CORPORATION
By: /s/Arthur C. Reeds, III
Name: Arthur C. Reeds, III
Title: Chairman, President & Chief Executive
Officer
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ANNEX I
CONDITIONS TO THE OFFER
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH
IN THE AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") TO WHICH THIS ANNEX
I IS ATTACHED.
Notwithstanding any other provisions of the Offer, Purchaser
shall not be required to accept for payment or (subject to any applicable rules
and regulations of the SEC) pay for, and may delay the acceptance for payment
of, any Common Shares and may terminate or, subject to the terms of the Merger
Agreement, amend the Offer, unless (i) there shall be validly tendered and not
properly withdrawn prior to the expiration date for the Offer, as it may be
extended in accordance with the Offer (the "Expiration Date") that number of
Common Shares which, when aggregated with the number of Common Shares currently
beneficially owned by Parent, represents at least two-thirds of the total number
of outstanding Common Shares on a fully diluted basis on the date of purchase
(the "Minimum Condition"), and (ii) at any time on or after the date of the
Merger Agreement and prior to the acceptance for payment for Common Shares, none
of the following conditions exists or shall have occurred and remain in effect:
(a) there shall be pending any Action by any Governmental Entity,
or any Law proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the Offer, (i) seeking to or
which does prohibit or impose any material limitations on
Parent's or Purchaser's ownership or operation (or that of any of
their respective Subsidiaries or affiliates) of all or a material
portion of their or the Company's or any of its Subsidiaries'
businesses or assets, or to compel Parent or Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the
Company or Parent or Purchaser and their respective Subsidiaries,
in each case taken as a whole, (ii) seeking to or which does make
the acceptance for payment of, or the payment for, some or all of
the Common Shares illegal or otherwise prohibiting, restricting
or significantly delaying consummation of the Offer or the Merger
or the performance of any of the other transactions contemplated
by the Merger Agreement, or seeking to obtain from the Company or
Purchaser any damages that are material in Parent's view in
relation to the Company and its Subsidiaries as taken as a whole,
(iii) seeking to or which does impose material limitations on the
ability of Purchaser, or render Purchaser unable, to acquire or
hold or to exercise effectively all rights of ownership of the
Common Shares, including, the right to vote any Common Shares
purchased by Purchaser on all matters properly presented to the
stockholders of the Company, or effectively to control in any
material respect in Parent's view the business, assets or
operations of the Company, its Subsidiaries or Purchaser or any
of their respective affiliates, (iv) seeking to or which does
impose circumstances under which the purchase or payment for some
or all of the Common Shares pursuant to the Offer and Merger
could reasonably be expected to have a Purchaser Material Adverse
Effect, or (v) which otherwise would reasonably be expected to
have a Company Material Adverse Effect; or
<PAGE> 44
(b) there shall have occurred any change that would reasonably be
expected to constitute a Company Material Adverse Effect; or
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New
York Stock Exchange, Inc. or The Nasdaq Stock Market for a period
in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such
exchanges not related to market conditions), (ii) the declaration
of a banking moratorium or any suspension of payments in respect
of banks in the United States (whether or not mandatory), (iii)
the commencement of a war or other international or national
calamity directly or indirectly involving the United States, (iv)
any mandatory limitation by any U.S. governmental authority or
agency that would reasonably be expected to have a material
adverse affect on the extension of credit by banks or other
financial institutions, or (v) in the case of any of the
foregoing, existing at the date of the execution of the Merger
Agreement, a material acceleration or worsening thereof; or
(d) the Merger Agreement shall have been terminated in
accordance with its terms; or
(e) (i) the Special Committee shall have withdrawn, changed or
modified (including by amendment of the Schedule 14D-9) in a
manner adverse to Purchaser or Parent his approval or
recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended an Acquisition Proposal, or shall have
adopted any resolution to effect any of the foregoing, (ii) the
Special Committee shall have recommended any proposal other than
this Agreement in respect of an Acquisition Proposal, (iii) the
Special Committee shall have continued discussions with any third
party concerning an Acquisition Proposal for more than ten (10)
business days after the date of receipt of such Acquisition
Proposal, or (iv) an Acquisition Proposal that is publicly
disclosed and that contains a proposal as to price (without
regard to whether such proposal specifies a specific price or a
range of potential prices) shall have been commenced, publicly
proposed or communicated to the Company and the Special Committee
shall not have rejected such proposal within ten (10) business
days of the earlier to occur of (A) the Company's receipt of such
Acquisition Proposal and (B) the date such Acquisition Proposal
first becomes publicly disclosed; or
(f) not all consents, permits and approvals of Governmental
Entities and other Persons set forth in Section 4.6 of the
Company Disclosure Schedule shall have been obtained without
material adverse conditions attached and material expenses
imposed on the Company or any of its Subsidiaries; or
(g) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct (without
giving effect to any qualifications as to "Company Material
Adverse Effect," "material" or similar qualifications) as of the
date of the Merger Agreement or on and as of the Expiration Date
as though made on and as of the Expiration Date (except to the
extent any such representation or warranty expressly speaks as of
an earlier or different date, and except for changes contemplated
or permitted by the terms hereof) except, in either case, where
the fail-
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<PAGE> 45
ure of such representations and warranties to be so true and
correct (without giving effect to any qualifications as to
"Company Material Adverse Effect," "material" or similar
qualifications) would not, in the aggregate, be reasonably
likely to have a Company Material Adverse Effect; or
(h) the Company shall not have performed in all material
respects all obligations required to be performed by it under
the Merger Agreement at or prior to the Expiration Date.
The parties acknowledge that the Tender Offer Conditions set
forth above in this Annex I are for the sole benefit of Parent and Purchaser,
that Parent or Purchaser may assert the failure of any of the Tender Offer
Conditions regardless of the circumstances (other than any circumstance arising
solely by any action or inaction by Parent or Purchaser) giving rise to any such
failure, that the Company shall not assert the failure of, or waive, any such
condition without the prior written consent of Parent and Purchaser, and that if
Parent or Purchaser elects to waive any such condition to the Offer (which
Parent or Purchaser may do in whole or in part at any time and from time to
time), the Company shall cooperate and comply with such election. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right, and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to any of the
foregoing provisions, all tendered Common Shares not theretofore accepted for
payment shall forthwith be returned to the tendering stockholders.
I-3
<PAGE> 1
1
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made and entered into as of 1 May 1995 by and between General
American Life Insurance Company, a Missouri insurance company ("Client"), and
General American Investment Management Company ("Advisor");
WITNESSETH THAT:
WHEREAS, Client desires that Advisor serve as investment advisor with respect to
the investment portfolio maintained by Client in connection with Client's
business as an insurer; and
WHEREAS, Advisor hereby represents and warrants that it is duly registered as an
investment advisor under the Investment Advisers Act of 1940 and experienced in
the management of insurance portfolios;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties covenant and agree as follows.
1. Appointment of Investment Advisor. Client hereby appoints Advisor as
investment advisor with respect to its general account (herein referred to as
"the Account," as constituted on the date hereof and as it may be changed,
accreted, or diminished pursuant hereto). The Account is to be invested so as to
accommodate Client's mix of liabilities in accordance with the investment laws
for insurance companies in Missouri, Client's state of domicile.
2. Investment Authority. Client shall retain fiduciary responsibility,
authority, and control with respect to management and investment of the
securities in the Account. Client shall supervise operations of Advisor with
respect to the Account. Advisor shall be free to buy, sell, exchange, convert,
or otherwise trade assets in the Account in the exercise of its sole discretion,
provided Advisor acts in a manner consistent with general directions received
from Client.
3. Assignment. Neither party to this Agreement may assign its rights or
responsibilities under this Agreement without the prior written consent of the
other party.
4. Client Obligations. Client agrees to give Advisor any information in its
possession which Client deems relevant to the suitability of the investment
strategy implemented by Advisor, including information on Client's liabilities,
whether this information becomes known before or after the adoption of the
strategy. Client agrees to pay or have paid all fees and charges within thirty
days of receipt of a bill stating what such fees and charges.
<PAGE> 2
5. Advisor Obligations.
a) Advisor does not warrant any rate of return on all or any segment of
the Account. Advisor will try to select the most favorable prices and timing of
asset purchases and sales. Advisor will select brokers and dealers on a basis
which is favorable to Client, taking into account research services provided,
ability to execute orders promptly and correctly, fees charged, and any other
factors which Advisor deems relevant. Advisor will pass along to Client the cost
of any and all brokers' fees, commissions, taxes, and other custodial charges
related to management of the Account.
b) It is understood and agreed that Advisor does not provide its
services exclusively for Client. Advisor shall remain free to provide services
to other clients or for its own account, pursuant to objectives which may or
may not be similar to the strategy adopted for Client.
c) Advisor shall make reports to Client as requested, including, but
not limited to:
i) delivery on the sixth working day of each month of all
investment accounting data for the previous month, in an electronic format
suitable for use in updating Client's computerized accounting records;
ii) delivery by January 30 of each year of all
investment-related exhibits and schedules for Client's statutory annual
statement, in a printed format suitable for inclusion in Client's statutory
annual statement without modification:
6. Custodian. The Advisor shall not have custody of any of the assets in
the Account. Custody of assets of the Account shall at all times be maintained
by one or more custodians selected by the Client. All transactions authorized
by this Agreement shall be carried out through such custodians. The Advisor
shall not be responsible for any act or omission of such custodians.
7. Fees.
a) Fees are payable quarterly in arrears and are based on the market
value of the Account as determined by Advisor on the last day of the quarter.
The fee schedule is attached as Appendix A. Payments for less than a full
calendar quarter shall be pro-rated. Client agrees that Advisor may direct
custodians of the Account to make direct payment of fees due hereunder.
2
<PAGE> 3
3
b) Calculation of fees shall be in accordance with the requirements of
regulation 275.205-3 issued under the Investment Advisor Act of 1940 by the
Securities and Exchange Commission, which requires among other things that
Client be notified that it is theoretically possible that a fee based in part
on the growth of a Client's funds could create an incentive for an advisor to
make investments that are riskier or more speculative than it would make
without a performance-based fee.
c) Client shall have the right to audit the Account during normal business
hours with or without notice.
d) The fee may be modified from time to time with the written assent of
both parties.
8. Confidentiality. Advisor shall keep any information it obtains about
Client's business or investment objectives and results in confidence.
9. Term. This Agreement shall remain in effect until 1 May 1998 unless Client,
in its sole discretion, elects to end this Agreement at an earlier time by
giving ninety (90) days written notice to Advisor. After the initial three-year
term this Agreement shall renew automatically for successive one-year terms
unless the Parties amend it in writing to provide otherwise. Ninety days
written notice of termination shall be required of either party, but Advisor
agrees not to terminate during the initial three-year term.
10. Governing Law. This agreement shall be governed by and construed and
enforced in accordance with the laws of Missouri.
11. Notice. All notices provided for in this Agreement shall be deemed to have
been duly given when delivered by hand to an office of the other party or when
deposited with the U.S. Postal Service as first class certified or registered
mail, postage prepaid, or when delivered to an overnight courier, a telex, or a
telecopy machine addressed as follows:
a) To Client:
General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
Attn: John W. Barber
b) To Advisor:
General American Investment Management Company
700 Market Street
St. Louis, MO 63101
Attn: J. Terri Tanaka
3
<PAGE> 4
or to such other persons or places as each party may from time to time
designate by written notice such as specified.
GENERAL AMERICAN INVESTMENT GENERAL AMERICAN LIFE
MANAGEMENT COMPANY INSURANCE COMPANY
By: /s/ Leonard M. Rubenstein By: /s/ Richard A. Liddy
----------------------------- -----------------------------
Leonard M. Rubenstein Richard A. Liddy
President President
4
<PAGE> 5
Appendix A to
Investment Advisory Agreement
by and between
General American Life Insurance Company
and
General American Investment Management Company
and dated
1 May 1995
For Investment Advice:
An annual fee based on the market value of the amount under management, payable
quarterly as per the following schedule:
<TABLE>
<S> <C>
Commercial Mortgages 0.22%
Securities 0.10%
Real Estate 0.78%
</TABLE>
5
<PAGE> 1
Exhibit (d)(3)
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as
of March 1, 2000, by and among CONNING ASSET MANAGEMENT COMPANY, a Missouri
corporation ("Assignor"), METROPOLITAN LIFE INSURANCE COMPANY, a New York life
insurance company ("Assignee") and GENERAL AMERICAN LIFE INSURANCE COMPANY, a
Missouri life insurance company ("General American").
W I T N E S S E T H:
WHEREAS, Assignor and General American are parties to that certain
Investment Advisory Agreement, dated as of May 1, 1995 (the "Advisory
Agreement"), pursuant to which Assignor (formerly known as General American
Investment Management Company) provides General American with investment
advisory services for its general account (the "General Account"), including,
without limitation, services relating to the trading of securities and the
advisability of investing in, purchasing or selling securities ("Investment
Advisory Services"), asset/liability management services in respect of the
General Account ("Portfolio Management Services"; together with Investment
Advisory Services, "Front-Office Services") and services other than Front-Office
Services needed to operate and report on the General Account, including, without
limitation, accounting services (including tax accounting, statutory accounting
and accounting under generally accepted accounting principles), record-keeping
services, reconciliation of trade confirmations, reporting and other similar
functions not pertaining to Front-Office Services ("Back-Office Services"); and
WHEREAS, on the date this Agreement is deemed approved by the Missouri
Department of Insurance, whether by specific, written approval or by the passage
of thirty days from receipt of the Agreement by the Missouri Department of
Insurance (the "Agreement Effective Date"), Assignor desires to assign and
transfer to Assignee, and Assignee desires to accept and assume, all of
Assignor's rights and obligations under the Advisory Agreement (other than in
respect of Back-Office Services and the Portfolio Management Services) with
respect to all assets other than any and all commercial mortgage loan assets
(the "Real Estate Mortgage Assets") and real estate assets other than the Real
Estate Mortgage Assets (the "Real Estate Equity and Joint Venture Assets") (the
"Assigned Assets); and
WHEREAS, Assignor desires to continue to perform Portfolio Management
Services in respect of the Assigned Assets until such date as Assignee shall
notify Assignor in writing, but in any event no later than June 30, 2000 (the
"Portfolio Management Termination Date"), at which time Assignor desires to
assign and transfer, and Assignee desires to accept and assume, all of
Assignor's rights and obligations in respect of Portfolio Management Services
under the Advisory Agreement with respect to the Assigned Assets (the "Portfolio
Management Assignment")
<PAGE> 2
WHEREAS, Assignor desires to continue to perform Back-Office Services
in respect of the Assigned Assets until such date as Assignee shall notify
Assignor in writing, but in any event no later than September 30, 2000 (the
"Back-Office Termination Date"), at which time Assignor desires to assign and
transfer, and Assignee desires to accept and assume, all of Assignor's rights
and obligations in respect of Back-Office Services under the Advisory Agreement
with respect to the Assigned Assets (the "Back-Office Assignment"); and
WHEREAS, Assignor desires to continue to perform Front-Office Services
and Back-Office Services in respect of the Real Estate Equity and Joint Venture
Assets until such date as Assignee shall notify Assignor in writing, but in any
event no later than the Back-Office Termination Date (the "Real Estate Equity
and Joint Venture Assignment Date"), at which time Assignor desires to assign
and transfer, and Assignee desires to accept and assume, all of Assignor's
rights and obligations in respect of the Real Estate Equity and Joint Venture
Assets under the Advisory Agreement (the "Real Estate Equity and Joint Venture
Asset Assignment"); and
WHEREAS, notwithstanding the assignments set forth herein, Assignor
will continue to provide Front-Office Services and Back-Office Services with
respect to the Real Estate Mortgage Assets; and
WHEREAS, Assignee is a registered investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, General American desires to consent to the assignments
described above and to the payment of fees in respect of services rendered by
Assignee and Assignor that will be provided in respect of the Assigned Assets,
the Real Estate Equity and Joint Venture Assets and the Real Estate Mortgage
Assets.
NOW, THEREFORE, in consideration for the covenants, agreements and
assignments set forth herein, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto,
intending to be legally bound, have agreed as follows:
1. Various Assignments.
a. Assigned Assets. Effective on the Agreement Effective
Date, Assignor hereby assigns and transfers, and
Assignee hereby accepts and assumes, all of Assignor's
rights and obligations under the Advisory Agreement
(other than in respect of Back-Office Services and
Portfolio Management Services) with respect to the
Assigned Assets.
b. Portfolio Management Services. Effective on the
Portfolio Management Termination Date, Assignor hereby
assigns and transfers, and Assignee hereby accepts and
assumes, all of Assignee's rights and obligations under
the Advisory Agreement relating to Portfolio Management
Services in respect of the Assigned Assets.
2
<PAGE> 3
c. Back-Office Services. Effective on the Back-Office
Termination Date, Assignor hereby assigns and transfers,
and Assignee hereby accepts and assumes, all of
Assignee's rights and obligations under the Advisory
Agreement relating to Back-Office Services in respect of
the Assigned Assets.
d. Real Estate Equity and Joint Venture Assets. Effective
on the Real Estate Equity and Joint Venture Assignment
Date, Assignor hereby assigns and transfers, and
Assignee hereby accepts and assumes, all of Assignor's
rights and obligations under the Advisory Agreement in
respect of the Real Estate Equity and Joint Venture
Assets.
2. Assignor's Continued Performance of Portfolio Management Services
and Back-Office Services; Services Relating to Real Estate Equity
and Joint Venture Assets and Real Estate Mortgage Assets.
a. Portfolio Management Services. For a period beginning on
the date hereof and ending on the Portfolio Management
Termination Date, Assignor shall continue to perform
Portfolio Management Services in respect of the Assigned
Assets.
b. Back-Office Services. For a period beginning on the date
hereof and ending on the Back-Office Termination Date,
Assignor shall continue to perform Back-Office Services
in respect of the Assigned Assets.
c. Real Estate Equity and Joint Venture Assets. For a
period beginning on the date hereof and ending on the
Real Estate Equity and Joint Venture Assignment Date,
Assignor will continue to perform Front-Office Services
and Back-Office Services with respect to the Real Estate
Equity and Joint Venture Assets.
d. Real Estate Mortgage Assets. Notwithstanding the various
assignments described in Section 1 hereof, Assignor
shall continue to perform Front-Office Services and
Back-Office Services with respect to the Real Estate
Mortgage Assets.
3. Fees. General American hereby agrees to pay quarterly fees in
arrears (which shall be pro-rated for any partial quarter) within 30
days after the end of the quarter to which such fees relate, which
fees shall be calculated and paid as follows:
a. Assignor's Fees.
(i) Portfolio Management Services for the
Assigned Assets. In consideration for its
performance of Portfolio Management Services
in respect of the Assigned Assets from the
date hereof through (and including) the
Portfolio Management Termination
3
<PAGE> 4
Date, General American shall pay to Assignor
a quarterly fee equal to the product of (x)
the market value of the Assigned Assets as
determined by Assignor as at the last day of
the quarter to which such payment relates
and (y) the applicable percentage set forth
on the fee schedule annexed hereto as
Exhibit A (the "Fee Schedule").
(ii) Back-Office Services for the Assigned
Assets. In consideration for its performance
of Back-Office Services in respect of the
Assigned Assets from the date hereof through
(and including) the Back-Office Termination
Date, General American shall pay to Assignor
a quarterly fee equal to the product of (x)
the market value of the Assigned Assets as
determined by Assignor as at the last day of
the quarter to which such payment relates
and (y) the applicable percentage set forth
on the Fee Schedule.
(iii) Real Estate Equity and Joint Venture Assets.
In consideration for all services rendered
by Assignor with respect to the Real Estate
Equity and Joint Venture Assets, from the
Agreement Effective Date and through (and
including) the Real Estate Equity and Joint
Venture Assignment Date, General American
shall pay to Assignor a quarterly fee equal
to the product of (x) the gross market value
of the Real Estate Equity and Joint Venture
Assets determined by Assignor as at the last
day of the quarter to which such payment
relates and (y) the applicable percentage
set forth on the Fee Schedule.
(iv) Real Estate Mortgage Assets. After the
Agreement Effective Date, in consideration
for all services rendered thereafter by
Assignor with respect to the Real Estate
Mortgage Assets, General American shall pay
to Assignor a quarterly fee equal to the
product of (x) the aggregate unpaid
principal balance of the mortgage loans
comprising the Real Estate Mortgage Assets
determined by Assignor as at the last day of
the quarter to which such payment relates
and (y) the applicable percentage set forth
on the Fee Schedule.
b. Assignee's Fees.
(i) Investment Advisory Services. In
consideration for Assignee's performance of
Investment Advisory Services in respect of
the Assigned Assets from the Agreement
Effective Date through (and including) the
Portfolio Management Termination Date,
General American shall pay to Assignee a
quarterly fee equal to the product of (x)
the market value of the Assigned Assets as
determined by Assignor as at the last day of
the quarter to
4
<PAGE> 5
which such payment relates and (y) the
applicable percentage set forth on the Fee
Schedule.
(ii) Front-Office Services. In consideration for
Assignee's performance of Front-Office
Services in respect of the Assigned Assets
from the Portfolio Management Termination
Date through (but not including) the
Back-Office Termination Date, General
American shall pay to Assignee a quarterly
fee equal to the product of (x) the market
value of the Assigned Assets as determined
by Assignor as at the last day of the
quarter to which such payment relates and
(y) the applicable percentage set forth on
the Fee Schedule.
(iii) Front-Office Services and Back-Office
Services. In consideration for Assignee's
performance of Front-Office Services and
Back-Office Services in respect of the
Assigned Assets from and after the
Back-Office Termination Date, General
American shall pay to Assignee a quarterly
fee equal to the product of (x) the market
value of the Assigned Assets as determined
by Assignee as at the end of such quarter
and (y) the applicable percentage set forth
on the Fee Schedule.
(iv) Real Estate Equity and Joint Venture Assets.
In consideration for Assignee's performance
of Front-Office Services and Back-Office
Services in respect of the Real Estate
Equity and Joint Venture Assets from and
after the Real Estate Equity and Joint
Venture Assignment Date, General American
shall pay to Assignee a quarterly fee equal
to the product of (x) the gross market value
of the Real Estate Equity and Joint Venture
Assets as determined by Assignee as at the
last day of the quarter to which such
payment relates and (y) the applicable
percentage set forth on the Fee Schedule.
4. Consent of General American. General American hereby consents to the
assignments set forth in Section 1 hereof, the Fee Schedule and the
other transactions contemplated by this Agreement.
5. Undertakings of Assignee; Standard of Care.
a. In consideration of the compensation described in
Section 3(b) above, Assignee undertakes to perform the
duties required of the "Advisor" in the Advisory
Agreement.
b. Assignee agrees to perform its services under the
Advisory Agreement with the same care and attention that
it applies to the services it provides to its own
accounts and to the accounts of its other clients,
making every reasonable effort to avoid conflicts of
5
<PAGE> 6
interest between or among General American, its own
accounts and the accounts of its other clients.
c. Assignee undertakes to perform the Front-Office Services
and the Back-Office Services in accordance with
applicable law and regulations, including the law and
regulations of Missouri relating to life insurance
companies such as General American; provided that,
General American shall provide Assignee with guidance
and assistance in respect of any such laws and
regulations of Missouri that relate to Assignee's
performance of Front-Office Services and Back-Office
Services hereunder.
d. Assignee will cooperate with Assignor to ensure that the
transition of Front-Office Services and Back-Office
Services contemplated by this Agreement occurs smoothly
and without harm to General American; provided that,
nothing contained in this Agreement shall constitute a
representation or warranty of Assignee, or otherwise
obligate Assignee, in respect of the future investment
performance of any of the Assigned Assets or Real Estate
Equity and Joint Venture Assets.
6. Term and Termination. The terms of this Section 6 shall supercede in
its entirety Paragraph 9 of the Advisory Agreement. The term of this
Agreement shall be the period of time from March 1, 2000 until
termination by either party at any time upon ninety (90) days
written notice, subject to the satisfaction of all outstanding
obligations hereunder. In the event of termination of this
Agreement, all books and records (including magnetic records, files,
and spreadsheets) maintained by Assignee in connection with the
performance of any of the services described herein will be
transferred to General American.
7. Miscellaneous.
a. Entire Agreement; Assignment; Amendment. This Agreement
(i) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and
supersedes all other prior agreements and
understandings, both written and oral, between the
parties with respect to the subject matter hereof, and
(ii) shall not be assigned by operation of law or
otherwise without the prior written consent of the other
parties hereto (which consent shall not be unreasonably
withheld). This Agreement shall not be amended except
pursuant to a writing that is executed by all parties
hereto.
b. Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, is
held invalid or unenforceable, such provision shall be
enforced to the maximum extent permissible in the
circumstances, and the remainder of this Agreement, and
the application of such provision to other persons or
circumstances, shall
6
<PAGE> 7
not be affected thereby, and to such end, shall be
severable and enforced to the greatest extent permitted
by applicable law.
c. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Missouri, without regard to the principles of conflicts
of law thereof.
d. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or
interpretation of this Agreement.
e. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party
hereto and its successors and permitted assigns, and
nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person,
entity, or group any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
f. Notices. All notices, requests, claims, demands, and
other communications hereunder shall be in writing
(including by facsimile with written confirmation
thereof) and unless otherwise expressly provided herein,
shall be delivered during normal business hours by hand,
by Federal Express, United Parcel Service or other
nationally recognized overnight commercial delivery
service, or by facsimile notice, confirmation of receipt
received, addressed as follows, or to such other address
as may be hereafter specified by the respective parties
hereto:
If to Assignor, to:
Conning Asset Management Company
700 Market Street
St. Louis, MO 63101
Attn: Douglas R. Koester
Fax: (314) 444-0613
with a copy (which shall not constitute notice) to:
Conning Asset Management Company
700 Market Street
St. Louis, MO 63101
Attn: Matthew P. McCauley, Esq., General Counsel
Fax: (314) 444-0510
If to Assignee, to:
Metropolitan Life Insurance Company
334 Madison Avenue
7
<PAGE> 8
Convent Station, NJ 07961
Attn: Anthony J. Williamson, Senior Vice-President
Fax: (973) 254-3054
with a copy (which shall not constitute notice) to:
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Attn: Jane Weinberg, Esq., Vice-President and
Investment Counsel
Fax: (212) 578-3916
If to General American, to:
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
Attn: Barry Cooper
Fax: (314) 444-0588
with a copy (which shall not constitute notice) to:
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
Attn: Matthew P. McCauley, Esq., Vice-President and
Associate General Counsel
Fax: (314) 444-0510
g. Counterparts. This Agreement may be executed in two or
more counterparts (including by facsimile), each of which
shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
h. Further Assurances. Assignor, Assignee and General
American each acknowledge and agree that they shall
execute and deliver such further amendments and/or
modifications to the Advisory Agreement as shall be
reasonably requested from time to time in order to carry
out the intention and/or facilitate the performance of the
terms of this Agreement, including, but not limited to,
further specifying the scope of services to be provided to
General American with respect to Investment Advisory
Services, Portfolio Management Services, Front-Office
Services and Back-Office Services.
8
<PAGE> 9
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
ASSIGNOR:
CONNING ASSET MANAGEMENT COMPANY
By: /s/ Douglas R. Koester
------------------------------------
Name: Douglas R. Koester
Title: Senior Vice President
ASSIGNEE:
METROPOLITAN LIFE INSURANCE COMPANY
By:/s/ Anthony J. Williamson
------------------------------------
Name: Anthony J. Williamson
Title: Senior Vice-President
GENERAL AMERICAN:
GENERAL AMERICAN LIFE INSURANCE COMPANY
By: /s/ Richard A. Liddy
------------------------------------
Name: Richard A. Liddy
Title: Chairman, President and
Chief Executive Officer
9
<PAGE> 10
Exhibit A
Fee Schedule
The following annual fees will be charged on a quarterly basis:
<TABLE>
<CAPTION>
Assignor's Fees:
- ----------------
<S> <C>
Portfolio Management Services: 0.03% per annum (0.0075% per
[SECTION 3(a)(i)] quarter)
Back-Office Services: 0.02% per annum (0.0050% per
[SECTION 3(a)(ii)] quarter)
Real Estate Equity 0.78% per annum (0.195% per
and Joint Venture Assets: quarter)
SECTION 3(a)(iii)]
Real Estate Mortgage Assets: 0.22% per annum (0.055% per
[SECTION 3(a)(iv)] quarter)
</TABLE>
<TABLE>
<CAPTION>
Assignee's Fees:
- ----------------
<S> <C>
Investment Advisory Services: 0.05% per annum (0.0125% per
[SECTION 3(b)(i)] quarter)
Front-Office Services: 0.08% per annum (0.02% per
[SECTION 3(b)(ii)] quarter)
Front-Office Services 0.10% per annum (0.025% per
and Back-Office Services: quarter)
[SECTION 3(b)(iii)]
Real Estate Equity and Joint Venture
Assets: 0.45% per annum (0.1125% per
[SECTION 3(b)(iv)] quarter)
</TABLE>
10
<PAGE> 1
CONNING CAPITAL PARTNERS VI, L.P.
-----------------------------------
LIMITED PARTNERSHIP AGREEMENT
------------------------------------
Dated
as of
February 25, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. ORGANIZATION............................................................ 1
1.1. Formation of Limited Partnership..................................... 1
1.2. Name................................................................. 1
1.3. Purpose and Powers................................................... 1
1.4. Principal Place of Business.......................................... 1
1.5. Fiscal Year.......................................................... 1
2. CAPITAL COMMITMENTS AND CONTRIBUTIONS................................... 2
2.1. Identity; Commitment................................................. 2
2.2. Capital Contributions................................................ 2
2.3. Additional Limited Partners and Additional Capital Contributions..... 3
3. PARTNERS' CAPITAL ACCOUNTS; ALLOCATIONS................................. 5
3.1. Capital Accounts..................................................... 5
3.2. Allocations.......................................................... 5
3.3. Extraordinary Allocations............................................ 6
3.4. Allocations for Income Tax Purposes.................................. 7
3.5. Interim Accounting Periods........................................... 8
3.6 Defaulting Limited Partner........................................... 8
4. DISTRIBUTIONS........................................................... 12
4.1. Limitations on Distributions......................................... 12
4.2. Timing of Distributions.............................................. 12
4.3. Distributions........................................................ 13
4.4. Final Distribution................................................... 13
4.5. Tax Distributions.................................................... 13
4.6. Distributions of Cash or Securities.................................. 14
4.7. Determination of Carrying Value...................................... 15
4.8. Withholding Taxes.................................................... 16
4.9. General Partner's Obligation to Return Excess Distributions.......... 17
5. MANAGEMENT.............................................................. 19
5.1. Investment Guidelines................................................ 19
5.2. Powers & Duties of General Partner................................... 21
5.3. Advisory Committee................................................... 23
5.4. Other Business Relationships......................................... 24
5.5. Custodian............................................................ 26
5.6. Key Person Trigger Event............................................. 26
6. MATTERS AMONG PARTNERS.................................................. 27
6.1. Liability of General Partner......................................... 27
6.2. Liability of Limited Partners........................................ 27
6.3. No Obligation to Restore Negative Capital Account.................... 28
6.4. Actions of Partners; Bank Limited Partners Voting Percentage......... 28
6.5 Bank Regulatory Matters.............................................. 28
6.6 Exclusions from Investments.......................................... 30]
7. INDEMNIFICATION......................................................... 31]
7.1. General.............................................................. 31]
7.2. Expenses............................................................. 32
7.3. No Waiver, etc....................................................... 32
7.4. Insurance............................................................ 32
8. EXPENSES; MANAGEMENT FEE................................................ 32
8.1. Administrative Expenses.............................................. 32
8.2. Other Expenses....................................................... 33
8.3. Management Fee....................................................... 33
9. BOOKS AND RECORDS; REPORTS TO PARTNERS.................................. 35
9.1. Books and Records.................................................... 35
9.2. Tax Information...................................................... 35
9.3. Reports to Partners.................................................. 35]
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
9.4. Meetings............................................................ 36
9.5. Compliance with Laws................................................ 36
10. TRANSFERS............................................................... 37
10.1. Transfer by General Partner......................................... 37
10.2. Removal of General Partner.......................................... 37
10.3. Transfer by Limited Partners........................................ 37
10.4. Certain Restrictions on Transfers................................... 38
10.5 Further Restrictions................................................ 39
10.6. Actions............................................................. 39
11. DURATION AND TERMINATION OF THE PARTNERSHIP............................. 40
11.1. Duration............................................................ 40
11.2. Winding Up.......................................................... 40
11.3. Final Distribution.................................................. 41
12. DEFINITIONS............................................................. 42
13. MISCELLANEOUS........................................................... 52
13.1. Waiver of Partition................................................. 52
13.2. Power of Attorney................................................... 52
13.3. Modifications....................................................... 53
13.4. Severability........................................................ 54
13.5. Notices............................................................. 54
13.6. Governing Law....................................................... 54
13.7. Successors and Assigns.............................................. 54
13.8. Counterparts........................................................ 54
13.9. Headings............................................................ 54
13.10. Further Actions..................................................... 54
13.11. Delivery of Certificate............................................. 55
</TABLE>
SCHEDULES
Schedule I -- Partners' Identification and Capital Commitments
Schedule II -- Business Addresses of the Partners
<PAGE> 4
CONNING CAPITAL PARTNERS VI, L.P.
This LIMITED PARTNERSHIP AGREEMENT of CONNING CAPITAL PARTNERS VI, L.P., a
Delaware limited partnership (the "Partnership"), is made as of this 25th day of
February, 2000 by and among each and all of the undersigned persons.
1. ORGANIZATION.
1.1. Formation of Limited Partnership. Conning Investment Partners VI,
L.L.C., a Delaware limited liability company acting as the general partner of
the Partnership (the "General Partner") together with the undersigned persons
designated as Limited Partners (collectively, the "Partners", which term shall
include any party hereafter admitted to the Partnership and shall exclude any
party that ceases to be a Partner) hereby agree to form the Partnership,
pursuant to and in accordance with the provisions of the Revised Uniform Limited
Partnership Act, as adopted by the State of Delaware, as amended and in effect
(the "LP Act"). Certain capitalized terms used in this Agreement are defined
separately in Section 12.
1.2. Name. The name of the Partnership is "Conning Capital Partners VI,
L.P.". The General Partner, without the prior consent of the Limited Partners,
may change the name of the Partnership from time to time. The General Partner
shall provide the Limited Partners with notice of any new name of the
Partnership and the effective date of such change.
1.3. Purpose and Powers. The Partnership is being formed to operate as
an investment fund principally for the purpose of making investments primarily
in equity, equity-related and other securities issued in expansion financings,
start-ups, buy-outs and recapitalization transactions relating to companies in
the areas of insurance, financial services, e-commerce, healthcare and related
businesses, including, without limitation, service and technology enterprises
supporting such businesses, in order to realize long-term capital returns, all
as determined and managed by the General Partner for the benefit of the
Partners. The Partnership will make investments in accordance with the
Investment Guidelines set forth in Section 5.1, and will engage in such other
activities as are permitted hereby or are incidental or ancillary thereto, all
as the General Partner shall reasonably deem necessary or advisable, upon the
terms and conditions set forth in this Agreement. The Partnership reserves the
authority, and may engage in any lawful act or activity and shall have and
exercise any of the powers available to a limited partnership under the LP Act,
to the extent not contrary to the terms and intent of this Agreement.
1.4. Principal Place of Business. The Partnership shall have and
maintain its principal place of business at CityPlace II, 185 Asylum Street,
Hartford, Connecticut 06103-4105. The Partnership may have such other place or
additional places of business as the General Partner may determine from time to
time and as indicated by written notice to the Limited Partners; provided that
in no event shall the Partnership's principal place or any other place of
business be outside of the United States.
1.5. Fiscal Year. The fiscal year of the Partnership (the "Fiscal
Year") shall be the period ending on the 31st day of December in each year or,
in the case of the last Fiscal Year of the Partnership, the last day on which
the Partnership conducts any activities and as designated
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by the General Partner for purposes of the dissolution and final liquidation of
the Partnership. The Partnership shall have the same Fiscal Year for income tax
purposes and for financial accounting purposes.
2. CAPITAL COMMITMENTS AND CONTRIBUTIONS.
2.1. Identity; Commitment. The name, address and other identity
information describing each Partner are set forth on Schedule I and Schedule II
hereto. Each Partner has agreed and is obligated to perform with respect to the
full amount of its Capital Commitment set forth opposite each such Partner's
name on Schedule I, subject to and in accordance with the terms and conditions
of this Agreement. The Capital Commitment of the General Partner in respect of
the General Partner Interest shall be equal to at least 1% of all Capital
Commitments of the Partnership. Any additional Capital Commitment of the General
Partner beyond such amount may be treated separately as an Interest by a Limited
Partner, in the sole discretion of the General Partner. The General Partner,
acting on its own, is authorized to amend and revise the information on Schedule
I from time to time to reflect the admission of additional Partners together
with any additional or increased Capital Commitments, the withdrawal of any
Partner, the transfer of any part or all of an interest of any Partner, or such
other change in the information describing any Partner, all as may be determined
by the General Partner and consistent with the purpose and terms of this
Agreement.
2.2. Capital Contributions. Each Partner, upon its execution and
delivery of this Agreement, shall be obligated to make Capital Contributions to
the Partnership in immediately available funds in such amount as shall be called
from time to time by the General Partner hereunder, subject to Section 6.6(b),
determined on a pro rata basis relative to the Capital Commitments of all
Partners, up to a total aggregate amount equal to its Capital Commitment as
shown on Schedule I hereto. The General Partner may determine individual Partner
Capital Contribution call amounts on a pro rata basis relative to the
outstanding or unused Capital Commitments of the Partners to account for Excused
Partner Capital Contributions with respect to Excused Investments under Section
6.6.
(a) Call Procedures, Timing and Contributions. Each Partner
shall make its initial Capital Contribution, in an amount to be determined by
the General Partner, upon at least five (5) business days' prior written notice
from the General Partner. Thereafter, each Limited Partner will make additional
Capital Contributions to the Partnership, each in an amount to be determined by
the General Partner and as called from time to time by the General Partner, upon
prior written notice from the General Partner of not less than ten (10) business
days. Each call notice shall set forth the name of the Partnership and the
following basic information: (i) the scheduled date of the Capital Contribution
and the total amount of Capital Contributions to be made by all Partners on such
date; (ii) the required Capital Contribution to be made by the Limited Partner
to which the notice is directed; (iii) the Partnership account to which such
capital contribution shall be paid, including wiring and routing information;
and (iv) such information relating to the proposed use to be made of the funds
obtained by the Partnership as the General Partner in its discretion determines
to include in that call notice, including a general description of the proposed
Portfolio Investment that contains the business and industry of the related
Portfolio Entity. The General Partner will coordinate the timing of, and amounts
requested pursuant to, the notice of additional Capital Contributions on an "as
needed" basis relative to the Partnership's anticipated funding requirements.
The General Partner shall provide prompt
<PAGE> 6
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written notice to each Limited Partner of the occurrence of the Partnership's
first investment. In the event that the General Partner reasonably determines
that the amount of any Capital Contributions called under this Section 2.2 is
not likely to be used to make a Portfolio Investment, pay expenses of the
Partnership or satisfy obligations or liabilities of the Partnership within a
reasonable period of time (not to exceed ninety (90) days) after the
Partnership's receipt of such Capital Contribution amounts, then within such
ninety-day period the General Partner shall return to the Partners their
respective pro rata portions of such amount of the Capital Contributions as are
not likely to be so used, applied or reserved. The full amount of such returned
Capital Contributions amount shall remain subject to further call by the General
Partner for Capital Contributions in accordance with the other terms of this
Section 2.2.
(b) Investment Period. The General Partner shall be authorized
to call and each Partner is obligated to make additional Capital Contributions
up to an aggregate amount equal to its Capital Commitment throughout the period
ending on the later to occur of: (i) the fifth (5th) anniversary of the date of
the Partnership's final closing (the "Investment Period"). After the Investment
Period the General Partner is authorized to call and each Partner is obligated
to make additional Capital Contributions, up to an aggregate amount equal to its
Capital Commitment remaining to be called, for the purposes of: (i) paying or
satisfying Partnership expenses, obligations or liabilities which may be
outstanding and due or are reasonably anticipated to become due within ninety
(90) days of the General Partner's call for Capital Contributions; (ii) making
additional incremental or follow-on investments in companies in which the
Partnership has established an investment; and (iii) funding the conversion or
exercise price of any warrant, option, purchase right or other security, or
making any installment payment or settlement to acquire any security by contract
or other arrangement, to the extent any of the foregoing is outstanding and was
issued in connection with or as a result of an investment made or committed to
be made during the Investment Period.
(c) General Partner Contributions. Concurrently with each
Capital Contribution to the Partnership by a Limited Partner pursuant to this
Section 2.2, Section 2.3 or Section 3.6, the General Partner will make a Capital
Contribution to the Partnership, in respect of its minimum General Partner
Interest, in an amount in cash which will cause the General Partner's Capital
Contribution to be at least equal to 1% of the aggregate Capital Contributions
of all Partners.
(d) Reinvestment. The Partners acknowledge that the General
Partner may retain certain distributable amounts under Section 4.2 for
reinvestment in accordance with the Investment Guidelines under Section 5.1. No
Partner shall be obligated to contribute additional amounts in excess of such
Partner's Capital Commitment as a result of such reinvestment.
2.3. Additional Limited Partners and Additional Capital Contributions.
After the expiration of two hundred seventy (270) days from the date of this
Agreement, no additional Limited Partners (other than Substitute Limited
Partners admitted pursuant to Section 10.3) shall be admitted to the
Partnership. Until the expiration of such period, the General Partner may admit
one or more persons as additional Limited Partners ("Additional Limited
Partners") to the Partnership or permit any existing Limited Partner to increase
its Capital Commitment.
(a) Conditions of Acceptance. The admission of Additional
Limited Partners and acceptance of additional Capital Commitments from existing
Limited Partners shall not be permitted if, upon the determination of the
General Partner, such admission or acceptance would:
<PAGE> 7
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(i) result in the Partnership becoming subject to additional regulation which
the General Partner determines would have a material effect upon the ability of
the Partnership to pursue its stated purposes; (ii) jeopardize the Partnership's
tax status as an entity taxable as a partnership; or (iii) require the
Partnership to be registered as an investment company under the Investment
Company Act of 1940.
(b) Capital Adjustments among Partners. Any existing Limited
Partner which increases its Capital Commitment shall be considered to have been
admitted to the Partnership as an Additional Limited Partner to the extent of
such additional Capital Commitment upon the contribution of the initial portion
of such additional Capital Commitment to the capital of the Partnership. Each
Additional Limited Partner shall make an initial Capital Contribution to the
Partnership in a percentage of its Capital Commitment which is the same
percentage of the Capital Commitments of the other Limited Partners previously
paid in as Capital Contributions, as determined on the date of its admission to
the Partnership. Each existing Limited Partner which increases its Capital
Commitment pursuant to this Section 2.3 shall make a Capital Contribution to the
Partnership in such an amount as is required in order that the total Capital
Contributions made by such Limited Partner shall be in the same percentage
relationship to its total Capital Commitment (including such additional Capital
Commitment) as the Capital Contributions of all other Partners bear to their
respective Capital Commitments, determined on the date of such Capital
Contribution by the increasing Partner. The balance of such Capital Commitments
of Additional Limited Partners and of additional Capital Commitments from
existing Limited Partners shall be due and paid at the times provided for the
payment of additional Capital Contributions in Section 2.2.
(c) Additional Payments upon Admission. In addition, each
Additional Limited Partner and each existing Limited Partner which increases its
Capital Commitment pursuant to this Section 2.3 shall make additional payments
to the Partnership ("Late Payment Fees") comprised of the following amounts: (i)
interest on the amount of such Partner's Late Management Fee payable to the
General Partner pursuant to Section 8.3(b); (ii) interest on the amount of such
Partner's Late Expenses (other than Late Management Fee) allocated pursuant to
Section 3.3(c); and (iii) interest on any amounts of Capital Contributions used
to fund Portfolio Investments made by the Partnership prior to such Limited
Partner's admission into the Partnership or increase in its Capital Commitment
pursuant to this Section 2.3 which such Limited Partner would have been
obligated to contribute to the Partnership ("Late Portfolio Investment Capital
Contributions") if it had been admitted to the Partnership at the time of its
formation with a Capital Commitment equal to that set forth in Schedule I after
such schedule has been amended to reflect such Limited Partner's admission or
the increase in its Capital Commitment. In the case of interest amounts referred
to in clause (i) above, interest shall be calculated at the prime rate from the
date of the formation of the Partnership to the date of such Limited Partner's
admission into the Partnership or increase in its Capital Commitment pursuant to
this Section 2.3, as the case may be. In the case of interest amounts referred
to in clauses (ii) and (iii) above, interest shall be calculated at the prime
rate plus 2.0% from the date of the allocation of the Expense to the other
Partners which resulted in such Late Expense being allocated to the Limited
Partner or the contribution date of the Capital Contributions to the Partnership
which resulted in such Late Portfolio Investment Capital Contribution to the
Partnership by the Limited Partner, as the case may be, to the date of such
Limited Partner's admission into the Partnership or increase in its Capital
Commitment, as the case may be.
<PAGE> 8
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(d) General Partner Adjustments. Upon the admission of any
Additional Limited Partner or the making of an additional Capital Commitment by
any existing Limited Partner, the General Partner shall increase its Capital
Commitment to an amount equal to at least 1% of the aggregate Capital
Commitments of all Partners.
(e) Update and Amendment of Records. The General Partner,
acting without any Limited Partners, is authorized to cause Schedule I hereto to
be amended to reflect the occurrence of any and all of the foregoing events
referred to in this Section 2.3. The General Partner shall provide written
notice to each Limited Partner of any amendment to Schedule I pursuant to this
Section 2.3 or any other provision of this Agreement within ninety (90) days of
such amendment to Schedule I.
3. PARTNERS' CAPITAL ACCOUNTS; ALLOCATIONS.
3.1. Capital Accounts. There shall be established for each Partner on
the books of the Partnership a Capital Account. Each Partner's Capital Account
shall be credited with the amount of such Partner's Capital Contributions and
shall be: (i) increased by the amount of any Net Income allocated thereto; and
(ii) decreased by the amount of any Net Losses, items defined in Section
705(a)(2)(B) of the Code allocated thereto and by the amount of any
Distributions made to such Partner. Such items shall be credited or charged, as
the case may be, to the Capital Accounts of the Partners at the end of each
Fiscal Period of the Partnership. The General Partner shall maintain the Capital
Accounts of the Partners in accordance with Treas. Reg. Section
1.704-1(b)(2)(iv) (as amended and revised), shall have the authority to make and
shall make such adjustments to the Capital Accounts as are necessary to comply
with such regulations. Any revaluation of the Partnership's assets pursuant to
the previous sentence shall be made in accordance with the principles of Section
4.7 hereof. Other than as specifically provided in this Agreement, no Partner
shall be entitled to any other interest or compensation by reason of its Capital
Contribution.
3.2. Allocations.
(a) Net Income. As of the end of each fiscal quarter of the
Partnership, after giving effect to any allocations made pursuant to Section 3.3
hereof, the Net Income (if any) of the Partnership for such fiscal quarter shall
be allocated to the Partners as follows:
(i) First, to all Partners, in proportion to the
respective amounts of Net Losses (if any) previously allocated
to each such Partner pursuant to 3.2(b)(iii) and not offset by
prior allocations of Net Income made pursuant to this
3.2(a)(i), an amount of Net Income equal to the aggregate
amount of such Net Losses;
(ii) Second, to all Partners, in proportion to their
respective 7% Preferential Return Allocations, an amount of
Net Income equal to the aggregate amount of all such 7%
Preferential Return Allocations; and
(iii) Third, to all Partners in the amounts and
proportions necessary to ensure, as promptly as possible and
to the extent feasible, that the Cumulative Net Income of the
Partnership for all periods since its inception shall have
been
<PAGE> 9
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allocated 80% to all Partners in proportion to their
respective Capital Contributions and 20% to the General
Partner.
(b) Net Losses. Net Losses, if any, for any Fiscal Period of
the Partnership shall be allocated to the Partners as follows:
(i) First, to all Partners, in proportion to the
respective amounts of Net Income (if any) previously allocated
to each such Partner pursuant to 3.2(a)(iii) and not offset by
prior allocations of Net Losses made pursuant to this
3.2(b)(i), an amount of Net Losses equal to the aggregate
amount of such Net Income (if any);
(ii) Second, to all Partners, in proportion to the
respective aggregate amounts of Net Income (if any) previously
allocated to each such Partner pursuant to 3.2(a)(ii) and not
offset by prior allocations of Net Losses made pursuant to
this 3.2(b)(ii), an amount of Net Losses equal to the
aggregate amount of such Net Income (if any); and
(iii) Third, to all Partners in proportion to their
respective Capital Contributions.
3.3. Extraordinary Allocations.
(a) Negative Capital Account. Notwithstanding anything to the
contrary in this Agreement, no Net Losses shall be allocated to a Limited
Partner to the extent any such allocation, after taking into account all
Distributions made or to be made to such Limited Partner with respect to a
Fiscal Year, would cause a negative balance in such Limited Partner's Capital
Account for such Fiscal Year. Any such Net Losses instead shall be allocated to
and among those Partners with positive Capital Account balances until such
Capital Account balances are reduced to zero, and any remaining Net Losses shall
be allocated to the General Partner; and thereafter an equivalent amount of Net
Income subsequently allocated shall be allocated to the Partners to reverse such
reallocation of Net Losses as promptly as possible, subject, however, to the
constraints of this Section 3.3(a).
(b) Qualified Income Offset. If a Partner unexpectedly
receives an adjustment, allocation or distribution described in Treas. Reg.
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be
allocated items of income and gain (consisting of a pro rata portion of each
item of Partnership income, including gross income, and gain for the Fiscal
Period in which such event occurs (and, to the extent necessary, each subsequent
Fiscal Period) in an amount and manner sufficient to eliminate (to the extent
required by Treas. Reg. Section 1.704(b)(2)(ii)(d)) any resulting excess
negative balance in such Partner's Capital Account as quickly as possible. In
any such event, appropriate adjustments shall be made to subsequent allocations
pursuant to Section 3.2 to counteract the effect of extraordinary allocations
pursuant to the first sentence of this Section 3.3(b) subject, however, to the
constraints of Section 3.3(a).
(c) Special Situations. If any person or entity is admitted to
the Partnership (or the Capital Commitment of any existing Partner is increased)
in accordance with the
<PAGE> 10
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provisions of this Agreement after the formation of the Partnership, the General
Partner shall adjust the allocations otherwise provided for in this Article 3 of
Net Income and Net Loss (and items of Partnership income, gain, loss and
expense), for the Fiscal Year in which such event occurs and for subsequent
fiscal years if necessary, so that, after such adjustments have been made, each
Partner (including any Partners admitted after the formation of the Partnership
and all Partners whose Capital Commitments have been increased after such time)
shall have been allocated specially an amount of Expenses equal to the aggregate
amount of Expenses such Partner would have been allocated if it had been
admitted to the Partnership at the time of its formation with a Capital
Commitment equal to that set forth in Schedule I after such schedule has been
amended to reflect such Partner's admission or the increase in its Capital
Commitment ("Late Expenses"); provided, however, that: (i) no item of income,
gain or deductible loss realized (or deemed to have been realized on a
distribution in kind) before the admission of any new Partner shall be allocated
to such Partner; (ii) allocations to any existing Partner of items of income,
gain or deductible loss realized (or deemed to have been realized on a
distribution in kind) prior to the increase in the Capital Commitment of such
Partner shall be limited to those permitted by Section 706 of the Code; and
(iii) no special allocations shall be made pursuant to this Section 3.3(c) as a
result of any reductions in the Capital Account of a Defaulting Limited Partner
occurring pursuant to Section 3.6(d) or the adjustments provided for under that
section with respect to such reductions. In addition, the amount of such
Partner's Late Payment Fees relating to interest on Late Expenses (other than
Late Management Fees) (under clause (ii) of Section 2.3(c)) and Late Portfolio
Investment Capital Contributions (under clause (iii) of Section 2.3(c)) shall be
allocated 80% to all other Partners (including the General Partner) in
proportion to their respective Capital Contributions and 20% to the General
Partner.
(d) Guidelines. In making allocations of Net Income or Net
Losses pursuant to Sections 3.2(a) and 3.2(b), the General Partner, after
consulting with the Partnership's tax advisors, is authorized to separate these
aggregate amounts into their components and allocate the components separately
in order to further the intent of such Sections. For example, if with respect to
a particular fiscal period the Partnership realizes a gross loss of $100 on a
sale of Portfolio Securities and a gross gain of $200 on a sale of other
securities resulting in Net Income of $100 ($200 gross gain minus $100 gross
loss = $100 Net Income), the General Partner may allocate the $100 gross loss as
$100 in Net Losses in the manner required by Section 3.2(b), and then allocate
the $200 gross gain as $200 in Net Income in the manner required by Section
3.2(a), if advised by the Partnership's tax advisors that such special
allocations will cause the Capital Accounts of the Partners to reflect more
closely the Partners' relative economic interests in the Partnership.
(e) General Partner Minimum. Subject only to Section 3.3(b)
hereof, the General Partner shall be allocated, in respect of its minimum
General Partner Interest, at least 1% of each material item of Partnership
income, gain, loss, deduction or credit at all times during the existence of the
Partnership. To the extent that any extraordinary allocations to the General
Partner are required pursuant to this Section 3.3(e), appropriate adjustments
shall be made to subsequent allocations pursuant to Section 3.2 (subject to
Section 3.3(b) hereof and to the preceding sentence) to counteract the effects
of such extraordinary allocations.
3.4. Allocations for Income Tax Purposes. Items of Partnership income,
gain, loss, deduction or credit for each Fiscal Year of the Partnership shall be
allocated among the Partners for Federal income tax purposes in accordance with
the allocation of such income, gain, loss or
<PAGE> 11
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deduction (or, in the case of a credit, the allocation of any item to which the
credit relates) pursuant to Section 3.2. All matters concerning allocations for
Federal, state and local income tax purposes, including accounting procedures,
not expressly provided for by the terms of this Agreement shall be equitably
determined in good faith by the General Partner upon advice of the Partnership's
tax advisors. As set forth in Section 5.2(g) hereof, the General Partner shall
be the "tax matters partner", as that term is used in the Code, of the
Partnership.
3.5. Interim Accounting Periods. If:
(i) a Limited Partner becomes a Defaulting Limited
Partner within the meaning of Section 3.6,
(ii) a non-defaulting Partner elects to make an additional
Capital Commitment pursuant to paragraph (c) of
Section 3.6,
(iii) a Distribution is made pursuant to Sections 4.2, 4.3,
4.4 or 4.5 hereof,
(iv) any revaluation of the assets of the Partnership is
made pursuant to Section 3.1 hereof, or
(v) the General Partner is required, or determines in its
discretion to make an interim allocation of Net
Income or Net Losses,
then, and in each such event, the Fiscal Year in which such event occurs shall
be divided into interim accounting periods (each an "Interim Accounting Period")
for purposes of allocations pursuant to Section 3.2. The first Interim
Accounting Period in any such Fiscal Year shall commence on the first day of
such Fiscal Year and shall terminate on the date immediately prior to the date
of the first event giving rise to an Interim Accounting Period in such Fiscal
Year. Each subsequent Interim Accounting Period shall commence on the date of
the event giving rise to such Interim Accounting Period in such Fiscal Year and
shall terminate on the earlier of the last day of such Fiscal Year or the date
immediately prior to the date of the event giving rise to the next Interim
Accounting Period in such Fiscal Year.
3.6. Defaulting Limited Partner. The Partners severally hereby agree
and acknowledge their mutual obligation to make Capital Contributions to the
Partnership in an aggregate amount equal to their total Capital Commitments.
Accordingly, the Partners agree to the default and penalty provisions of this
Section 3.6 for their mutual assurance and to promote the purposes of the
Partnership. The Partners agree that the damages to the Partnership from any
default by a Partner in respect of its Capital Commitment cannot be determined
or estimated with reasonable accuracy, and, accordingly, agree that the penalty
provisions of this Section 3.6 provide reasonable liquidated damages on default.
(a) Default. In the event that any Limited Partner fails to
make payment in full of any Capital Contribution to the Partnership in a timely
manner as called for and due, the General Partner will send written notice to
such Limited Partner of such failure, and if such Limited Partner does not make
full payment of its Capital Contribution within five (5) days after such Limited
Partner has been given written notice thereof from the General Partner, then, at
the
<PAGE> 12
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close of business on such fifth (5th) day, such Limited Partner shall be in
default (a "Defaulting Limited Partner") and shall be subject to the penalty
provisions of this Section 3.6; except that any Partner that is an Excused
Partner under Section 6.6 will not be regarded as a Defaulting Partner in
respect of the Capital Contribution subject to the Excluded Investment
provisions of Section 6.6.
(b) Loss of Voting. Whenever the vote, consent or decision of
a Partner or of the Partners is required or permitted pursuant to this Agreement
or under the LP Act, no Defaulting Limited Partner shall be entitled to
participate in such vote or consent, or to make such decision, and such vote,
consent or decision shall be tabulated or made as if no Defaulting Limited
Partner were a Partner.
(c) Penalty. A Defaulting Limited Partner shall not be
entitled to make any further Capital Contributions to the Partnership. Upon any
such default, there shall be deducted from the Capital Account of such
Defaulting Limited Partner as liquidated damages for such default (which each
Partner hereby agrees is reasonable) an amount equal to 30% of the portion of
such Defaulting Limited Partner's Capital Commitment which remains unpaid, and
the Capital Commitment of the Defaulting Limited Partner shall thereafter be the
amount of the Capital Contribution of such Partner as of the date of default,
less the amount deducted pursuant to this sentence. The amount deducted from the
Capital Account of the Defaulting Limited Partner shall be allocated among the
Capital Accounts of the non-defaulting Partners as of the date of such default,
in proportion to the respective Capital Contributions of the non-defaulting
Partners as of such date, and the amount so allocated to the Capital Account of
each such Partner shall be deemed to be a Capital Contribution by, and an
increase in the Capital Commitment of, such Partner as of such date. The General
Partner shall cause Schedule I hereto to be amended to reflect the Capital
Commitments of the Partners as adjusted pursuant to this Section 3.6(c),
including the deemed Capital Contributions of the non-defaulting Partners under
this Section 3.6(c). Notwithstanding the foregoing: (i) the amount by which a
Defaulting Limited Partner's Capital Account is reduced shall in no case exceed
the positive balance in such Defaulting Partner's Capital Account immediately
before the reduction; (ii) if the Capital Account of the Defaulting Limited
Partner otherwise would be reduced below zero by a reduction occurring pursuant
to the first sentence of this Section 3.6(c), such account shall be reduced to
zero and any excess of the full reduction required by the first sentence of this
Section 3.6(c) over the positive balance in such Defaulting Limited Partner's
Capital Account immediately before such reduction shall be carried over and
applied to reduce the balance in such account at such subsequent time or times
(if ever) as such account has a positive balance; (iii) any resulting increases
in the Capital Accounts of non-defaulting Partners shall occur only at such time
or times as the corresponding reductions in the Defaulting Limited Partner's
Capital Account occurs; and (iv) all adjustments required by the first and
second sentences of this Section 3.6(c) to the Capital Commitments and Capital
Contributions of the Partners shall occur at the time of the initial reduction
in the Capital Account of the Defaulting Limited Partner, notwithstanding that
subsequent adjustments to the Partners' Capital Accounts may occur as a result
of such default.
(d) Treatment of Management Fee. As of the first day of each
fiscal quarter of the Partnership commencing after any such default, there shall
be deducted from the Capital Account of each Defaulting Limited Partner (but in
no event from the Capital Accounts of the non-defaulting Limited Partners) an
amount equal to the Management Fee that would have been
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due in accordance with Section 8.3 on the unpaid portion of the original Capital
Commitment of such Defaulting Limited Partner and the amount so deducted shall
be paid to the General Partner in lieu of the Management Fee which would
otherwise be due on such unpaid Capital Commitment. The General Partner, in its
discretion may defer payment of such amount. Any amounts so deferred shall
accrue interest at the rate of twelve percent (12%) per annum and shall be
charged solely to the Capital Account of the Defaulting Partner. No Distribution
shall be made to a Defaulting Limited Partner until all amounts due the General
Partner under this paragraph (e) shall have been paid in full unless payment
thereof shall have been deferred by the General Partner, in its discretion. No
special allocation of expenses to the Defaulting Partner shall be made, and no
interest on deferred management fee amounts shall accrue, to the extent that
these allocations (or accruals and related allocations) would cause the
Defaulting Partner's Capital Account to be reduced below zero.
(e) Option Repurchase Remedy. Further, the General Partner, in
its sole discretion, may elect to exercise the provisions of this Section 3.6(e)
in respect of any Defaulting Partner, such that the non-defaulting Limited
Partners (the "Optionees") and the General Partner together shall have the right
and the option, but not the obligation, to acquire the remaining Partnership
Interest, as adjusted to reflect any penalty amounts under Section 3.6(c) above,
of the Defaulting Limited Partner (for this purpose, the "Optionor"), as
follows:
(i) The General Partner shall give written notice to
the Optionor stating that the General Partner elects to pursue
the option repurchase remedy in this Section 3.6(e); and the
General Partner shall notify the Optionees of the default,
within twenty (20) days of the date of default by the
Defaulting Limited Partner. Such notice shall advise each
Optionee of the portion and the price of the Optionor's
Interest available to it. The portion available to each
Optionee shall be that portion of the Optionor's Interest that
bears the same ratio to the Optionor's entire Interest as each
Optionee's Capital Contributions bears to the aggregate
Capital Contributions of all Optionees (before the default).
The aggregate price for the Optionor's Interest shall be the
lesser of (A) the amount of the Optionor's Capital Account
calculated as of the due date of the additional contribution
and adjusted to reflect (1) the allocation of the appropriate
proportion of the Partnership's unrealized gains and losses as
of the due date of such defaulted contribution and (2) the
deduction of the penalty amount pursuant to Section 3.6(c), or
(B) the aggregate amount of the Optionor's Capital
Contributions actually made less any Distributions (valued at
their Carrying Value on the date of Distribution) on or prior
to such due date, as adjusted to reflect any penalty amounts
under Section 3.6(c) above. The price for each Optionee shall
be prorated according to the portion of the Optionor's
Interest purchased by each such Optionee. The option granted
hereunder shall be exercisable at any time within twenty (20)
days of the date of the notice from the General Partner to the
Optionees by delivery to the Optionor in care of the General
Partner of a notice of exercise of option together with a
non-recourse promissory note for the purchase price and a
security agreement in accordance with subsection (v) below,
which notice and documents the General Partner shall forward
to the Optionor.
(ii) Should any Optionee not exercise its option
within said twenty (20) day period, the General Partner
immediately shall notify the other Optionees
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who have elected to exercise their option, which Optionees
shall have the right and option ratably among them to acquire
the portion of the Optionor's Interest not so acquired (the
"Remaining Portion") within ten (10) days of the date of the
notice specified in this subsection (ii) on the same terms as
provided in subsection (i).
(iii) The amount of the Remaining Portion not
acquired by the Optionees pursuant to subsection (ii) may be
acquired by the General Partner within ten (10) days of the
expiration of the ten (10) day period specified in subsection
(ii) on the same terms as set forth in subsection (i);
provided, however, that the General Partner shall not be
obligated to make the additional contributions otherwise due
from the Optionor with respect to the Remaining Portion so
acquired.
(iv) The amount of the Remaining Portion not acquired
by the Optionees and the General Partner pursuant to
subsections (ii) or (iii) may, if the General Partner deems it
in the best interest of the Partnership, be acquired by the
Partnership or sold by the General Partner to any other
investor of quality, net worth and standing comparable to the
other Limited Partners, on terms not more favorable to such
parties than those applicable to the Optionees' option, and
upon the consent of the General Partner, any such third party
purchaser may become a Limited Partner to the extent of the
interest purchased hereunder.
(v) The price due from each of the General Partner
and the Optionees shall be payable by a non-interest bearing,
non-recourse promissory note (in such form as the General
Partner shall designate) due upon final liquidation of the
Partnership. Each such note shall be secured by the portion of
the Optionor's Partnership interest so purchased by its maker
pursuant to a security agreement in a form designated by the
General Partner and shall be enforceable by the Optionor only
against such security.
(vi) Upon exercise of any option hereunder, each
Optionee (and, if applicable, any third party purchaser shall
be obligated (A) to contribute to the Partnership that portion
of the additional capital then due from the Optionor equal to
the percentage of the Optionor's Interest purchased by such
person and (B) except as otherwise provided in subsection
(iii), to pay the same percentage of any further contributions
otherwise due from such Optionor on the date such
contributions are otherwise due. Each person who purchases a
portion of the Optionor's Partnership Interest shall be deemed
to have acquired such portion as of the due date of the
additional Capital Contribution with respect to which the
Optionor defaulted, and any distributions made after the due
date on account of the Optionor's Interest shall be
distributed among such purchasers (and, unless the entire
Interest was purchased, the Optionor) in accordance with their
ultimate respective interests in the Optionor's Interest.
Distributions otherwise allocable to the Optionor under the
preceding sentence shall first be used to offset any defaulted
Capital Contribution of the Optionor still due to the
Partnership.
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(vii) Upon completion of any transaction hereunder,
the General Partner shall cause Schedule I to be amended to
reflect all necessary changes resulting therefrom including,
without limitation, admission of a purchaser as a Limited
Partner, and adjustment of Capital Account balances, Capital
Commitment amounts and Capital Contributions as of the date of
the Optionor's default to reflect the acquisition from
Optionor of the appropriate pro rata portion of each such item
(including, if applicable, the reduction of aggregate Capital
Commitments and resulting adjustment of Capital Contributions
in connection with any acquisition of any Remaining Portion by
the General Partner pursuant to subsection (iii)). The
purchase and transfer of the Partnership Interest of the
Optionor shall occur automatically upon exercise by any
Optionee or the General Partner of its option hereunder,
without any action by Optionor.
(f) Reservation of Rights and Remedies. No right, power or
remedy conferred upon the General Partner in this Section 3.6 shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy, whether conferred in this
Section 3.6 or now or hereafter available at law or in equity or by statute or
otherwise for the benefit or on behalf of the Partnership relative to any
Defaulting Limited Partner. The General Partner is authorized to exercise its
discretion as to the appropriate remedy and course of action to be taken, and to
enforce any and all such remedy or course of action by and on behalf of the
Partnership. No course of dealing between the General Partner and any Defaulting
Limited Partner and no delay in exercising any right, power or remedy conferred
in this Section 3.6 or now or hereafter existing at law or in equity or by
statute or otherwise shall operate as a waiver or otherwise prejudice any such
right, power or remedy.
4. DISTRIBUTIONS.
4.1. Limitations on Distributions. No distribution will be made to any
Partner if and to the extent that such distribution would not be permitted under
Sections 17-607(a) of the LP Act or if, in the determination of the General
Partner, after giving effect to such distribution the assets of the Partnership
would be insufficient to satisfy the liabilities or obligations of the
Partnership to persons other than the Partners. Except for the Distributions as
otherwise expressly provided for in Sections 4.2 through 4.6, no Partner shall
have the right to withdraw any amount from its Capital Account or otherwise to
demand and receive any distributions from the Partnership.
4.2. Timing of Distributions. The General Partner generally will
endeavor to cause the Partnership to make Distributions to each Partner in the
respective amounts of Net Income distributable to such Partner during such year
by April 30 of the year following the year of the date of any allocation of Net
Income pursuant to paragraph (a) of Section 3.2; provided, however, that (i) the
General Partner will use its reasonable efforts to distribute cash proceeds from
the disposition of any Portfolio Investment within forty-five (45) days after
the Partnership's receipt thereof, and (ii) until the third (3rd) anniversary of
the date of this Agreement, the General Partner, in its discretion, in
accordance with the Investment Guidelines may determine not to make any such
Distributions in respect of Net Income and may elect to retain and reinvest some
or all of such distributable amounts in accordance with the Investment
Guidelines in Section 5.1(a)(iv) below.
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4.3. Distributions. The General Partner, at any time in its discretion,
may cause the Partnership to make Distributions to the Partners from their
Capital Accounts, subject to Section 4.2. Each Distribution pursuant to Section
4.2 and this Section 4.3 shall be apportioned among the Partners as follows:
(i) First, to all Partners in proportion to their
respective Priority Return Amounts until each Partner (other
than any Defaulting Limited Partner) has received aggregate
Distributions equal to such Partner's Priority Return Amount;
(ii) Second, to all Partners in proportion to their
respective 7% Distribution Preferences until each Partner
(other than any Defaulting Limited Partner) has received
aggregate Distributions equal to such Partner's 7%
Distribution Preference;
(iii) Third, 100% to the General Partner until the
General Partner has received Distributions made pursuant to
this 4.3(iii) equal in the aggregate to 20% of all
distributions made pursuant to 4.3(ii) and this 4.3(iii) since
the inception of the Partnership; and
(iv) Thereafter, 80% to all Partners in proportion to
their respective Capital Contributions and 20% to the General
Partner.
4.4. Final Distribution. The Final Distribution shall be made in
accordance with the provisions of Section 11.3.
4.5. Tax Distributions.
(a) General. The General Partner shall use reasonable efforts
to cause the Partnership to distribute in cash to each Partner, either during
such Fiscal Year or within ninety (90) days after the close of such Fiscal Year,
an amount equal to the aggregate Federal and state income tax liability such
Partner would have incurred as a result of the Net Income for such Fiscal Year
allocated to such Partner and reflected in the Partnership Return filed or to be
filed for such Fiscal Year, calculated as follows: as if (i) such Partner was a
natural person resident in the state with the highest applicable state income
tax rate; (ii) such Partner was taxable at the maximum rates provided under
applicable Federal and state income tax laws; and (iii) as if allocations from
the Partnership were the sole source of income and loss for such Partner for
such year. Such tax distribution amount will be reduced by the amount of all
Distributions made to such Partner since the commencement of such Fiscal Year
(other than Distributions required under this Section 4.5 in respect of the
preceding Fiscal Year) in order that the amount of any such tax distributions
will not have the effect of increasing the overall amount of distributions to
the Partners under Section 4.3 with respect to any Fiscal Year.
(b) Special General Partner Tax Distributions. The Partnership
may make Distributions to the General Partner during any Fiscal Year to enable
the members of the General Partner to satisfy their liability to make estimated
tax payments with respect to such Fiscal Year or the preceding Fiscal Year based
on calculations of the General Partner's hypothetical estimated tax liability
made pursuant to paragraph (a) of this Section 4.5 as of such dates as the
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General Partner in its sole discretion may determine; provided, however, that:
(i) if the aggregate amount of Distributions under this Section 4.5 made to the
General Partner with respect to any Fiscal Year exceeds the amount distributable
to the General Partner with respect to such Fiscal Year, calculated as of the
end of such Fiscal Year pursuant to paragraph (a), the Partnership shall treat
such excess amount as an advance against the General Partner's distributive
share of Partnership income and the General Partner shall return such excess to
the Partnership without interest within ten (10) days following determination by
the Partnership that such excess distributions have been made; and (ii) the
Capital Account of the General Partner shall not be reduced by any amounts
treated as advances made to the General Partner pursuant to this paragraph (b)
during any Fiscal Year, but shall be reduced as of the end of such Fiscal Year
by an amount equal to the aggregate of all such amounts treated as advances,
reduced by any part of such advances returned to the Partnership by the General
Partner pursuant to the preceding clause (i) of this paragraph (b).
4.6. Distributions of Cash or Securities. Distributions may be made in
cash or Securities or other assets of the Partnership, at the discretion of the
General Partner, subject to the other provisions of this Section 4.6. The
General Partner will use its reasonable efforts to make all distributions to
Partners in the form of cash or Marketable Securities until such time as the
Partnership commences liquidation.
(a) Guidelines. The General Partner shall give the Partners at
least five (5) business days' prior written notice of any proposed Distribution
in kind of Securities or other assets. In the case of a Distribution which in
whole or in part consists of Securities or other assets: (i) the amount of such
Distribution shall be the sum of the amount of any cash distributed plus the
Carrying Value of the Securities and other assets distributed, as of the close
of business on the valuation date, as determined by the General Partner in
accordance with the provisions of Section 4.7; and (ii) such Securities or other
assets shall be deemed to have been sold for such value at the close of business
on such valuation date and the amount of any gain or loss which would have been
realized upon a sale for such value shall be deemed to have been realized and
recognized at such time for the purpose of determining Net Income or Net Losses
for the Fiscal Period immediately preceding such valuation date. The General
Partner shall distribute such Securities or other assets as soon as practical
after such valuation date. Each Distribution of Securities shall be made to the
Partners in proportion to the amount each is receiving in the Distribution
pursuant to Section 4.3.
(b) Restrictions. The General Partner may cause the
certificates evidencing any Securities to be distributed to be imprinted with
legends as to such restrictions on transfer as may be reasonably necessary or
appropriate, including legends as to applicable Federal or state securities law
or other legal or contractual restrictions, and may require each Limited Partner
to agree in writing: (i) that such Securities will not be transferred except in
compliance with such restrictions and (ii) to such other matters as the General
Partner may deem necessary or appropriate.
(c) Limitations on In Kind Distributions. Prior to the
termination of the Investment Period or, if earlier, the date of the Final
Distribution, or otherwise unless consented to by a Majority in Interest of the
Limited Partners, the General Partner will not distribute Non-Marketable
Securities unless: (i) the issuer of such Securities is a reporting company
under the Securities Exchange Act of 1934, as amended, and such issuer has, or
has agreed to make,
<PAGE> 18
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adequate current public information with respect to the issuer to comply with
Rule 144 of the Securities and Exchange Commission; (ii) in the case of an
issuer which has publicly traded equity Securities, not more than 50% of the
Limited Partners are entitled to cause such Securities to be registered on
demand and sold pursuant to an effective registration statement filed by such
issuer pursuant to the Securities Act of 1933, as amended; (iii) the holders of
such Securities are the beneficiaries of rights pursuant to valid contracts,
charter or otherwise entitling them to "put" such Securities for purchase or
redemption by such issuer or other financially capable third party at market
equivalent pricing; (iv) such Securities represent a debt claim or other self
liquidating contract right; or (v) such Securities are otherwise readily salable
to an identifiable purchaser or class of purchasers, in the reasonable judgment
of the General Partner, at the Carrying Value by the holders thereof or
convertible or exchangeable for a Marketable Security.
(d) Bank Partner Provisions. If, at any time, any Bank
Regulated Partner notifies the General Partner that: (i) its holdings of any
Security from a distribution in kind by the Partnership, combined with the
ownership of securities of the same Portfolio Entity by such Bank Regulated
Partner and its Affiliates, results in aggregate ownership by such Bank
Regulated Partner and its Affiliates of an amount of securities of such
Portfolio Entity in excess of that permitted by the Bank Holding Company Act of
1956; and (ii) despite their best efforts, such Bank Regulated Partner and its
Affiliates are unable to sell such securities of such Portfolio Entity owned by
them other than through the Partnership, then the General Partner shall take
such steps as it deems reasonable, which steps are equitable to all Limited
Partners, so as to avoid such excessive ownership attributable to the Bank
Regulated Partner.
(e) Modification for Regulatory Matters. Notwithstanding any
other provision of this Agreement, in the event of a distribution in kind of any
Securities or other asset that would cause a Limited Partner to own or control
an equity interest in a Portfolio Company that exceeds the amount that such
Limited Partner may lawfully own or control, then, upon written notice to the
General Partner by such Limited Partner prior to the date of such distribution,
(i) the Partners not so affected shall receive their shares of such Securities
or other asset in kind; (ii) the Capital Accounts of the Partners shall be
adjusted in the same manner as if the entire distribution of such Securities or
other asset had been made in kind; and (iii) to the extent practicable, the
General Partner shall be authorized to sell the affected Limited Partner's share
of such Securities or other asset on behalf of such Limited Partner and
distribute the proceeds of such sale, net of all expenses attributable to such
sale, to such Limited Partner in cash.
4.7. Determination of Carrying Value.
(a) Guidelines. The Carrying Value of Marketable Securities
shall be determined in accordance with the following guidelines which shall be
interpreted and applied in the good faith determination of the General Partner:
(i) for purposes other than valuation in connection with a Distribution, their
last sales price on the last trading day on which such Securities were traded
immediately preceding the date of determination on the largest national
securities exchange (measured by dollar volume of transactions in all Securities
traded thereon) on which such Securities shall have traded, or, if available,
such sales price on the consolidated tape; (ii) for purposes of a valuation in
connection with a Distribution, the average of their last sales price on the
five (5) most recent trading days on which such Securities were traded
immediately preceding the date of determination on the largest national
securities exchange
<PAGE> 19
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(measured by dollar volume of transactions on all Securities traded thereon) on
which such Securities shall have been traded, or if available, such sales price
on the consolidated tape; or (iii) if neither determination referred to in
clauses (i) or (ii) can be made, for purposes other than valuation in connection
with a Distribution, the last closing "bid" price on the last trading day on
which such Securities were traded immediately preceding the date of
determination, or for purposes of a valuation in connection with a Distribution,
the average of the last closing "bid" price on the five (5) most recent trading
days on which such securities were traded immediately preceding the date of
determination; provided, however, that if such Marketable Securities are subject
to a restriction on transfer, the General Partner, in good faith and with the
consent of the Advisory Committee, shall discount such sales or "bid" prices 4%
to 20% depending on the nature of such restriction.
(b) General Partner Authority. Except in connection with a
Distribution or any revaluation of the Partnership's assets, which shall be
governed by paragraph (c) of this Section 4.7, the General Partner shall
establish the Carrying Value of Non-Marketable Securities at cost; provided,
however, that the General Partner may revalue such Non-Marketable Securities in
accordance with said paragraph (c) if a good faith basis for such
redetermination exists.
(c) Advisory Committee Review. The Advisory Committee shall
have the authority (but not the obligation) to review the methodology used for
any valuation of Non-Marketable Securities made for the purpose of making any
Distribution or any revaluation of the Partnership's assets. Any valuation
issues of Non-Marketable Securities which are not addressed by or in accordance
with such reviewed methodology shall be made by the General Partner with the
consent of the Advisory Committee. If either: (i) the Advisory Committee shall
object to any such methodology or other valuation or (ii) any such methodology
or other valuation reviewed by the Advisory Committee shall be objected to in
writing by a Majority in Interest of the Limited Partners, then the General
Partner will obtain an appraisal of the value of such Non-Marketable Securities
by an independent investment banking, accounting or financial consulting firm
selected by the General Partner and approved by the Advisory Committee in its
reasonable discretion. Any such appraisal shall be an expense of the Partnership
under Section 8.2 and shall be binding on all Partners.
4.8. Withholding Taxes.
(a) General. The Partnership at all times shall be entitled to
make payments required to discharge any obligation of the Partnership to
withhold or make payments to any governmental authority with respect to any
United States Federal, state or local tax liability or any other tax liability
of any Limited Partner liable for such taxes arising out of such Limited
Partner's interest in the Partnership. Any amount withheld for the payment of
any such tax liability from a Distribution to a Limited Partner shall be deemed
to be a Distribution to that Limited Partner made as of the time the withheld
amount would have actually been distributed and shall reduce the amounts
actually distributed. Any amounts paid by the Partnership for any such tax
liability, but not withheld from a Distribution, shall be deemed to be an
interest-free advance made by the Partnership to such Limited Partner and shall
not be deemed to be a Distribution to such Limited Partner under this Agreement.
Amounts treated as advances to any Limited Partner under this Section 4.8 shall
be repaid by such Limited Partner to the Partnership within thirty (30) business
days after the Partnership delivers a written request to such Limited Partner
for such payment, which notice will be delivered promptly by the General
Partner;
<PAGE> 20
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provided, however, that if any such repayment is not made, the Partnership may
(without prejudice to any other rights of the Partnership) collect such unpaid
amounts from any Distribution that otherwise would be made to such Limited
Partner. Notwithstanding any other provisions of this Agreement, in the event
the Partnership fails to withhold any taxes in respect of any Limited Partner
when required to do so (including as a result of any change in law or
interpretation thereof or otherwise), any liability incurred by the Partnership
(including interest but excluding any penalties) as a result of such failure
shall be borne solely by such Limited Partner (and charged to such Partner's
Capital Account) or, in the event that: (i) the Partnership shall no longer
exist or such Limited Partner's Capital Account shall not be adequate for such
purpose and (ii) any such liability shall have been paid by the General Partner,
then such Limited Partner shall, promptly upon notice thereof, reimburse the
General Partner for any such payment.
(b) Operational Rules. The General Partner, after consulting
with the Partnership's accountants or other advisers, shall determine the amount
(if any) of any tax liability attributable to any Partner taking into account
any differences in the Partners' status, nationality or other characteristics.
Any such determination regarding the amount of tax liability attributable to
particular Partners shall be based on the manner in which the jurisdiction
imposing the related tax would attribute that tax liability and, in making any
such determination, the General Partner shall be entitled to treat any Partner
as ineligible for an exemption from or reduction in rate of such foreign tax
under a tax treaty or otherwise except to the extent that such Partner provides
the General Partner with such written evidence (including but not limited to
forms or certificates executed by its managers and/or beneficial owners) as the
General Partner or the relevant tax authorities may require to establish such
Partner's (or some or all of its beneficial owners') entitlement to such
exemption or reduction. The intent of this Section 4.8(b) is to ensure, to the
maximum extent feasible, that the burden of any taxes withheld at the source or
paid by the Partnership is borne by those Partners to which such tax obligations
are attributable, and this Section 4.8(b) shall be interpreted and applied
accordingly.
4.9. General Partner's Obligation to Return Excess Distributions.
(a) Amount; Timing of Determination. If, as of the
determination date of the Partnership's Final Distribution, (i) the General
Partner has received Distributions in an aggregate amount in excess of 20% of
the Partnership's Cumulative Net Income or (ii) the General Partner has received
any Distributions and there is a shortfall between the aggregate Distributions
made to the Limited Partners from the inception of the Partnership through such
time and the full amount distributable to Limited Partners as of such time
pursuant to clauses (i) and (ii) of Section 4.3, then the General Partner shall
be regarded as having received "Excess Distributions" equal to the greater of
the excess amount referred to in clause (i) above and the shortfall referred to
in clause (ii) above, but not more than the aggregate amount of Distributions
actually received by the General Partner from the inception of the Partnership
through and including such date. The General Partner may elect not to receive
any part or all of any distribution to which the General Partner otherwise may
be entitled under the provisions of Section 4.3 and instead may distribute such
amounts to and among the Partners in accordance with the provisions of clauses
(i) and (ii) of Section 4.3, and thereafter may receive in full distributable
amounts to which it is then entitled under Section 4.3, from time to time and
upon the reasonable determination of the General Partner, as may be deemed to be
appropriate by the General Partner in light of its obligations under this
Section 4.9.
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(b) Repayment on Liquidation. Within 100 days after the
determination date of the Partnership's Final Distribution: (i) the Partnership
shall make a final determination of the amount of Excess Distributions received
by the General Partner and not previously returned to the Partnership; and (ii)
the General Partner shall return all such remaining Excess Distributions to the
Partnership, subject to the conditions and limitations set forth in the other
provisions of this Section 4.9.
(c) Form of Repayment; Other Rules. All returns made to the
Partnership pursuant to this Section 4.9 shall be in the form of cash or of
Securities previously distributed to the General Partner by the Partnership
during the fiscal period for which such determination of Excess Distributions is
being made, valued in accordance with Section 4.7 at the time of their return.
(i) No amount returned to the Partnership by the
General Partner pursuant to this Section 4.9 shall increase
the General Partner's Capital Contribution or reduce the
General Partner's Subscription or remaining Capital
Commitment.
(ii) In no event shall the General Partner be
required to return to the Partnership any amount greater than
the excess, if any, of the total amount of distributions made
by the Partnership to the General Partner as of the
determination date, reduced by the sum of:
(A) the aggregate amount of distributions
that the General Partner would have received from the
Partnership if it had made all of its Contributions
to the Partnership in exchange for an interest as a
limited partner therein and had never owned any
interest in the Partnership as a general partner,
(B) the aggregate amount of tax
Distributions previously received by the General
Partner pursuant to Section 4.5 (net of any amounts
properly taken into account in the preceding clause
(A)), and
(C) the aggregate amount (if any) previously
returned to the Partnership by the General Partner
pursuant to this Section 4.9.
(d) Obligation. The General Partner hereby acknowledges and
agrees that, in the event that the General Partner does not perform its
obligation under this Section 4.9, each of its members shall be severally (not
jointly) liable for the General Partner's obligations to return Excess
Distributions pursuant to this Section 4.9, solely to the extent of their
respective pro rata shares of Distributions actually received by them from the
General Partner. The General Partner agrees to maintain and enforce such
provisions in its Limited Liability Company Agreement for the benefit of the
Limited Partners.
(e) Limitations. Except as provided by the Delaware Act or
other applicable law or Section 4.8 (dealing with Tax Withholding), and (with
respect to the General Partner) this Section 4.9 and Section 11.3, and (with
respect to the Limited Partners) Section 11.3, neither the General Partner nor
any Limited Partner shall be obligated at any time to repay to the Partnership
<PAGE> 22
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all or any part of any distributions made to such Partner by the Partnership, or
to make any Contribution or payment to the Partnership with respect to any
deficit in such Partner's Capital Account. Nothing in this Section 4.9(e) shall
affect the obligation of any Partner to contribute capital to the Partnership
pursuant to the additional Capital Contributions provided for herein or to make
any other payments to the Partnership otherwise required by this Agreement.
5. MANAGEMENT.
5.1. Investment Guidelines. The General Partner will invest the assets
of the Partnership principally in companies engaged in various segments of the
insurance, financial services, e-commerce and healthcare industries, including
without limitation, service and technology businesses supporting such
industries. Investments may be made in Securities of all types, including
Marketable and Non-Marketable Securities. Any of the foregoing investments is
hereinafter sometimes referred to as a "Portfolio Investment" and the issuer of
such Portfolio Investment in Securities is hereinafter referred to as a
"Portfolio Entity."
(a) Roster of Items. The General Partner shall manage the
investment activities of the Partnership in accordance with the provisions of
this Section 5.1 (the "Investment Guidelines"), which shall be implemented
subject to the good faith interpretation of the General Partner. The Investment
Guidelines can be waived upon the consent of the Advisory Committee.
(i) At no time shall the aggregate Portfolio
Investment in any Portfolio Entity exceed twenty percent (20%)
of the aggregate Capital Commitments of all Partners.
(ii) At such times as the funds of the Partnership
are not used to make Portfolio Investments or to pay expenses
or other obligations and commitments of the Partnership, the
General Partner shall invest such funds in Short-Term
Investments.
(iii) The General Partner, on behalf of the
Partnership, may enter into arrangements to borrow funds such
that the total outstanding indebtedness of the Partnership at
any time will not exceed $15 million. The Partnership will not
use borrowed funds to make Portfolio Investments except that
the Partnership may incur indebtedness to acquire Securities
in a Portfolio Investment if such indebtedness arises solely
with respect to and in the amount of pending Capital
Contributions called by the General Partner and in any event
is reasonably likely to be paid in full and retired within 90
days of incurrence by the Partnership.
(iv) The General Partner, in its discretion, may
determine to reinvest net proceeds from the sale or other
disposition of Portfolio Investments, at any time during the
period ending on the third (3rd) anniversary of the final
closing date, in other Portfolio Investments under the
Investment Guidelines; provided, however, that the amount
available for reinvestment at any time shall not exceed an
amount equal to the Cost of Disposed Investments.
<PAGE> 23
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(v) The Partnership will not initiate any tender
offer or proxy contest transaction for the purpose of changing
management of a company in a "hostile" transaction formally
opposed by the board of directors (or other appropriate
management of such entity), except that the Partnership may
acquire Securities of any issuer in the ordinary course of
investment activity and may initiate, propose and participate
in any plan for reorganization or change in management of a
Portfolio Entity once a Portfolio Investment is made.
(vi) The Partnership will not invest in any other
pooled investment vehicle or managed investment fund,
including any "fund of funds" or other vehicle as to which any
person or entity is entitled to any separate fee, "carried
interest" or other compensation from the Partnership.
(vii) The Partnership will not be engaged in the
short-term trading of Marketable Securities. Further, the
Partnership will not make open-market purchases of a class of
publicly traded Securities except in anticipation of or in
direct connection with a Portfolio Investment or as a
follow-on investment in a Portfolio Entity. The Partnership
may make Portfolio Investments in Securities which are
convertible or exchangeable into Securities of a class of
Securities which are publicly traded and listed, if such
transaction is negotiated directly with the issuer in a
private placement transaction and as to which the Partnership
acquires a meaningful position with respect to such Portfolio
Entity. For this purpose a "meaningful position" means either
(x) a holding of at least 5% of the issuer's outstanding
capital stock or (y) the right to elect or nominate a
director.
(viii) The Partnership will not engage in market
arbitrage transactions but may enter into put, call, options,
derivative securities and other contractual arrangements on a
selected basis solely for the purposes of hedging the
Partnership's Portfolio Investments.
(ix) The Partnership at any time will not have
Portfolio Investments (valued at cost) exceeding 30% of the
aggregate Capital Commitments in Portfolio Entities with main
offices, domiciled or otherwise conducting their main lines of
business in jurisdictions outside the United States (including
its territories and protectorates), the United Kingdom, Canada
or Bermuda.
(x) The Partnership will not make any Portfolio
Investment in any Portfolio Entity whose principal business
consists of (A) tobacco or tobacco products, (B) alcohol
products, (C) the production of firearms or (D) gambling
operations.
(b) FCC Restrictions. The Partnership will not make any
Portfolio Investment in a Portfolio Entity which is a Media or Common Carrier
Company (as defined herein) if and to the extent that any Limited Partner would
be attributed with an ownership interest as a result of such Portfolio
Investment in such Media or Common Carrier Company under the rules and written
policies of the FCC ("Attribution Rules"). For purposes of this Agreement,
"Media or Common Carrier Company" means any company that, directly or
indirectly, has an interest which is deemed attributable under the Attribution
Rules in a broadcast radio or television
<PAGE> 24
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station, a cable televisions system, a "daily newspaper" (as such term is
defined in 47 C.F.R. Section 73.3555 of the FCC's rules), a multipoint
multichannel distribution system, a local multipoint distribution system, an
open video system, a commercial mobile radio service or any other communications
facility the operations of which are subject to regulation by the FCC under any
of (i) the Communications Act of 1934, as amended; (ii) the Attribution Rules;
and (iii) the rules and written polices of the FCC limiting or restricting
ownership in such Media or Common Carrier Companies.
(c) Confidentiality. Except as otherwise expressly provided
herein, including without limitation, Sections 9.2 through 9.4, the General
Partner shall not be required to disclose information known by the General
Partner as to Portfolio Entities or proposed Portfolio Investments and the
General Partner may, in its discretion, keep such information confidential, to
the extent required or deemed necessary or advisable in the good faith judgment
of the General Partner, consistent with the provisions of Section 17-305 of the
LP Act.
5.2. Powers & Duties of General Partner.
(a) Authority. The management, operation and policy of the
Partnership shall be vested exclusively in the General Partner, which shall be
authorized and empowered on behalf and in the name of the Partnership by itself
to carry out any and all of the objects and purposes of the Partnership and to
perform all acts and enter into and perform all contracts and other undertakings
that it may, in its discretion, deem necessary or advisable or incidental
thereto. The General Partner shall have all the rights and powers and be subject
to all the restrictions and liabilities of a general partner in a partnership
without limited partners.
(b) Specific Actions. Without limiting the general powers and
duties set forth in paragraph (a) of this Section 5.2, the General Partner is
hereby authorized and empowered on behalf and in the name of the Partnership to:
(i) direct the formulation of investment policies and
strategies for the Partnership, and invest Partnership funds,
in accordance with the Investment Guidelines;
(ii) acquire, hold, sell, transfer, exchange and
dispose of Securities, and exercise all rights, powers,
privileges and other incidents of ownership or possession with
respect to Securities, including, without limitation, the
voting of Securities, the approval of a restructuring of an
investment in Securities, participation in arrangements with
creditors, the institution and settlement or compromise of
suits and administrative proceedings and other like or similar
matters;
(iii) purchase Securities for investment and make
such representations to the seller of such Securities, and to
other persons, as the General Partner may deem proper in such
circumstances, including the representation that such
Securities are purchased by the Partnership for investment and
not with a view to their sale or other disposition;
<PAGE> 25
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(iv) obtain on behalf of the Partnership options to
purchase blocks of shares in private transactions under the
Program, and trade in puts, calls, futures, other derivative
securities, or invest in listed options, or write options to
the extent that such vehicles are used for the purpose of
hedging portfolio Securities (including Securities held by the
Partnership as consideration for, or upon exchange, conversion
or otherwise in respect of Portfolio Investment Securities),
as the General Partner deems as appropriate; provided,
however, that the Partnership has a sufficient number of such
type of Securities underlying the hedge in its portfolio and
expected cash flows from the portfolio to cover such hedge;
and provided, further, however, that no such hedge shall
extend for a term greater than six months;
(v) open, maintain and close bank accounts and draw
checks or other orders for the payment of money and open,
maintain and close brokerage, mutual fund and similar
accounts;
(vi) hire consultants, attorneys, accountants,
actuaries and such other agents and employees for itself and
for the Partnership as may be reasonably necessary or
advisable, and authorize any such agent or employee to act for
and on behalf of the Partnership;
(vii) retain any of its Affiliates to provide
services to the General Partner on terms that are no less
favorable than terms for such services offered to or engaged
in with a third party, except as otherwise approved by the
Advisory Committee;
(viii) make any and all elections and other decisions
with respect to tax and accounting matters;
(ix) act on its own behalf and in its own name, as
the General Partner may determine to be reasonably necessary
and appropriate to enforce or secure the powers or rights of
the Partnership; and
(x) make and perform such other agreements and
undertakings as may be necessary or advisable for the carrying
out of any of the foregoing powers, objects or purposes.
(c) Notwithstanding the foregoing provisions of this Section
5.2, the General Partner, acting on behalf of the Partnership, may not:
(i) buy or sell commodities;
(ii) buy or sell real estate; or
(iii) buy or sell currencies other than currencies of
the countries of domicile of Portfolio Entities.
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(d) UBTI Matters. The General Partner agrees to use its
reasonable efforts to avoid the realization of income of the Partnership in the
form of "unrelated business taxable income" attributable to a Limited Partner
that is exempt from taxation under Section 501(a) of the Code, and shall use its
reasonable efforts to conduct the affairs of the Partnership so as to minimize
the risk of incurring such income.
(e) ERISA/VCOC Matters. The General Partner shall use its
reasonable efforts to ensure that the assets of the Partnership shall not be
"plan assets" subject to the Employee Retirement Income Security Act of 1974 and
the regulations thereunder ("ERISA"), and accordingly the General Partner shall
use its reasonable efforts to operate and manage the affairs of the Partnership
so as to qualify the Partnership as a "venture capital operating company" exempt
from regulation as plan assets under ERISA. The General Partner and the
Partnership will not have any obligations or requirements under these
provisions, however, if the participation of "benefit plan" investors in the
Partnership is not "significant" within the meaning of the Plan Asset
Regulations of ERISA, or if such requirements of the Plan Asset Regulations no
longer apply to the Partnership.
(f) Tax Partnership Status. The General Partner agrees that
it: (i) will not cause or permit the Partnership to elect to be excluded from
the provisions of Subchapter K of the Code or to be treated as a corporation for
federal income tax purposes; (ii) will cause the Partnership to make any
election reasonably determined to be necessary or appropriate in order to ensure
the treatment of the Partnership as a partnership for federal income tax
purposes; (iii) will cause the Partnership to file any required tax returns in a
manner consistent with its treatment as a partnership for federal income tax
purposes; and (iv) has not taken, and will not take, any action that would be
inconsistent with the treatment of the Partnership as a partnership for such
purposes.
(g) Tax Matters Partner. The General Partner shall be the tax
matters partner, as defined in Section 6231 of the Code, of the Partnership (the
"Tax Matters Partner"). The General Partner shall receive no additional
compensation from the Partnership for its services in that capacity, but all
reasonable expenses incurred by the Tax Matters Partner (including professional
fees for such accountants, attorneys and agents as the General Partner in its
discretion determines are necessary to or useful in the performance of its
duties in that capacity) shall be borne by the Partnership. The General Partner
shall be entitled to exculpation and indemnification with respect to any action
it takes or fails to take as Tax Matters Partner with respect to any
administrative or judicial proceeding involving "partnership items" (as defined
in Section 6231 of the Code) of the Partnership to the extent provided under
Article 7.
5.3. Advisory Committee.
(a) Designation and Composition. An advisory committee (the
"Advisory Committee"), composed of representatives of certain Limited Partners
and other persons selected by the General Partner, will meet periodically, but
no less often than once each year, with the General Partner and may advise the
General Partner regarding the valuation of the Partnership's assets, interested
party transactions and other similar actions. The Advisory Committee shall have
the authority (but shall not be required) to advise and consult with the General
Partner regarding the valuation of the Partnership's assets, interested party
transactions and other similar actions. The General Partner and its members will
not be regarded as a member of the Advisory
<PAGE> 27
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Committee. At all times a majority of the members of the Advisory Committee
shall be representatives of Limited Partners. Initially, the members of the
Advisory Committee will consist of individual representatives or designees of
the Limited Partners, as indicated on Schedule I hereto. Any individual member
may be removed by the action of the General Partner together with a majority of
the members then serving (other than the member who is the subject of such
removal). In the event of any vacancy, whether by removal, resignation or
otherwise, the Limited Partner whose representative is the subject of such
vacancy will be entitled to designate an alternative representative to serve as
the member, with such individual to be subject to the approval of the General
Partner (which shall not be withheld unreasonably or delayed unduly).
(b) Actions. Votes, approvals, consents, assents and other
actions of the Advisory Committee shall be effective upon the action of at least
a majority in number of the members of the Advisory Committee. The Advisory
Committee may adopt rules, procedures and policies for the conduct of its
meetings consistent with the other terms of this Agreement.
(c) Authority; Confidentiality. The General Partner will
retain exclusive authority and responsibility for the selection of investments
and the operation of the business of the Partnership, and no member of the
Advisory Committee or other Limited Partner shall take part in the control of
the Partnership business or have any authority or power to act for or bind the
Partnership or have any liability therefor. Except as otherwise expressly
provided herein, including without limitation, Sections 9.2 through 9.4, the
General Partner shall not be required to disclose to the members of the Advisory
Committee any information known by the General Partner as to Portfolio Entities,
proposed Portfolio Investments or other aspects of the Partnership's business
where the General Partner reasonably and in good faith believes that there is a
contractual basis or other basis for which it is necessary to keep such
information confidential, or otherwise as consistent with the provisions of
Section 17-305 of the LP Act.
5.4. Other Business Relationships.
(a) General Partner and Principals. The General Partner, and
its members (including the Principals), employees and Affiliates are engaged and
may in the future engage, individually or with others, in other business or
investment activities or business ventures, including those which may be similar
to or in competition with the investments or business of the Partnership. The
Principals also may provide management assistance, financial consulting,
investment and asset management services, reporting and accounting, and
investment banking (including merchant banking or other activities in which the
Principals may act as a principal) and similar services to clients, which may
include Portfolio Entities or potential Portfolio Entities. No fees for such
services need be shared with the Partnership. In the event of any potential
conflict of interest due to any other investment or business relationship, the
General Partner will act in the manner which it reasonably and in good faith
believes to be in or not opposed to the best interests of the Partnership.
Obligations of fair dealing, non-disclosure of inside information and the like
also may limit the Principals in acting on behalf of the Partnership.
(b) Other Investment Funds. Subject to the other provisions of
this Agreement, the Principals may at any time organize, sponsor, invest in or
otherwise enter into contracts with other limited partnerships or other entities
with the same or similar investment objectives as the Partnership and in which
any Principal has the same or similar kinds of
<PAGE> 28
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responsibilities as in this Agreement; provided, however, that unless approved
in advance by at least Two-Thirds in Interest of the Limited Partners, the
Principals shall not form or serve as general partner or investment manager of
another private U.S. investment fund that has as its investment purpose and
agenda the making of private equity investments in companies substantially
similar to the companies in which the Partnership invests until the earlier of
(i) the fourth anniversary of the date of this Agreement or (ii) such time as an
amount equal to at least 75% of the Capital Commitments of all Partners (A) has
been invested in Portfolio Investments or reserved for potential Portfolio
Investments which are identified and likely to close within ninety (90) days or
(B) reserved for follow-on investments (in an amount consistent with the
Partnership's historical reserves for follow-on investments) and/or (C) paid or
reserved for payment of Partnership expenses and obligations, including any such
investments, expenses or obligations reasonably expected by the General Partner
to be funded or become due within ninety (90) days (such set of conditions being
referred to as "fully invested").
(c) Principal Transactions. Upon the approval of the Advisory
Committee: (i) the Principals may make an investment in any Portfolio Entity in
which the Partnership has invested, and the Partnership may make an investment
in any entity in which a Principal has invested; and (ii) any Principal may also
invest in any Portfolio Entity in which the Partnership is investing, at the
same time as the Partnership invests therein and on terms not more favorable to
any such Principal than those applicable to the Partnership's investment in the
Portfolio Entity, unless such Principal's investment would result in a reduction
of the amount of the investment which the Partnership would otherwise make.
(d) Related Fund Transactions. Notwithstanding anything to the
contrary herein, (i) the Partnership may make an investment in any Portfolio
Entity in which any Related Fund has invested, and any Related Fund may make an
investment in any entity in which the Principal has invested; and (ii) any
Related Fund may also invest in any Portfolio Entity in which the Partnership is
investing at the same time as the Partnership invests therein. For purposes of
this Section 5.4, the term "Related Fund" shall mean any limited partnership or
investment fund currently managed, or to be managed in the future, directly or
indirectly, by any of the Principals, Conning & Company or an Affiliate of
Conning & Company.
(e) Related Party Transactions. The Partnership may not engage
in a purchase or sale transaction of a Non-Marketable Security with a limited
partnership or an investment fund which is managed or controlled by a Related
Party. With regard to a Related Party which is not a limited partnership or an
investment fund, the Partnership may not engage in a purchase or sale
transaction of a Non-Marketable Security with a Related Party: (i) unless the
Non-Marketable Security is of the same class as, or has the same rights to
earnings and distributions as, a Marketable Security of the same issuer and the
price for the Non-Marketable Security is determined by the price of the
Marketable Security, after adjustments for illiquidity; or (ii) if otherwise,
without the prior written consent of a Majority in Interest of the Limited
Partners. The Partnership may not purchase securities in a Public Offering
through which a Related Party is selling its holdings, unless the Securities
purchased by the Partnership constitute 20% or less of the total Public
Offering. For purposes of this Section 5.4 only, the term "Related Party" shall
mean the General Partner and its Affiliates, and each of their respective
stockholders, employees, officers, directors, and agents or, in the case of any
General Partner member who is an individual, any of such person's family
members, and the term "Public Offering" shall mean an offering of securities
under the Securities Act of 1933, as amended.
<PAGE> 29
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(f) General Partner Disclosure. The General Partner shall
devote such resources as it deems in good faith to be reasonably necessary to
manage the affairs of the Partnership. Without the prior written consent of the
Advisory Committee, and notwithstanding any other provision of this Section 5.4,
the General Partner, the Principals and each Related Party shall not engage in
any transaction with the Partnership except on terms that are no less favorable
than the terms of any such transaction offered to or engaged in with a third
party. The General Partner will disclose the nature and terms of any such
Related Party transactions to the Advisory Committee. For purposes of this
Section 5.4, a Limited Partner shall not be deemed to be a Principal, a Related
Party or an Affiliate solely by virtue of its status as a Limited Partner in the
Partnership.
5.5. Custodian. All cash and Securities of the Partnership shall be
held by a custodian appointed by the General Partner, which shall be a bank or
trust company with combined capital, surplus and undivided profits of not less
than $100 million at the time of appointment (the "Custodian"). Any Custodian
may be replaced at the discretion of the General Partner, by another Custodian
meeting the requirements of this Section 5.5, and the General Partner shall
promptly notify the Limited Partners of such replacement.
5.6. Key Person Trigger Event.
(a) Event Occurrence. The failure of (i) any four of the
Principals or (ii) John B. Clinton and any two other Principals to be active in
the affairs of the Partnership in the capacity of investment managers of the
General Partner during the Investment Period shall constitute a "Key Person
Trigger Event." For purposes of this provision, "failure to be active in the
affairs of the Partnership" with respect to any Principal shall mean the failure
of such Principal to devote all or a substantial portion of such Principal's
business time and efforts as a manager of the General Partner. The General
Partner shall provide written notice to all Partners promptly after the
occurrence of any Key Person Trigger Event.
(b) Suspension Period. Immediately upon the occurrence of such
Key Person Trigger Event, the General Partner: (i) shall cause the Partnership
to cease making any new Portfolio Investments other than a proposed Portfolio
Investment to which the Partnership made a commitment evidenced in writing
setting forth the significant terms in definitive form prior to the date of such
Key Person Trigger Event or any follow-on investment that the General Partner
determines is advisable to make in order to preserve the Partnership's rights
and economic benefits of an existing Portfolio Investment; (ii) shall cause the
Partnership not to commit to any new proposed Portfolio Investment unless such
commitment explicitly is made dependent upon the separate approval of a Majority
in Interest of the Limited Partners; (iii) shall not make (and no Partner shall
be obligated to pay) any Capital Contributions in respect of any new or proposed
Portfolio Investments; (iv) shall use its reasonable best efforts to manage the
ownership, conversion, disposition and distribution of the Partnership's assets
so as to preserve the value of the Partnership's assets; and (v) shall be
authorized to make (and each Partner shall be obligated to pay) Capital
Contributions solely to the extent necessary to support the investment
activities permitted in the preceding clause (i) and to satisfy current
outstanding Other Expenses and liabilities or obligations of the Partnership to
third parties (collectively, the "Suspension Period Restrictions").
<PAGE> 30
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(c) Restart Consent. Within sixty (60) days of the occurrence
of the Key Person Trigger Event, the General Partner will deliver written notice
to the other Partners or call a meeting of the Partners in order to disclose the
steps that the General Partner has taken and/or intends to take in order to
continue with management of the investment activities of the Partnership, which
may include the replacement of one or more Principals or an alternative plan of
management. The Suspension Period Restrictions shall terminate immediately only
upon the consent of a Majority in Interest of the Limited Partners, to such
effect, at which time the General Partner shall resume and continue to manage
the full investment activities of the Partnership, including without limitation,
the making of new Portfolio Investments and Capital Contributions for any and
all Partnership purposes.
(d) No Restart Consent. If the Limited Partners do not so
consent to the termination of the Suspension Period Restrictions within sixty
(60) days of the date of the aforementioned General Partner's notice or meeting,
then the General Partner may either (i) continue to manage the activities of the
Partnership as set forth in this Agreement subject to the Suspension Period
Restrictions or (ii) elect to terminate the Partnership and manage the
activities of the Partnership as set forth in Article 11.
6. MATTERS AMONG PARTNERS.
6.1. Liability of General Partner.
(a) Basic Standard of Care. The General Partner, each of its
employees, affiliates, officers, directors and agents from time to time and the
Principals shall not be liable to the Partnership or any Partner for any action
or omission taken or suffered by any Principal which does not constitute a
breach of any fiduciary duty owed by such Principal and is taken or suffered in
good faith and in the belief that such action or omission was in or was not
opposed to the best interests of the Partnership; provided, however, that such
action or omission was not a material violation of this Agreement and did not
constitute gross negligence, willful misconduct, fraud or a material violation
of law and that such acts or omissions do not constitute a knowing failure to
comply with the LP Act such that the liability of any of the Limited Partners
for the liabilities of the Partnership may exceed their Capital Contributions.
None of the General Partner or the Principals shall be liable to the Partnership
or any Partner for any act or omission of any other party other than a
Principal, nor shall any Principal (in the absence of gross negligence, willful
misconduct, fraud, a material violation of this Agreement or a material
violation of law by such Principal) be liable to the Partnership or any Partner
for any act or omission of any employee or agent of the Partnership where
reasonable care was exercised in their appointment, supervision and retention.
Except as otherwise provided in this paragraph (a), neither the General Partner
nor any Principal shall be liable to the Partnership or any Partner for any
mistake of fact or judgment in conducting the affairs of the Partnership or
otherwise acting in respect of and within the scope of this Agreement.
(b) Not Liable for Return. Except as otherwise expressly
provided in paragraph (a) of this Section 6.1, neither the General Partner nor
any Principal shall be liable for the return of all or any portion of any
Limited Partner's Capital Contributions.
6.2. Liability of Limited Partners. Except as may be otherwise provided
by law, the liability of each Limited Partner is limited to its Capital
Commitment, and nothing in this
<PAGE> 31
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Agreement shall remove, diminish or affect such limitation. If a Partner has
received the return of any part of its Capital Contributions, the Partner may
continue to be liable to the Partnership for the amount of the returned Capital
Contribution, but only to the extent necessary to discharge the Partnership's
liabilities to creditors who extended credit to the Partnership during the
period the Capital Contribution was held by the Partnership, and as otherwise
provided under the LP Act or Section 11.3.
6.3. No Obligation to Restore Negative Capital Account. Except as
otherwise provided for by law or by Section 11.3, no Partner shall have any
obligation at any time to contribute any funds to restore any negative balance
in its Capital Account.
6.4. Actions of Partners; Bank Regulated Partner Voting Percentage. The
Partners hereby agree and acknowledge that any vote, consent, approval or other
action to be taken by or on behalf of the Limited Partners hereunder shall be
valid and effective for all purposes hereunder upon the taking of such action at
a meeting or as evidenced in writing by or on behalf of Limited Partners
representing at least the requisite percentage in Interest of all Limited
Partners eligible and entitled to act with regard to such matters, based upon
their relative Limited Partner Percentages at the time such action is to be
taken; provided, however, that for such purposes any Bank Regulated Partner
shall be deemed at all times to have a Limited Partner Percentage equal to the
lesser of (i) 4.9% or (ii) its actual Limited Partner Percentage. Further, with
respect to any action by the Partners: (x) any Limited Partner who is the
subject of such action or against whom such action is to be enforced separate or
apart from other Limited Partners on behalf of the Partnership as a whole, shall
be excluded from taking any such action; (y) any Affiliate of the General
Partner, to the extent it holds a Limited Partner Interest, shall be excluded
from such action; and (z) no Bank Regulated Partner shall take part in action
regarding the admission, removal or approval of replacement of the General
Partner under Section 10.2 and as otherwise referred to in this Agreement.
6.5. Bank Regulatory Matters.
(a) No "Control" Presumption. No Bank Regulated Partner shall
be required to make any Capital Contribution to the Partnership to the extent
that such contribution would result in such Bank Regulated Partner contributing
more than 24.99% of all capital contributed to the Partnership, if such Bank
Regulated Partner shall obtain an opinion of counsel (which counsel and opinion
shall be reasonably acceptable in form and substance to the General Partner) to
the effect that such contribution would cause such Bank Regulated Partner to
violate Regulation Y or otherwise causes a Bank Regulatory Problem.
(b) Adjustment. Anything contained in this Agreement to the
contrary notwithstanding, any Bank Regulated Partner may elect to withdraw
partially from the Partnership but only to the extent necessary to provide that
the Interest of such Bank Regulated Partner in the Partnership shall not exceed
24.99%, if such Bank Regulated Partner shall obtain an opinion of counsel (which
counsel and opinion shall be reasonably acceptable in form and substance to the
General Partner) to the effect that, as a result of Regulation Y, such partial
withdrawal of the Interest such Bank Regulated Partner from the Partnership to
the extent described above is required to enable such Limited Partner to comply
with Regulation Y or otherwise to avoid a Bank Regulatory Problem is necessary.
<PAGE> 32
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(c) Partial Withdrawal Remedy. Any such Bank Regulated Partner
partial withdrawal of Interest shall be effective at the end of the fiscal
quarter in which such election occurs. Upon the partial withdrawal of any Bank
Regulated Partner, either the remaining Partners or the Partnership, within
sixty (60) days after the effective date of such Bank Regulated Partner
withdrawal, shall purchase from the Bank Regulated Partner that amount of such
Bank Regulated Partner's Interest corresponding to such Limited Partner's
partial withdrawal at the price determined below. The purchase price to be paid
for such Bank Regulated Partner's withdrawal Interest shall be the fair market
value thereof as reflected in its Capital Account, determined as if all assets
of the Partnership had been sold for their Carrying Values, all Partnership
liabilities satisfied (to the extent feasible) and the resulting income, gains
and losses to the Partners' Capital Accounts in accordance with Section 3.1 of
this Agreement.
(d) Payments. All payments made to a withdrawing Bank
Regulated Partner pursuant to this Section 6.5 may be made (i) in cash or (ii)
in the form of other consideration mutually acceptable to such Bank Regulated
Partner and the General Partner. If and to the extent that any of the
consideration consists of Securities, the General Partner and the Bank Regulated
Partner shall apply the provisions of Sections 4.6(d) and (e) to determine the
acceptability of such Securities as in-kind consideration.
(e) Election Out. Upon issuance of the regulations
implementing the "merchant banking activities" provisions of amended Section
4(k)(4)(H) of the Bank Holding Company Act, any Bank Regulated Partner may
irrevocably elect, by providing written notice to the General Partner, not to be
governed by this Section 6.5 because such Limited Partner or an Affiliate has
elected to be treated as a "financial holding company" under the Financial
Services Act of 1999 (the Gramm-Leach-Bliley Act of 1999).
(f) Modification; Definitions. This Section shall not be
amended without the consent of each of the Bank Regulated Partners. For purposes
of this Section 6.5 the following defined terms apply:
"Bank Holding Company Act" means the Bank Holding Company Act of 1956, as
amended (12 U.S.C. 1843(c)(8)), including the Financial Services Act of 1999.
"Bank Regulated Partner" means each Limited Partner that is (or is an Affiliate
of a bank holding company that is) subject to the provisions of Regulation Y.
"Regulation Y" shall mean Regulation Y of the Board of Governors of the Federal
Reserve System (C.F.R. Part 225) or any successor to such Regulation.
"Bank Regulatory Problem" means (i) any set of facts or circumstances wherein it
has been asserted by any governmental regulatory agency (or any Bank Regulatory
Partner believes that there is a significant risk of such assertion) that such
Bank Regulated Partner is not entitled to own, hold, or exercise any material
right with respect to all or any portion of the interest in the Partnership
which such Partner holds or (ii) when a Bank Regulated Partner and its
affiliates would own, control or have power (including voting rights) over a
greater quantity of securities of any kind than are permitted under any
requirement of any governmental rule or regulation directly applicable to the
investment activities of such Bank Regulated Partner in its capacity as a
Limited Partner.
<PAGE> 33
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6.6 Exclusions from Investments.
(a) Request for Exclusion. If participation by a Bank
Regulated Partner in a Portfolio Investment would result in a Bank Regulatory
Problem, and such Bank Regulated Partner provides the General Partner with a
written opinion of counsel to that effect, such Bank Regulated Partner may
request to be excused from making payment of its capital contributions in
respect of such Portfolio Investment (an "Excused Partner") and shall be
excluded from participating in Partnership profits, losses and distributions
attributable to such investment (the "Excluded Investment"). Any such request
shall be submitted to the General Partner in writing, accompanied by the opinion
of counsel, within five (5) business days after the receipt by the Bank
Regulated Partner of the Capital Contribution call notice with respect to such
proposed Portfolio Investment.
(b) Effect of Exclusion. If a Bank Regulated Partner is an
Excused Partner with respect to any Portfolio Investment, then, notwithstanding
any other provision of this Agreement, the following provisions shall be
applied:
(i) The Capital Commitment of the Excused Partner
shall not be reduced by such Excused Partner's share of any
Capital Contributions called for by the Partnership to make
such Excluded Investment;
(ii) Such Excused Partner shall receive no
allocations of items of income, gain, loss, deduction or
expense attributable to that Excluded Investment and no
Distributions attributable to that Excluded Investment (i.e.,
it shall be entitled to no economic returns from, and to the
maximum extent feasible shall suffer no economic detriment
attributable to, the Partnership's participation in that
Excluded Investment);
(iii) For purposes of determining the General
Partner's "carried interest" attributable to Portfolio
Investments made (in part) with such Excused Partner's paid-in
Capital Contributions, and the General Partner's obligation to
return Excess Distributions to such Excused Partner: (A) such
Excused Partner and the General Partner shall be treated as
partners in a separate "sub-partnership" with aggregate
Capital Commitment and Capital Contributions equal to the
Excused Partner's revised Capital Commitment and Capital
Contributions plus a proportionate share of the General
Partner's actual Capital Commitment and Capital Contributions,
and (B) all calculations of the General Partner's carried
interest shall be made separately, in accordance with the
relevant provisions of the Agreement, with respect to this
sub-partnership;
(iv) The amount of Expenses attributable to this
sub-partnership shall be equal to the Expenses attributable to
the Portfolio Investments held by that sub-partnership,
determined as follows: (A) all Expenses incurred solely as a
result of making, holding or disposing of a particular
Portfolio Investment (e.g., indemnification expenses for
claims arising out of that Portfolio Investment) shall be
deemed to be attributable to that Portfolio Investment; (B)
all other Expenses (excluding Expenses attributable to the
Management Fee) shall be apportioned
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among (and shall be deemed to be attributable to) all
Portfolio Investments in proportion to the Capital
Contributions used to acquire such Portfolio Investments; and
(C) the General Partner shall determine the amount of Capital
Contributions used to acquire each Portfolio Investment, and
shall recalculate periodically the amount of Expenses
attributable to each Portfolio Investment as additional
Expenses accrue, in each case in a reasonable and consistent
manner;
(v) The Management Fee payable by the Partnership
shall not be reduced as a result of any reduction in Capital
Commitments occurring pursuant to this Section 6.6, and each
Limited Partner (including each Excused Partner) shall bear
the economic impact of its proportionate share (based on its
relative Capital Commitment and without regard to any
reduction occurring pursuant to this Section 6.6) of the
aggregate amount of the Management Fee expense allocated to
all Limited Partners under this Agreement. The General Partner
is authorized to allocate Expenses attributable to payments or
accruals of the Management Fee to the sub-partnership referred
to in Section 6.6(b)(iii) and (iv) and, within such
sub-partnership, between the General Partner and any Excused
Partners, in such manner as the General Partner reasonably
determines is necessary or advisable to implement the
Partners' economic agreement as set forth in the preceding
sentence;
(vi) No Bank Regulated Partner which has become an
Excused Partner pursuant to Section 6.6 shall be required to
make any additional Capital Contributions to the Partnership
with respect to such Portfolio Investment, but the General
Partner shall adjust Partnership allocations to and within
such sub-partnership to ensure, to the extent feasible, that
such Excused Partner bears the economic burden of any
Management Fee expense attributable to such Excused Partner's
Capital Commitment (determined without regard to any reduction
thereof);
(vii) To the maximum extent feasible, except as
explicitly provided in Sections 6.6(b)(i) through (vi), the
amounts of Net Income or Net Losses allocable to, and the
Distributions made to, the Partners other than the Excused
Partner shall not be affected by the special arrangements
between the General Partner and the Excused Partner
contemplated by this Section 6.6; and
(viii) With respect to Capital Contribution calls
after an Excused Investment, the General Partner may determine
individual Partner Capital Contribution amounts on a pro rata
basis relative to the outstanding or unused Capital
Commitments of all Partners.
7. INDEMNIFICATION.
7.1. General. The General Partner, each Principal, each member of the
Advisory Committee, and each of their respective partners, members, managers,
employees, affiliates, officers, directors and agents from time to time (each an
"Indemnitee") shall be and hereby are: (i) indemnified and held harmless by the
Partnership and (ii) released by the Partners, from and against any and all
claims, demands, liabilities, costs, expenses, damages, losses, suits,
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proceedings and actions, whether civil or criminal, actual or threatened
(collectively, "Liabilities"), whether judicial, administrative, investigative
or otherwise, of any nature whatsoever, known or unknown, liquidated or
unliquidated which Liability or Liabilities arise out of the conduct of the
business or affairs of the Partnership by the respective Indemnitee or otherwise
relate to this Agreement, including, without limitation, any Liability of any
nature whatsoever resulting from an Indemnitee serving as a member of the Board
of Directors of any Portfolio Entity; provided, however, that the satisfaction
of any indemnification and holding harmless shall be from and limited to assets
of the Partnership and no Limited Partner shall have any personal liability on
account thereof; and provided, further, that an Indemnitee shall not be entitled
to indemnification and release hereunder only if it shall have been determined
by a court of competent jurisdiction that: (x) such Indemnitee did not act in
good faith and in the reasonable belief that the Indemnitee's action was in
accordance with such Person's obligations to the Partnership or such Indemnitee
acted with reckless disregard for the duties of his or its office or with
willful malfeasance; (y) such Liability arose from a material violation of this
Agreement or the gross negligence, willful misconduct, or fraud by such
Indemnitee, or from actions of such Indemnitee outside the scope of and
unauthorized by this Agreement, or from any violation of Federal or state
securities laws or (z) with respect to any criminal action or proceeding, such
Indemnitee did have cause to believe beyond any reasonable doubt that the
Indemnitee's conduct was criminal.
7.2. Expenses. Reasonable expenses, including reasonable legal
expenses, incurred by an Indemnitee in defense or settlement of any claim that
may be subject to a right of indemnification hereunder shall be advanced by the
Partnership prior to the final disposition thereof upon receipt of the
Indemnitee's undertaking to repay such amount to the Partnership if it shall be
ultimately determined that the Indemnitee was not entitled to be indemnified
hereunder. The right of any Indemnitee to the indemnification provided herein
shall be cumulative of, and in addition to, any and all rights to which such
Indemnitee may otherwise be entitled by contract or as a matter of law or
equity, and shall extend to such Indemnitee's successors, assigns and legal
representatives. All judgments against the Partnership or any Principal, in
respect of which any of them is entitled to indemnification, must first be
satisfied from Partnership assets before any such party is responsible therefor.
7.3. No Waiver, etc. Nothing contained herein shall constitute a
waiver by any Partner of any right which it may have against any party under
Federal or state securities laws.
7.4. Insurance. The General Partner may cause the Partnership to
purchase and secure insurance, to the extent available at reasonable cost (as
determined by the General Partner), covering the Liabilities described in this
Article 7.
8. EXPENSES; MANAGEMENT FEE.
8.1. Administrative Expenses. Subject to the provisions of Section 8.2,
the General Partner will bear and be charged with all ordinary, necessary and
recurring costs and expenses of administering the Partnership (other than the
Management Fee), and providing such services to the Partnership as are required
to be provided by it pursuant to this Agreement, including office expenses,
travel expenses (other than as provided for in Section 8.2(iv)), salaries and
employee benefits, and other overhead expenses of the Partnership and all
out-of-pocket costs of evaluating and developing potential Portfolio Investments
or Short-Term Investments (other than fees and
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expenses of third-party consultants and other advisors) and of making, holding
or selling Portfolio Investments and Short-Term Investments (collectively,
"Administrative Expenses"). The General Partner, at its expense, may contract
with Conning & Company or its subsidiaries for the furnishing of all of such
services.
8.2. Other Expenses. All reasonable costs and expenses of the
Partnership and (to the extent fairly allocable to the Partnership) of the
General Partner (other than Administrative Expenses) are "Other Expenses" and
will be borne by and charged to the Partnership. Other Expenses will include,
without limitation: (i) out-of-pocket expenses incurred by the Partnership or
the General Partner in connection with the organization of the Partnership and
the offering of the interests therein (but excluding any placement fees and
expenses) ("Organizational Expenses") and fees and expenses of placement agents
and syndication expenses in connection with the offering and formation of the
Partnership ("Syndication Expenses") up to an aggregate of $750,000 with such
expenses in excess of $750,000 to be offset against the Management Fee payable
to the General Partner by the Partnership pursuant to Section 8.3(a); (ii) fees
and expenses of consultants, appraisers, custodians, counsel, independent public
accountants, actuaries and other agents; (iii) finders, placement, brokerage and
other similar fees incurred making Portfolio Investments; (iv) out-of-pocket
costs of meetings with (including travel), and reports to, the Limited Partners;
(v) all expenses of the Advisory Committee; (vi) costs and expenses incurred for
the preparation and distribution of financial reports, tax reports and other
information for the benefit of the Limited Partners or as specifically requested
by a Limited Partner; (vii) any taxes, fees or other governmental charges levied
against the Partnership or its income or assets or in connection with its
business or operations; (viii) costs of any agency or administrative actions or
hearings, any governmental action or third-party litigation or other matters
that are the subject of indemnification pursuant to Article 7 hereof; (ix) costs
of winding-up and liquidating the Partnership; (x) fees and expenses incurred in
connection with potential Portfolio Investments that are not consummated by the
Partnership; and (xi) all other costs and expenses of the Partnership or the
General Partner in connection with this Agreement other than Administrative
Expenses.
8.3. Management Fee.
(a) Amount. The Partnership shall pay to the General Partner
an annual management fee (the "Management Fee") computed as follows: (i) during
the term of the Investment Period, 2.0% of aggregate Capital Commitments of the
Partnership and (ii) during the period following the end of the Investment
Period until the date of the Final Distribution, 2.0% of aggregate amount of
Capital Commitments of the Partnership invested in Portfolio Investments of the
Partnership which are unrealized as of the beginning of such period for which
the Management Fee is due and payable pursuant to Section 8.3(b) below. The
Management Fee shall be payable for the period commencing on the date of
formation of the Partnership and terminating on the date of the Final
Distribution. The amount of the Management Fee shall be reduced by the amount of
Syndication Expenses and Organization Expenses in excess of $750,000. Any amount
of such excess Syndication Expenses and Organization Expenses to be offset
against the Management Fee shall reduce the annual Management Fee due and
payable to the General Partner pursuant to Section 8.3(b) below on a pro rata
basis applied over the five years following the determination date of such
amount.
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(b) Payment. The Management Fee, calculated as provided in
this Section 8.3, shall be payable quarterly in advance, for the period
commencing with the date of this Agreement until the Final Distribution. The
initial payment shall be due as part of the Initial Capital Call and thereafter
will be made on each, January 1, April 1, July 1 and October 1 thereafter.
Quarterly installments for any period less than a full quarter shall be prorated
on the basis of the actual number of days elapsed. Upon the admission of any
Additional Limited Partner or the making of any additional Capital Commitment to
the Partnership by any Limited Partner pursuant to Section 2.3, the Management
Fee (the "Late Management Fee") attributable to the Capital Commitment of such
Additional Limited Partner (or to the additional Capital Commitment of such
existing Limited Partner) for the period commencing on the date of the inception
of the Partnership and terminating on the last day in the fiscal quarter in
which such Partner is admitted (or makes such additional Capital Commitment) and
the amount of such Partner's Late Payment Fees relating to interest on the Late
Management Fee pursuant to Section 2.3(c)(i) shall be payable on the date of
admission (or the date of making such additional Capital Commitment).
(c) Adjustments. The following adjustments shall be made to
the Management Fee:
(i) Director's fees, consulting fees, commitment
fees, monitoring fees, break-up fees and success fees
(excluding any options, warrants or other equity securities
awarded or otherwise issued to directors of a Portfolio
Entity) paid during such year to the General Partner, to any
member of the General Partner by Portfolio Entities for
services rendered by such persons ("Portfolio Entity
Remuneration") shall be used first to offset any transaction
expenses advanced by such service provider and not reimbursed
by the Partnership. Any remaining Portfolio Entity
Remuneration shall be used to reduce the Management Fee (but
not below zero) by 50% of such remaining amount, in accordance
with the terms of Sections 8.3(c)(ii) and (iii) below.
(ii) The amount of any Portfolio Entity Remuneration
to be so applied shall be applied first against the quarterly
payment next following the date of the determination of such
net remuneration and then against each successive quarterly
payment until such net remuneration has been fully utilized,
provided that no amount shall be carried over as a credit from
any fiscal year to the next.
(iii) For purposes of 8.3(c)(ii), a fee reduction
shall be deemed to have occurred when Portfolio Entity
Remuneration is actually received by the remunerated Person
and the amount of the net remuneration (and related reduction)
has been determined in good faith by the General Partner. In
the case of any fees paid in consideration other than cash
(excluding any options, warrants or other equity securities
awarded or otherwise issued to directors of a Portfolio
Entity), such fees shall be deemed to have been received by
the remunerated Person when such consideration has been
disposed of for cash and shall be deemed to be in an amount
equal to the proceeds of such disposition net of acquisition
and other transaction expenses (including taxes, if any).
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9. BOOKS AND RECORDS; REPORTS TO PARTNERS.
9.1. Books and Records.
(a) General. The General Partner shall keep or cause to be
kept complete and accurate records and books of account in which shall be
entered all such transactions and other matters relative to the Partnership's
business as are usually entered into records and books of account maintained by
persons engaged in businesses of like character or which are required by the
Act. Such books and records shall, to the extent consistent with all other
provisions of this Agreement, be maintained for all purposes in accordance with
generally accepted accounting principles consistently applied.
(b) Maintenance; Inspection. The books and records of the
Partnership shall be maintained at the offices of the General Partner, and all
such books and records shall be available for inspection and copying at the
reasonable request, and at the expense, of any Partner during ordinary business
hours. All Partners shall also have the right, at their expense and during
ordinary business hours, to meet with the Partnership's accountants.
9.2. Tax Information. The General Partner shall use its reasonable
efforts to send to each person who was a Partner at any time during a Fiscal
Year such Partnership tax information as shall be necessary for the preparation
by such person of its Federal tax returns (including information returns) within
seventy-five (75) days (but in no event later than ninety (90) days after the
end of each Fiscal Year); and, to this end, upon specific request by a Partner,
the General Partner shall provide each such Partner with a copy of the
Partnership's estimated and unaudited financial statements for each Fiscal Year
within forty-five (45) days after the close of such Fiscal Year. Upon the
request of any Limited Partner, the General Partner will undertake to furnish to
such person such additional information as may be necessary to enable such
person to file other required returns or reports with governmental agencies.
9.3. Reports to Partners.
(a) Annual Period. Within ninety (90) days after the end of
each Fiscal Year of the Partnership, the General Partner shall send to each
Limited Partner the following audited financial statements, prepared in
accordance with generally accepted accounting principles (the "Annual Financial
Statements"):
(i) a balance sheet of the Partnership as of the end
of such year;
(ii) a statement of income of the Partnership for
such year;
(iii) a statement of cash flows of the Partnership
for such year;
(iv) a statement of changes in Partner's Capital
Account for such year;
(v) schedules detailing each Portfolio Investment of
the Partnership as of the end of such year and
setting forth both the cost and the General Partner's
good faith estimate of the Carrying Value of each
Portfolio Investment as of the end of such year
presented substantially in the format
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that such information has been presented to investors
in the Prior Funds; and
(vi) notes to the audited financial statements.
The General Partner shall cause an audit of the Annual Financial Statements to
be made by the Partnership's independent public accountants, which audit shall
be conducted in accordance with generally accepted auditing standards. The
General Partner will select a nationally recognized independent public
accounting firm on behalf of the Partnership. Upon reasonable request of a
Limited Partner, the General Partner will use its reasonable efforts to provide
such other additional information relating directly to the requesting Limited
Partner's interest in the Partnership, subject to Section 17-305 of the LP Act.
(b) Quarterly Period. Within forty-five (45) days after the
end of the first, second, third and fourth fiscal quarters of the Partnership,
the General Partner shall send to each Limited Partner: (i) a report summarizing
the status of the Partnership and each Portfolio Investment of the Partnership
as of the end of such period and setting forth the General Partner's good faith
estimate of the Carrying Value of each Portfolio Investment as of the end of
such period presented substantially in the format that such information has been
presented to investors in the Prior Funds; (ii) a balance sheet, statement of
income and cash flows and statement of changes in Capital Account balances for
the Partnership with respect to such period (prepared on a pro forma basis,
unaudited); and (iii) notice of the commencement of any event during such period
entitling the Limited Partners to vote to terminate the Partnership or to vote
to remove the General Partner.
(c) Notices. The General Partner shall send to each Limited
Partner notice of the bringing of any action or proceeding against the General
Partner by one or more Limited Partners within twenty (20) days of the
commencement thereof.
9.4. Meetings. The General Partner shall hold an annual meeting of the
Partners on such date as the General Partners may determine and give at least
thirty (30) days' prior written notice to the Limited Partner, at which the
General Partner shall report on the Portfolio Investments of the Partnership.
9.5. Compliance with Laws. The General Partner shall conduct its
affairs and shall conduct the affairs of the Partnership in such a manner that
no Limited Partner will have any personal liability with respect to any
obligation of the Partnership except as expressly assumed by any Limited Partner
or as otherwise provided by law and generally so as to comply with all material
laws as applicable to it (including without limitation the Foreign Corrupt
Practices Act). The General Partner shall use its best efforts to cause all
registrations or notices required under the LP Act to be submitted or made in
accordance with the provisions of the LP Act and shall indemnify and keep
indemnified each of the Limited Partners from and against any and all costs,
expenses, claims, damages and liabilities to which they may become subject which
result from the failure by the General Partner to comply with the requirements
of the LP Act; provided, however, that the General Partner shall not be under
any obligation to indemnify and keep indemnified each of the Limited Partners
where such costs, expenses, claim damages or liabilities arise or result from a
breach by a Limited Partner of its representations and warranties contained in
the Subscription Agreement between the General Partner and the Limited Partners.
<PAGE> 40
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10. TRANSFERS
10.1. Transfer by General Partner. The General Partner shall not assign
or otherwise transfer (collectively, "Transfer") its interest, and shall not
voluntarily withdraw as General Partner of the Partnership, except with the
consent of Two-Thirds in Interest of the Limited Partners; provided, however,
that the General Partner may Transfer its interest to any successor of the
General Partner or Affiliate of Conning Corporation without the consent of the
Limited Partners.
10.2. Removal of General Partner.
(a) Actions and Conditions. The General Partner may be removed
by the action, evidenced by a written notice delivered in accordance with the
requirements of Section 13.5, and executed by a Majority in Interest of the
Limited Partners if, but only if: (i) the General Partner shall be in material
violation of this Agreement and such violation shall have continued for a period
of thirty (30) days after receipt by the General Partner of written notice
thereof in accordance with the requirements of Section 13.5, executed by a
Majority in Interest of the Limited Partners; or (ii) the General Partner shall
have been determined by a court of competent jurisdiction to be guilty of gross
negligence, fraud or willful misconduct in the conduct of the business or
affairs of the Partnership or of any felony (it being understood that the
General Partner shall promptly send written notice of any such determination to
the Limited Partners). The General Partner may be removed for any reason by the
action of Eighty Percent (80%) in Interest of the Limited Partners, evidenced by
a written notice delivered in accordance with the requirements of Section 13.5
and executed by Eighty Percent (80%) in Interest of the Limited Partners. Except
as provided in Section 10.2(b), the General Partner shall cease to be the
general partner of the Partnership upon its removal or upon the occurrence of
any other Event of Withdrawal and the provisions of Section 5.4 hereof shall
terminate at such time.
(b) Effect. Upon the removal of the General Partner or upon
the occurrence of any other Event of Withdrawal, the Partnership shall be
dissolved and wound up in accordance with the provisions of Sections 11.2 and
11.3, unless within ninety (90) days thereafter Eighty Percent (80%) in Interest
of the Limited Partners agree in writing to continue the business of the
Partnership and to the appointment of one or more general partners to replace
the General Partner.
10.3. Transfer by Limited Partners. Subject at all times to Sections
10.4 and 10.5 and unless approved in advance by the General Partner under this
Section 10.3, a Limited Partner may not Transfer all or any part of its Interest
in the Partnership to another person (an "Assignee"). Notwithstanding the
foregoing, upon reasonable prior written notice to the General Partner, a
Limited Partner may Transfer all or any part of its Interest in the Partnership
to an Assignee without such consent of the General Partner (but still subject to
Sections 10.4 and 10.5): (i) to any entity that controls, is controlled by or is
under common control with such Limited Partner; (ii) to any successor in
interest upon the sale of all or substantially all of the assets of the Limited
Partner or in connection with a merger, consolidation or dissolution of any
corporate Limited Partner; (iii) as may be required by any law or regulation;
(iv) by testamentary disposition or intestate succession; or (v) to a trust,
profit sharing plan or other entity controlled by, or for the benefit of, such
Limited Partner or one or more family members. Further, any
<PAGE> 41
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change in any trustee or fiduciary of a Limited Partner shall not be considered
to be a Transfer; provided, however, that (i) any replacement trustee or
fiduciary of an ERISA Partner is also a fiduciary under ERISA and (ii) written
notice of such change is given to the General Partner within a reasonable period
of time after the effective date thereof. For purposes of this Section 10.3,
"control" shall mean beneficial ownership of at least sixty percent (60%) of the
outstanding interests of the subject entity. No Assignee shall have the right to
become a Limited Partner (a "Substitute Limited Partner") upon the Transfer of a
Limited Partner's Interest in the Partnership, unless all of the following
conditions are satisfied:
(i) a duly executed and acknowledged written
instrument of assignment shall have been filed with the
Partnership;
(ii) the Limited Partner and the Assignee shall have
executed and acknowledged such other instruments and taken
such other actions as the General Partner shall deem
reasonably necessary or desirable to effect such substitution,
including, without limitation, the execution by the Assignee
of a counterpart of or an appropriate supplement to this
Agreement pursuant to which such Assignee agrees to be bound
by the terms and provisions hereof;
(iii) the conditions set forth in Section 10.4 have
been satisfied, and, if requested by the General Partner, the
Limited Partner or the Assignee shall have obtained an opinion
of counsel reasonably satisfactory to the General Partner
(which may include in-house counsel for such Limited Partner)
as to the legal matters set forth therein;
(iv) the Limited Partner or the Assignee shall have
paid to the Partnership such amount of money as is sufficient
to cover all expenses incurred by or on behalf of the
Partnership in connection with such substitution; and
(v) unless the Assignee is an Affiliate of the
Limited Partner, the General Partner shall have consented in
writing to such substitution, which consent will not be
withheld unreasonably.
10.4. Certain Restrictions on Transfers. Notwithstanding any other
provision of this Agreement, no Partner may Transfer in any manner whatsoever
all or any part of its Interest in the Partnership, and no attempted or
purported Transfer of such Interest shall be effective, unless: (i) such
Transfer would not result in a violation of applicable law including any Federal
or state securities laws or any term or condition of this Agreement; (ii) such
Transfer would not result in a requirement that the Partnership register as an
investment company under the Investment Company Act of 1940, as amended; (iii)
if such Transfer is to an employee benefit plan within the meaning of ERISA, the
General Partner shall have consented thereto; (iv) such Transfer is to an entity
which the General Partner deems to be a Qualified Investor; and (v) such
Transfer would not result in the Partnership being characterized as a
publicly-traded partnership for Federal income tax purposes under Section 7704
of the Code. To this end, the General Partner shall be permitted to require and
rely on representations made by the transferor Partner and the transferee
Partner in connection with any proposed Transfer of all or any portion of any
Interest to the extent that the General Partner determines that such
representations are necessary or appropriate to satisfy the provisions of this
Section 10.4.
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10.5 Further Restrictions. Any Transfer or withdrawal under this
Article 10 shall be subject to the restrictions in this Section 10.5. The
following provisions are included in this Agreement to prevent the Partnership
from being classified as a "publicly traded partnership", as defined in Section
7704 of the Code, that is taxable at the entity level:
(i) The General Partner shall not cause or permit (x)
any offering of Partnership interests to be registered under the
Securities Act, or (y) interests in the Partnership to become "traded
on an established securities market," and shall withhold its consent to
any Transfer that, to the General Partner's knowledge after reasonable
inquiry, would otherwise be accomplished by a trade on a "secondary
market or the substantial equivalent thereof," in each case within the
meaning of Sections 7704 or 469(k) of the Code and/or any Treasury
Regulations;
(ii) No Transfer of any Partnership interest or
portion thereof shall be permitted or recognized (within the meaning of
Treasury Regulation Section 1.7704-1(d)) by the Partnership or the
General Partner if and to the extent that such Transfer, if made, would
(x) fail to qualify as a "transfer not involving trading" pursuant to
Treasury Regulation Section 1.7704-1(e), and (y) cause the Partnership
to fail to qualify for the safe harbor for "private placements" set
forth in Section 1.7704-1(h), and (z) cause the Partnership to fail to
qualify for the "lack of actual trading" safe harbor set forth in
Treasury Regulation Section 1.7704-1(j), unless the General Partner
together with the Partnership's tax advisors determines that such
Transfer would not otherwise cause the Partnership to be treated as a
publicly traded Partnership under Section 7704(b) of the Code; and
(iii) The transferor and transferee shall provide the
General Partner, in connection with any proposed Transfer, written
representations to the effect that (x) the proposed Transfer will not
be effected on or through (1) a United States national, regional or
local securities exchange, (2) a foreign securities exchange or (3) an
interdealer quotation system that regularly disseminates firm buy or
sell quotations by identified brokers or dealers (including, without
limitation, the Nasdaq Automated Quotation System) and (y) such Person
is not, and its proposed Transfer or acquisition (as the case may be)
will not be made by, through or on behalf of, (1) a Person, such as a
broker or a dealer, making a market in interests in the Partnership, or
(2) a Person who makes available to the public bid or offer quotes with
respect to interests in the Partnership; and shall provide such
additional written representations as the General Partner reasonably
may request to enable it to comply with this clause (iii), and the
General Partner and counsel to the Partnership shall be permitted to
rely upon such representations and on written representations from
other Partners made prior to or contemporaneously with such proposed
Transfer.
10.6. Actions. In the event that a Limited Partner completes an
approved Transfer of an Interest, the General Partner is authorized to cause
Schedule I to be amended to reflect as appropriate the occurrence of any of the
transactions referred to in this Article 10.
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11. DURATION AND TERMINATION OF THE PARTNERSHIP.
11.1. Duration. The existence of the Partnership commenced on the date
of the filing of the Certificate of Limited Partnership pursuant to the LP Act
and its term shall continue until the first to occur of any of the following
events (an "Event of Termination"):
(i) the tenth (10th) anniversary of the date of this
Agreement; provided, however, that the General Partner may
extend the term of the Partnership for up to two (2)
additional one year terms to provide for the orderly
termination and liquidation of the Partnership's Portfolio
Investments;
(ii) the decision by the General Partner to terminate
the Partnership, together with the consent of Two-Thirds in
Interest of the Limited Partners;
(iii) the failure by the Limited Partners to continue
the business of the Partnership, in accordance with the
provisions of paragraph (b) of Section 10.2, following an
Event of Withdrawal;
(iv) the vote to terminate the Partnership by a
Majority in Interest of the Limited Partners, in the event the
Internal Revenue Service makes a determination, which is final
except for the right of judicial review, or a court of
competent jurisdiction makes a determination, that the
Partnership is or is taxable as an association taxable as a
corporation for Federal income tax purposes;
(v) the election of the General Partner to terminate
the Partnership after the failure of the Limited Partners to
terminate the Suspension Period Restrictions in accordance
with the provisions of Section 5.6; or
(vi) the vote to terminate the Partnership by Eighty
Percent in Interest of the Limited Partners.
Upon the occurrence of an Event of Termination, the General Partner shall
promptly provide notice thereof to each Limited Partner.
11.2. Winding Up. Upon the occurrence of an Event of Termination, the
Partnership shall be wound up, liquidated and dissolved as promptly as
reasonably practicable. The General Partner or, if there is no General Partner,
a liquidator appointed by a Majority in Interest of the Limited Partners, shall
proceed with the Dissolution Sale. In the Dissolution Sale, the General Partner
or such liquidator shall use its best efforts to reduce the Securities of the
Partnership to cash, subject to obtaining Carrying Value for such Securities and
any tax or legal considerations. In the event that the General Partner or such
liquidator is unable to reduce the Non-Marketable Securities of the Partnership
to cash, the General Partner or liquidator, in its sole discretion, may enter
into arrangements or form a vehicle to manage such Non-Marketable Securities
until they can be reduced to cash. Any such Limited Partner shall give notice of
its desire to have the General Partner or liquidator form such a vehicle within
ten (10) days after notice from the General Partner or liquidator which states
that the General Partner or liquidator is unable to reduce the Securities of the
Partnership to cash, consistent with obtaining Carrying Value, and which sets
forth the proposed terms of such vehicle and may designate a trustee other than
the
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General Partner. The General Partner or liquidator shall be entitled to
reasonable compensation for managing such vehicle and shall not be obligated to
manage such vehicle for more than three (3) years.
11.3. Final Distribution.
(a) Carrying Value of Assets. The Net Income or Net Losses of
the Partnership from the Dissolution Sale shall be allocated to the Partners'
Capital Accounts in accordance with Article 3. All securities remaining in the
Partnership upon completion of the Dissolution Sale shall be deemed to have been
sold at their Carrying Value and the amount of any gain or loss which would have
been realized upon a sale for such value shall be deemed to have been realized
and recognized for the purposes of computing the final allocations to the
Capital Accounts in accordance with Article 3.
(b) General Partner Account. If after final allocations to the
Capital Accounts of the Partners, the Capital Account of the General Partner is
negative, the General Partner shall contribute to the Partnership sufficient
cash or Securities previously distributed to the General Partner (valued as of
the date of return under Section 4.7) so that the balance of the Capital Account
of the General Partner is increased to zero. Notwithstanding the preceding
sentence, in no event shall the General Partner be required to return to the
Partnership an amount that is in excess of the amount described in Section 4.9
hereof. If any Securities are so returned, they shall be valued at their
Carrying Value at the time they are returned by the General Partner.
(c) Limited Partners' Accounts. The General Partner may
require a Limited Partner (including any former Limited Partner) to return
distributions made to such Limited Partner or former Limited Partner for the
purpose of meeting such Limited Partner's pro rata share of the Partnership's
indemnity obligations under Section 7 or any other liability of or claim against
the Partnership for which the Partnership has insufficient funds to pay (after
calling any unpaid Capital Commitments) in an amount up to, but in no event in
excess of, the aggregate amount of Distributions actually received by such
Limited Partner from the Partnership; provided, however, that for such purposes
no Partner shall be required to return an aggregate amount of Distributions in
excess of fifty percent (50%) of such Partner's Capital Commitment.
Notwithstanding the terms of this Agreement, if it is determined under the LP
Act or other applicable law that any Limited Partner has received a Distribution
which it is required to return to or for the account of the Partnership or
Partnership creditors, then such Partner shall be obligated to return such
Distribution in the full amount required under the LP Act or other applicable
law. The obligation of any Limited Partner to return all or any part of a
Distribution made to such Limited Partner shall be the obligation of such
Limited Partner only and not of any other Partner. Any amount returned by a
Limited Partner pursuant to this Section 11.3(c) shall be treated as a
contribution of capital to the Partnership. The General Partner shall be
required to return (at the same time as the Limited Partners) its pro rata
portion (as provided below) of any amounts required to be returned by Limited
Partners under this Section 11.3(c). A Partner's share of the giveback
obligation under this Section 11.3(c) will be based on the amount of
distributions received by such Partner arising out of the Portfolio Investment
giving rise to the Partnership's indemnity obligations under Section 7 or other
liability or claim; provided, however, that if such indemnity obligations or
other liability or claim are not related to a particular Portfolio Investment,
then amounts required to be returned under this Section 11.3(c) will be funded
out of distributions generally to those Partners or former Partners who were
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Partners at or after the time of the event giving rise to such indemnity
obligations or other liability or claim. Notwithstanding the foregoing, no
Limited Partner shall be required to return a distribution after the first
anniversary of the Final Distribution; provided, however, that if at the end of
such period, there are any proceedings under Section 7 then pending or any other
liability (whether contingent or otherwise) or claim then outstanding, the
General Partner shall so notify the Limited Partners at such time (which notice
shall include a brief description of each such proceeding (and of the
liabilities asserted in such proceeding) or of such liabilities and claims) and
the obligation of the Limited Partners to return any distribution for the
purpose of meeting their giveback obligations under the Section 11.3 shall
survive with respect to each such proceeding, liability or claim set forth in
such notice (or any related proceeding, liability or claim based upon the same
or similar claim) until the date that such proceeding, liability or claim is
ultimately resolved and satisfied.
(d) Priority of Distributions. The cash and any other property
remaining in the Partnership upon completion of the Dissolution Sale shall be
applied or distributed as a final distribution (a "Final Distribution") in one
or more installments in the following order of priority:
(i) to creditors of the Partnership, including
Partners who are creditors, in the order of priority as provided
by law; and
(ii) to the Partners, in proportion to the amounts
in their Capital Accounts.
12. DEFINITIONS. As used herein, the following terms have the following
meanings:
7% Distribution Preference means, with respect to any Partner and at
any time, an amount which if distributed to such Partner at such time would
cause the aggregate amount of distributions made to such Partner and such
Partner's predecessors in interest by the Partnership (determined, with respect
to distributions in kind, pursuant to Section 4.6) to equal but not exceed an
amount equal to such Partner's (and any such predecessor's) Aggregate 7%
Preferential Return as of such time.
7% Preferential Return means, with respect to any Partner and as of the
end of any fiscal quarter, an amount (not less than zero) equal to such
Partner's Return Base as of the last day of the preceding fiscal quarter
multiplied by 0.017059% (the equivalent, with quarterly compounding, of 7%
compounded annually). A Partner's 7% Preferential Return for any fiscal period
consisting of less than a full fiscal quarter shall be determined through
proration on a daily basis by (1) multiplying 0.017059% times a fraction, the
numerator of which is the actual number of days in such fiscal period and the
denominator of which is the actual number of days in the fiscal quarter that
includes such fiscal period; and (2) multiplying the result by such Partner's
Return Base as of the end of the preceding fiscal quarter.
7% Preferential Return Allocation means, with respect to any Partner
and as of the end of any fiscal period: (a) such Partner's Aggregate 7%
Preferential Return determined as of the end of such fiscal period; reduced, but
not below zero, by (b) the excess (if any) of (1) the aggregate amount of Net
Income previously allocated to such Partner and such Partner's predecessors in
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interest (if any) over (2) the aggregate amount of Net Loss previously allocated
to such Partner and such predecessors, in each case since the inception of the
Partnership.
Additional Limited Partner: An additional Limited Partner admitted to
the Partnership pursuant to Section 2.2.
Administrative Expenses: As defined in Section 8.1.
Advisory Committee: As defined in Section 5.3.
Affiliate: As to any person, any other person directly or indirectly
controlling, controlled by, or under common control with, such person.
Aggregate 7% Preferential Return means, with respect to any Partner and
fiscal period, the sum of such Partner's 7% Preferential Returns for each
calendar quarter (and partial quarter) from the inception of the Partnership
through the end of such fiscal period.
Agreement: This Limited Partnership Agreement, as amended from time to
time.
Annual Financial Statements: As defined in Section 9.3(b).
Assignee: As defined in Section 10.3.
Bank Regulated Partner: A Limited Partner which is a bank holding
company as defined in Section 2 (c) of the Bank Holding Company Act of 1956, or
an Affiliate thereof.
Capital Account: The capital account of each Partner on the books of
the Partnership, as described in Section 3.1.
Capital Commitment: As to any Limited Partner, the amount of capital
committed to be contributed to the Partnership by such Limited Partner as shown
on Schedule I hereto, as revised from time to time in accordance with this
Agreement.
Capital Contribution: As to any Partner at any time, the capital
contributed to the Partnership by such Partner at or before such time, including
any additional Capital Contribution of such Partner under Section 3.6(c) and any
amount allocated to the Capital Account of such Partner under Section 3.6(d),
less any deduction pursuant to such Section.
Carrying Value: The value of Securities as determined in accordance
with the procedures set forth in Section 4.7.
Certificate of Limited Partnership: The Certificate of Limited
Partnership of the Partnership, as amended from time to time.
Code: The Internal Revenue Code of 1986, as amended from time to time;
and Treas. Reg. means the Treasury Regulation and related rules promulgated
under the Code.
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Cost: With respect to Partnership assets and unless the context
otherwise requires, the Partnership's adjusted tax basis in such assets for
federal income tax purposes, provided, however, that, if the Partnership has
made an election under Section 754 of the Code, such tax basis shall be
determined after giving effect to adjustments made under Section 734 of the Code
but (except as provided in Treasury Regulations Section 1.734-2(b)(1)) without
regard to adjustments made under Section 743 of the Code.
Cumulative Net Income: As of the time of any determination, the excess
(if any) of the cumulative Net Income of the Partnership from its inception
through and including such time over the cumulative Net Losses of the
Partnership over that period.
Custodian: As defined in Section 5.5.
Defaulting Limited Partner: As defined in Section 3.6(a).
Disposed Investments: As of any time of determination, all Portfolio
Investments that have been sold, distributed to the Partners, written off as
worthless securities, or otherwise disposed of, in whole or in part, to the
extent so distributed or disposed of at or prior to the date of determination;
provided, however, that any exchange of any securities of a Portfolio Entity for
other securities or property (other than cash or cash equivalents) shall not
constitute a disposition of the original securities. For this purpose, the
following events shall be treated as partial dispositions of securities:
(a) Each principal payment (or portion thereof) on any
security that constitutes a debt instrument for federal income tax purposes
shall be treated as a disposition of a portion of such security that is
equivalent on a percentage basis to the portion of the original principal amount
of such debt instrument represented by such principal payment;
(b) In the event that the Partnership agrees to capitalize any
interest that is accrued but remains unpaid on any security that constitutes a
debt instrument for federal income tax purposes and to add such interest to
principal, the amount so capitalized shall be treated, solely for purposes of
determining whether payments subsequently made to the Partnership with respect
to such security will constitute Distributions, as a follow-on investment in the
debt securities of the issuer, and any determination regarding the extent to
which subsequent payments made to the Partnership with respect to the original
or any such follow-on investment in debt securities is properly treated as a
payment of principal shall be made in accordance with federal income tax
principles;
(c) Each payment (or portion thereof) made to the Partnership
in redemption of any security constituting stock for federal income tax purposes
that is treated for such purposes as a distribution in part or full payment in
exchange for such stock (rather than, for example, a dividend paid on such
security) shall be treated as a disposition of the portion of such security
treated for such purposes as having been exchanged;
(d) Any partial repurchase by the issuer and any lapse or
other termination of part of any security constituting an option or warrant for
federal income tax purposes shall be treated as a disposition of a portion of
such security that is equivalent on a percentage basis to the portion of the
Partnership's investment in such security (as reflected in the Partnership's
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financial records maintained in accordance with federal income tax principles)
represented by the portion of such security that was repurchased, lapsed or
terminated; and
(e) With respect to any Portfolio Investment that is subject
to a Net Write-Down, such Portfolio Investment shall be treated as a Disposed
Investment to the extent of such Net Write-Down while such Net Write-Down is in
effect.
In the event that the General Partner determines, pursuant to 4.2, to cause a
portion of the proceeds attributable to the disposition of any Portfolio
Investment to be retained by the Partnership and invested in other Portfolio
Investments, then, for purposes of determining the Partners' Priority Return
Amounts, the following portion of the original Portfolio Investment shall not be
treated as Disposed Investments: the entire amount of such original Portfolio
Investment multiplied by a fraction, the numerator of which is the amount of
such proceeds reinvested in new Portfolio Investments and the denominator of
which is the total amount of proceeds attributable to the disposition of such
original Portfolio Investment.
Dissolution Sale: All sales and liquidations by or on behalf of the
Partnership of all or substantially all of its assets in connection with or in
contemplation of the winding up of the Partnership.
Distribution: Any distribution made by the Partnership to any one or
more Partners.
ERISA Partner: Any Limited Partner which is (a) an "employee benefit
plan" within the meaning of Section 3(3) of ERISA and subject to Part 4 of Title
I of ERISA, (b) a "plan," as defined in Section 4975(e)(1) of the Code, to which
the provisions of section 4975 of the Code are applicable, or (c) any other
Person, any of the assets of which constitute "plan assets," within the meaning
of the Plan Assets Regulation, of a plan described in (a) or (b) above.
Event of Termination: As defined in Section 11.1.
Event of Withdrawal: Any of the following events with respect to the
General Partner:
(a) the General Partner withdraws from the Partnership as
provided in Section 17-602 of the LP Act;
(b) the General Partner ceases to be a member of the
Partnership as provided in Section 10.1;
(c) the General Partner is removed as a General Partner in
accordance with Section 10.2;
(d) the General Partner: (i) makes an assignment for the
benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is
adjudicated a bankrupt or insolvent; (iv) files a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation; (v) files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of this nature; or
(vi) seeks, consents to, or acquiesces in the appointment of
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a trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of its properties;
(e) if within one hundred twenty (120) days after the
commencement of any proceeding against the General Partner seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, the proceeding has not
been dismissed, or if within ninety (90) days after the appointment without its
consent or acquiescence of a trustee, receiver or liquidator of the General
Partner or of all or any substantial part of its properties, the appointment is
not vacated or stayed, or if within ninety (90) days after the expiration of any
such stay, the appointment is not vacated; or
(f) the dissolution and commencement of winding up of the
General Partner Excluded Investment: As defined in Section 6.6(a).
Excused Partner: As defined in Section 6.6(a).
Expenses: For any Fiscal Period, expenses or losses of the Partnership
incurred during such Fiscal Period, as determined pursuant to accrual method
Federal income tax accounting principles, including, without limitation, all
amounts borne by and charged to the Partnership pursuant to Sections 8.2 and
8.3.
Final Distribution: As defined in Section 11.3(c).
Fiscal Period: Any Fiscal Year or Interim Accounting Period.
Fiscal Year: As defined in Section 1.5.
General Partner: Conning Investment Partners VI, L.L.C., a limited
liability company organized and existing under the laws of the state of
Delaware.
Income: For any Fiscal Period, all income and gains of the Partnership
recognized for Federal income tax purposes, plus all income earned by the
Partnership which is exempt from Federal income tax.
Indemnitee: As defined in Section 7.1.
Interest: An interest as a Partner in the Partnership.
Interim Accounting Period: As defined in Section 3.5.
Investment Guidelines: As defined in Section 5.1.
Investment Period: As defined in Section 2.2(b).
Key Person Trigger Event: As defined in Section 5.6.
Late Expense: As defined in Section 3.3(c).
Late Management Fee: As defined in Section 8.3(b).
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Late Payment Fees: As defined in Section 2.3(c).
Late Portfolio Investment Capital Contribution: As defined in Section
2.3(c).
Liabilities: As defined in Section 7.1.
Limited Partner Percentage: As to any Limited Partner for any Fiscal
Period, the fraction, expressed as a percentage, having as its numerator the
balance of the Capital Contributions of such Limited Partner immediately prior
to the end of such Fiscal Period and having as its denominator the aggregate
amount of the balances of all of the Capital Contributions of all of the Limited
Partners immediately prior to the end of such Fiscal Period.
Limited Partners: At any time, the limited partners of the Partnership.
LP Act: The Uniform Limited Partnership Act, as adopted by the State of
Delaware and as amended from time to time.
Majority [or Two-Thirds or Eighty Percent or X%] in Interest of the
Limited Partners: At any time, Limited Partners whose Limited Partner
Percentages aggregate more than the requisite designated percentage (i.e.,
Majority, Two-Thirds, Eighty Percent, as the case may be) of the Limited Partner
Percentages of all the Limited Partners in the Partnership.
Management Fee: As defined in Section 8.3.
Marketable Securities: Securities that are traded on a national
securities exchange or reported through the automated quotation system of a
registered securities association and which at the same time are not subject to
restrictions on transfer of the sort referred to in Section 4.6(b).
Net Asset Value: As of any date, the amount by which the value of the
Partnership's assets, determined in accordance with Section 4.7, exceeds the
amount of its liabilities.
Net Income: For any Fiscal Period, the excess, if any, of the Income of
the Partnership over Expenses for such Fiscal Period.
Net Losses: For any Fiscal Period, the excess, if any, of the Expenses
of the Partnership over the Income of the Partnership for such Fiscal Period.
Net Write-Down: As of any time, the sum of the amounts by which any
Portfolio Investment that is not a Disposed Investment in its entirety has been
written down on the Partnership's books in accordance with the rules set forth
below to less than its Cost, but only to the extent that such write-down has not
previously been offset by a corresponding write-up.
(a) In the case of any Portfolio Investment for which market
quotations are readily available, then, solely for purposes of determining the
apportionment of distributions among the Partners:
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(i) the General Partner shall adjust the value of
such investment as shown in the Partnership's financial
records to its Carrying Value (determined in accordance with
Section 4.7) at the end of the fiscal period in question, and
(ii) if the Carrying Value of any such Portfolio
Investment that previously has been subject to a downward
adjustment subsequently increases, the General Partner shall
adjust the value of such investment as shown in the
Partnership's financial records to its Carrying Value at the
end of the period in question.
(b) In the case of any Portfolio Investment for which market
quotations are not readily available:
(i) if the General Partner shall determine in the
good faith exercise of its discretion that there has been a
significant decline as of the end of any fiscal period in the
Carrying Value of such Portfolio Investment, then, solely for
purposes of determining the apportionment of distributions
among the Partners, the General Partner shall write down the
value of such investment in the Partnership's financial
records by the amount of such decline not previously taken
into account in making such a downward adjustment; and
(ii) if the General Partner shall determine in the
good faith exercise of its discretion (after consultation with
the Partnership's independent accountants) that as of the end
of any fiscal period there has been a significant reversal or
mitigation of circumstances previously giving rise to a
write-down in the value of such Portfolio Investment, then,
solely for purposes of determining the apportionment of
distributions among the Partners, the General Partner shall
write up the value of such investment by any amount (as
determined in its sole discretion) not previously taken into
account in making such an upward adjustment; and
(iii) In the case of any such Portfolio Investment
that is a debt obligation,
(A) the determination by the General Partner
of the decline in such Carrying Value shall take into
account only changes in the creditworthiness of the
issuer of the obligation and not any changes which
may have taken place in general interest rate levels,
and
(B) any such determination of
creditworthiness may be made by reference to the
rating of the issuer's outstanding debt by Standard &
Poors Corporation, Moody's Investor Service, Inc. or
any other nationally-recognized rating organization
in the United States, the issuer's NAIC rating, and
such other information as the General Partner may
deem relevant.
(c) In no event shall any Portfolio Investment be written up
for these purposes to an amount exceeding the Cost of that security.
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Non-Marketable Securities: Any securities other than Marketable
Securities.
Optionees: As defined in Section 3.6(e).
Optionor: As defined in Section 3.6(e).
Organizational Expenses: As defined in Section 8.2.
Other Expenses: As defined in Section 8.2.
Partners: As defined in Section 1.1.
Partnership: Conning Capital Partners VI, L.P., the Delaware limited
partnership, referred to in the first paragraph of this Agreement.
Partnership Return: The return of partnership income which the
Partnership is required to file with respect to any taxable year pursuant to
Section 6031 of the Code.
Portfolio Entity: As defined in Section 5.1.
Portfolio Investment: As defined in Section 5.1.
Prime Rate: the variable rate of interest, per annum, most recently
published in the Wall Street Journal as its "prime rate."
Principals: John B. Clinton, Gregory L. Batton, Stephan L.
Christiansen, Scot Galliher, Preston B. Kavanagh, Steven F. Piaker and Gerard
Vecchio.
Priority Return Amount: With respect to any Partner and at any time, an
amount which, if distributed to such Partner at such time, would cause the
aggregate amount of distributions made by the Partnership to such Partner and
such Partner's predecessors in interest from the inception of the Partnership
through such time (other than those distributions necessary to satisfy the
requirements of Section 4.3(ii)) to equal but not exceed that portion of such
Partner's Capital Contribution that, at or prior to the time of determination,
is reflected in the Partnership's books as having been used by the Partnership:
(a) To acquire any Portfolio Investments that, as of such
time, are Disposed Investments (including, for avoidance of doubt, any
investments that are subject to a Net Write-Down, to the extent provided for in
clause (e) in the definition of "Disposed Investments"), or
(b) To pay any expenses properly borne by the Partnership
under this Agreement (including but not limited to the Management Fee,
Organizational Expenses and Syndication Expenses not in excess of $750,000 in
the aggregate, and indemnification expenses, if any), but only:
(i) To the extent of such Partner's proportionate
share (based on its relative Capital Contribution) of the
amount of such expenses attributable to investments that, at
such time, are Disposed Investments; and
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(ii) To the extent that the Partnership has not,
subsequent to the payment of such expenses but prior to the
time of determination, used proceeds to acquire additional
Portfolio Investments, at least equal in cost to the expenses
so paid (in which event the Partners' Capital Contributions
that were actually used to pay such expenses shall be deemed,
for purposes of determining their Priority Return Amounts, to
have been used to acquire such additional Portfolio
Investments).
For purposes of this definition, (A) any expenses borne by the Partnership shall
be deemed to have been paid with Partnership funds other than the Partners'
Capital Contributions to the extent that the Partnership has such other funds
available to pay such expenses; (B) the aggregate amount of the Partnership's
expenses from inception through any date of determination that have been paid
with the Partners' Capital Contributions shall be apportioned among all
Portfolio Investments (and the amounts so apportioned shall be deemed to be
attributable to such Portfolio Investment) that were acquired by the Partnership
since inception with the Partners' Capital Contributions in proportion to the
relative Cost of such investments except that, to the extent that a particular
Portfolio Investment has become a Disposed Investment, no further Partnership
expenses shall be deemed to be attributable to that investment; (C) for purposes
of the preceding clause (B), the General Partner may use any reasonable method
(including but not limited to a quarterly or monthly convention) to determine
the amount of expenses incurred from the Partnership's inception through such
date of determination; and (D) in no event shall the Limited Partners' aggregate
Priority Return Amounts exceed, at any time, their aggregate Capital
Contributions at such time reduced (but not below zero) by the aggregate amount
of Distributions previously distributed to them, other than those distributed
pursuant to Section 4.3(ii) as 7% Distribution Preference amounts.
Prior Funds: Conning Insurance Capital Limited Partnership, Conning
Insurance Capital International Partners, Conning Insurance Capital Limited
Partnership II, Conning Insurance Capital International Partners II, Conning
Insurance Capital Limited Partnership III and Conning Insurance Capital
International Partners III, L.P., Conning Connecticut Insurance Fund, L.P., and
Conning Capital Partners V, L.P.
Qualified Investor: An institutional or other sophisticated investor to
which, in the opinion of the General Partner, an interest in the Partnership may
be offered in a private placement without any violation of the Federal
securities laws or any other applicable laws or regulations.
Related Party: As defined in Section 5.4(e).
Remaining Portion: As defined in Section 3.6(e)(ii).
Return Base: shall mean, with respect to any Partner and as of any
determination date, an amount, not less than zero, equal to:
(a) such Partner's Return Base as of the end of the calendar
quarter preceding such determination date (the "Prior Quarter");
(b) increased by
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(i) all Capital Contributions made by such Partner to
fund Portfolio Investments (or pay related expenses subject to
capitalization as part of the Cost of such investments for
federal income tax purposes) to the extent that such
contributions are both (A) received by the Partnership from
such Partner at any time during or prior to the fiscal period
commencing at the end of the Prior Quarter and ending at such
determination date and (B) actually used by the Partnership
during such fiscal period to make such Portfolio Investments,
or pay such expenses (provided that, for this purpose, any
such contributions received by the Partnership during any
fiscal period and held by the Partnership for 60 days after
receipt without being so used shall be deemed to have been so
used as of the first day following the expiration of such
60-day period);
(ii) all Capital Contributions made by such Partner
for any purpose other than to fund Portfolio Investments (or
pay related expenses subject to capitalization as part of the
Cost of such investments for federal income tax purposes) to
the extent that such contributions are received by the
Partnership from such Partner during the fiscal period
commencing at the end of the Prior Quarter and ending at such
determination date; and
(iii) such Partner's full 7% Preferential Return for
the fiscal period commencing at the end of the Prior Quarter
and ending at such determination date; and
(c) reduced by an amount equal to the sum of all distributions
made to such Partner by the Partnership during the fiscal period commencing at
the end of the Prior Quarter and ending at such determination date.
For purposes of the preceding sentence: (1) in determining such Partner's Return
Base as of the Partnership's first determination date, the day on which such
Partner made its initial capital contribution pursuant to this Agreement shall
be deemed to constitute the end of the Prior Quarter; (2) except as provided in
the preceding clause (1), any capital contribution actually received by the
Partnership from such Partner during any calendar quarter or within five
business days thereafter shall be deemed to have been received on the last day
of such quarter; (3) any distribution actually made to such Partner by the
Partnership during any calendar quarter or within five (5) business days
thereafter shall be deemed to have been made on the last day of such quarter;
(4) all contributions made to the Partnership by such Partner's predecessors in
interest (if any), all distributions made by the Partnership to any such
predecessors, and all 7% Preferential Returns of any such predecessors shall be
taken into account as if such contributions had been made by, such distributions
had been made to, and such 7% Preferential Returns had been for the benefit of,
such Partner; (5) in the event the General Partner retains distributable amounts
for reinvestment in accordance with Sections 4.2 and 5.1(a)(iv), only the cost
basis of Securities constituting the Disposed Investment shall be included in
the Return Base; and (6) distributions received by the General Partner shall be
taken into account to reduce the General Partner's Return Base pursuant to
clause (c) of this definition only to the extent of that portion of such
distributions that the General Partner would have received if it had made its
Capital Contributions to the Partnership in exchange for an interest as a
Limited Partner and held no interest as a general partner of the Partnership
(and another person had served as the General Partner hereunder).
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For avoidance of doubt, in the event that any Partner receives distributions
that exceed the sum of such Partner's Aggregate 7% Preferential Return and
Return Base, and subsequently makes contributions to the Partnership that
otherwise would increase such Partner's Return Base, the resulting increase in
such Partner's Return Base shall be limited to the excess, if any, of the amount
so contributed over the sum of all such excess distributions.
Deemed capital contributions attributable to default penalties imposed by
Section 3.6(d) shall be treated for purposes of this definition as provided in
that Section.
Securities: Shares of capital stock, limited partnership interests,
warrants, options, bonds, notes, rights, debentures and other securities and
equity interests of whatever kind of any person, partnership, corporation or
government, whether readily marketable or not.
Securities Act: The Securities Act of 1933, as amended.
Short-Term Investments: Any investment by the Partnership in U.S.
government securities, certificates of deposit, commercial paper, and any other
banking or money market instruments or in pooled investment accounts which in
turn invest in such securities, which will have a rating of "BBB" or higher by
Moody's Investors Services, Inc. or "Baa" or higher by Standard & Poors
Corporation.
Subscription Agreement: As defined in Section 9.5.
Substitute Limited Partner: As defined in Section 10.3.
Suspension Period Restrictions: As defined in Section 5.6.
Syndication Expenses: As defined in Section 8.2.
Tax Matters Partner: As defined in Section 5.2(g).
Transfer: As defined in Section 10.1.
13. MISCELLANEOUS.
13.1. Waiver of Partition. Each Partner hereby irrevocably waives any
and all rights that it may have to maintain an action for partition of any of
the Partnership's property.
13.2. Power of Attorney.
(a) General. Each Limited Partner hereby makes, constitutes
and appoints the General Partner, with full power of substitution and
resubstitution, its true and lawful attorney for it and in its name, place and
stead for its use and benefit, to sign, execute, certify, acknowledge, file and
record all instruments amending, restating or canceling the Certificate of
Limited Partnership, as the same may hereafter be amended or restated, that may
be appropriate, and to sign, execute, certify, acknowledge, file and record such
other agreements, instruments or documents as may be necessary or advisable: (i)
to reflect the exercise by the General Partner of
<PAGE> 56
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any and all of the powers granted to it under this Agreement; (ii) to reflect
the admission to the Partnership of any Limited Partner or an increase in the
Capital Contributions of any Limited Partner or withdrawal of any Limited
Partner in the manner prescribed in this Agreement; and (iii) which may be
required of the Partnership or of the Partners by the laws of Delaware or any
other jurisdiction. Each Limited Partner hereby gives such attorney-in-fact full
power and authority to do and perform each and every act required by the
foregoing sentence as fully as such Limited Partner might or could do if
personally present, and hereby ratifies and confirms all that such
attorney-in-fact shall lawfully do or cause to be done by virtue thereof.
(b) Scope. The power of attorney granted pursuant to paragraph
(a) of this Section 13.2: (i) is a special power of attorney coupled with an
interest and, except as provided in clause (iii) of this paragraph (b) of
Section 13.2, is irrevocable; (ii) may be exercised by such attorney-in-fact by
listing all of the Limited Partners executing any agreement, certificate,
instrument or document with the single signature of such attorney-in-fact acting
as attorney-in-fact for all of them; and (iii) with respect to any Limited
Partner, shall terminate upon the effectiveness of the admission of a Substitute
Limited Partner pursuant to Section 10.3 except that the power of attorney for
such Limited Partner shall survive such substitution for the sole purpose of
enabling such attorney-in-fact to execute, acknowledge and file any such
agreement, certificate, instrument or document as is necessary to effect such
substitution.
13.3. Modifications.
(a) General. This Agreement may be modified or amended only
with the written consent of the General Partner and Two-Thirds in Interest of
the Limited Partners; provided, however, that no amendment shall be made to this
Agreement which would:
(i) add to, detract from or otherwise modify the
purposes of this Partnership without the consent of all the
Partners;
(ii) increase the Capital Commitment of any Partner
(other than pursuant to Section 2.1 or 3.6); convert a Limited
Partner's Interest into a General Partner's Interest; modify
the limited liability of a Limited Partner; or increase the
liabilities or responsibilities of, or diminish the rights or
protections of, any Partner under this Agreement; in each
case, without the consent of each such affected Partner;
(iii) alter the Interest of any Partner in income,
gains and losses or amend or modify any portion of Section 2.2
or Article 3 or 4 without the consent of each Partner
adversely affected by such amendment or modification;
provided, however, that the admission of Additional Limited
Partners in accordance with the terms of this Agreement shall
not constitute such an alteration, amendment or modification;
(iv) amend or modify any portion of Article 10 hereof
in a manner that would further restrict the transferability of
a Limited Partner's Interest without the consent of all of the
Limited Partners;
<PAGE> 57
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(v) amend any provision hereof which requires the
consent, action or approval of a specified percentage in
Interest of the Limited Partners without the consent of such
specified percentage in Interest of the Limited Partners; or
(vi) amend this Section 13.3 without the consent of
all the Partners.
(b) Special Notice. If the General Partner dismisses or
replaces the Partnership's independent public accountants, it shall notify the
Limited Partners of such action and, if so requested by a Majority in Interest
of the Limited Partners, it shall rescind or amend such action as requested.
13.4. Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby. No default
hereunder by a Limited Partner shall excuse a default by any other Limited
Partner.
13.5. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first class registered mail or certified mail, postage
prepaid, if to the Partners and air mail if such Partner is outside of the
United States, at the addresses set forth on Schedule II attached hereto, and if
to the Partnership, at the address referred to in Section 1.4, or to such other
address as the Partnership or any Partner shall have last designated by notice
to the Partners or the Partnership and the other Partners, as the case may be.
Notices mailed in accordance with the foregoing shall be deemed to have been
given and made seven (7) days following the date so mailed. All Distributions
made hereunder to any Limited Partner shall be made in accordance with such
reasonable written instructions as may be furnished by such Limited Partner to
the General Partner from time to time.
13.6. Governing Law. This Agreement shall be governed by the laws of
the State of Delaware.
13.7. Successors and Assigns. Except as otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
Partners and their legal representatives, successors and assigns.
13.8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall constitute one and the same instrument.
13.9. Headings. The Section headings in this Agreement are for
convenience of reference only, and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
13.10. Further Actions.
(a) Non-U.S. Partner Tax Matters. Each Limited Partner which
is a non-U.S. Person under the Code agrees that it will provide the information
and forms requested by the General Partner, including U.S. Tax Form Schedule W-8
(foreign status certificate) and
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Form 1001 (reduced withholding rate certificate), as may be applicable, and
shall cooperate with the General Partner upon its request in order to maintain
appropriate records and provide for withholding amounts, if any, relating to its
Interest in the Partnership, and, further, in the event that such Limited
Partner fails to provide such information regarding U.S. tax withholding, the
General Partner, the Partnership and the other Partners shall have no obligation
or liability to the non-U.S. Limited Partner with respect to any U.S. tax
matters or obligations which may be assessed against the non-U.S. Limited
Partner.
(b) Further Assurances. Each Partner shall execute and deliver
such other certificates, agreements and documents, and take such other actions,
as may reasonably be requested by the General Partner in connection with the
formation of the Partnership and the achievement of its purposes, including,
without limitation, (i) any documents that the General Partner deems necessary
or appropriate to form, qualify, or continue the Partnership as a limited
partnership in all jurisdictions in which the Partnership conducts or plans to
conduct business, and (ii) all such agreements, certificates, tax statements and
other documents as may be required to be filed in respect of the Partnership.
13.11. Delivery of Certificate. The General Partner shall provide a
copy of the Certificate of Limited Partnership to each Limited Partner that
makes a request therefor, but shall not otherwise be required to provide such
copies.
[Remainder of Page Left Blank Intentionally.]
[Signature Pages Follow Immediately.]
<PAGE> 59
CONNING CAPITAL PARTNERS VI, L.P.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
GENERAL PARTNER:
CONNING INVESTMENT PARTNERS VI, L.L.C.
By: /s/ John B. Clinton
------------------------
John B. Clinton
Principal Manager Member
<PAGE> 60
CONNING CAPITAL PARTNERS VI, L.P.
COUNTERPART LIMITED PARTNER SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has executed this Agreement for the
purchase of a limited partnership interest (the "Interest") in Conning Capital
Partners VI, L.P. (the "Partnership"). This page constitutes the signature page
for each of (i) the Subscription Agreement for the purchase of the Interest in
the amount set forth below, and (ii) the Limited Partnership Agreement of the
Partnership. Upon acceptance by the General Partner, the undersigned shall be
admitted as a Limited Partner of the Partnership and hereby authorizes this
signature page to be attached to a counterpart of the such Subscription
Agreement and such Limited Partnership Agreement, each as executed by the
General Partner.
<TABLE>
<S> <C>
Date: March 7, 2000 Metropolitan Life Insurance Company
(Print or Type Name of Investor)
Capital Commitment/Subscription Sign Here:
AMOUNT OF INTEREST PURCHASED: By: /s/ Charles E. Symington
$ (SEE NEXT Title (if applic.) Managing Director
PAGE)*____________________
Full name and address of Investor: Preferred address for receiving communications (Do not
complete if already listed in prior column):
Metropolitan Life Insurance Company
One Madison Avenue, New York, NY 10010 Metropolitan Life Insurance Company
Attn: Vice-President & Investment Counsel 334 Madison Avenue
(Law, Area 6H) Convent Station, NJ 07961
Attn: Director, Corporate Equities
Telephone No.: (973) 254-3000 Social Security or Federal Tax
Telecopy No.: (973) 254-3055 Identification No.:
Email Address: 13-5581829
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Type of Entity: Wire Instructions:
- --------------- ------------------
<S> <C>
____ Tax exempt under Section 501(c) of Bank: The Chase Manhattan Bank
Tax Code Bank ABA No.: 021-000-021
____ BANK LIMITED PARTNER Address: New York, NY
_X__ Insurance Company Account Name: Metropolitan Life Insurance Company,
____ ERISA Plan Corporate Partnerships
____ Governmental Plan Account Number: 002-2-430060
</TABLE>
*Amount of Interest Purchased. For purposes hereof, a "Closing" shall mean each
date, pursuant to Section 2.1 or 2.3 of the Partnership Agreement, that a
Partner (other than Metropolitan Life Insurance Company ("MetLife")) is admitted
to the Partnership or any existing Partner (other than MetLife) increases its
Capital Commitment. As a result of the initial Closing that occurred on February
25, 2000, as of the date hereof, the Interest hereby purchased, and the Capital
Commitment of MetLife hereunder, is equal to $7,944,444.44. At each subsequent
Closing, the Interest hereby purchased, and the Capital Commitment of MetLife
hereunder, shall be increased by an amount equal to the product of (x) five and
one-half percent (5.5%) and (y) the result of dividing (i) the aggregate Capital
Commitments of the Partnership that are made at such Closing (without regard to
the additional Capital Commitment of MetLife to be made at such Closing) by (ii)
ninety four and one-half percent (94.5%); provided that, in no event shall the
total Capital Commitment of MetLife be increased to exceed $27,500,000.
<PAGE> 1
Exhibit (d)(5)
CONNING INVESTMENT PARTNERS VI, L.L.C.
CITYPLACE II
185 ASYLUM STREET
HARTFORD, CT 06103
March 7, 2000
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
This letter agreement is executed and delivered to confirm certain agreements
with respect to the participation of Metropolitan Life Insurance Company
("MetLife") in Conning Capital Partners VI, L.P., a Delaware limited partnership
(the "Partnership"), and the execution, delivery and performance by MetLife of
the Limited Partnership Agreement of the Partnership dated as of February 25,
2000 (as amended, restated or modified from time to time, the "Partnership
Agreement"). Any capitalized term used herein but not otherwise defined herein
shall have the meaning ascribed to such term in the Partnership Agreement.
In order to induce MetLife to purchase a Limited Partnership Interest, the
General Partner, on behalf of itself and the Partnership, hereby agrees as
follows:
1. Advisory Committee. In accordance with the provisions of Section 5.3(a) of
the Partnership Agreement, at such time as the sum of (x) the Capital
Commitment of MetLife and (y) the Capital Commitment of any of its
subsidiaries (including, without limitation, Conning Corporation and its
subsidiaries) exceeds an aggregate of $40,000,000, at the request of
MetLife, the General Partner shall select a designee of MetLife as a
member of the Advisory Committee (the "MetLife Representative"). In the
event of any removal, resignation or other replacement of the MetLife
Representative to the Advisory Committee, the General Partner agrees to
select an alternative designee of MetLife as a member of the Advisory
Committee (it being agreed that any such alternative designee shall be
considered the "MetLife Representative" for all purposes under this
paragraph); provided that MetLife will use its reasonable efforts to
provide prior notice to, and to consult with, the General Partner in
respect of any resignation of the MetLife Representative and determination
of an alternative designee of MetLife to serve as the MetLife
Representative.
2. Side Letters. Neither the Partnership, the General Partner, nor any of the
General Partner's officers shall have entered into any side letter or
similar agreement with any Limited Partner, except as disclosed to MetLife
in writing on or prior to the date hereof. If at any time and from time to
time any Limited Partner receives
<PAGE> 2
Metropolitan Life Insurance Company
March 7, 2000
Page 2
any other side letter or similar agreement, MetLife will be given copies
of such agreements.
3. Counsel. The General Partner agrees that, in connection with any opinion
of Limited Partner's counsel, in-house counsel shall be deemed reasonably
acceptable counsel for MetLife to the General Partner.
This letter agreement supplements the Partnership Agreement as between
MetLife and the General Partner, and the terms hereof shall control with respect
to MetLife in the event any conflict exists between the Partnership Agreement
and the contents hereof. Except as set forth in this letter agreement, all the
terms of the Partnership Agreement shall remain and continue in full force and
effect as between MetLife and the General Partner.
This letter agreement may be signed in any number of counterparts
(including by facsimile), each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Neither this letter agreement nor any provision hereof is intended to confer
upon any person or entity other than the parties hereto any rights or remedies
hereunder.
<PAGE> 3
Metropolitan Life Insurance Company
March 7, 2000
Page 3
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to any conflicts-of-law
principles thereof.
Very truly yours,
CONNING INVESTMENT PARTNERS VI, L.L.C.
By: /s/ Preston B. Kavanagh
Name: Preston B. Kavanagh
Title: Manager Member
CONNING CAPITAL PARTNERS VI, L.P.
By: Conning Investment Partners VI,
L.L.C., its general partner
By: /s/ Preston B. Kavanagh
Name: Preston B. Kavanagh
Title: Manager Member
Acknowledged and
agreed as of the date
first set forth above:
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Charles E. Symington
Name: Charles E. Symington
Title: Managing Director
