<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended May 31, 1996
Commission file number 1-9085
MORGAN STANLEY GROUP INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2838811
- ------------------------------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1585 Broadway, New York, New York 10036
- ------------------------------------------------------ ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 761-4000
---------------------
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
As of June 30, 1996, there were 151,824,982 shares of Common Stock, $1
par value, outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Financial Condition
at May 31, 1996 (Unaudited) and November 30, 1995.
Condensed Consolidated Statement of Income (Unaudited)
for the Three and Six Months Ended May 31, 1996 and May
31, 1995.
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the Six Months Ended May 31, 1996 and
May 31, 1995.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
May 31,
1996 November 30,
(Unaudited) 1995
----------- ------------
<S> <C> <C>
Cash and interest-bearing equivalents $ 3,742 $ 2,471
Cash and securities deposited with clearing
organizations or segregated under federal
and other regulations (securities at market
value of $1,901 at May 31, 1996 and $859
at November 30, 1995) 2,279 1,339
Financial instruments owned:
U.S. government and agency securities 10,547 12,480
Other sovereign government obligations 14,536 13,792
Corporate and other debt 11,523 10,690
Corporate equities 13,024 13,185
Derivative contracts 8,277 8,043
Physical commodities 372 410
Securities purchased under agreements to resell 61,326 45,886
Securities borrowed 37,821 27,069
Receivables:
Customers 5,807 3,413
Brokers, dealers and clearing organizations 1,351 1,475
Interest and dividends 997 1,082
Fees and other 729 506
Property, equipment and leasehold improvements, at
cost, net of accumulated depreciation and
amortization of $543 at May 31, 1996 and $462
at November 30, 1995 1,289 1,286
Other assets 1,107 626
-------- --------
Total assets $174,727 $143,753
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements. Page 3
<PAGE> 4
MORGAN STANLEY GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(IN MILLIONS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
May 31,
1996 November 30,
(Unaudited) 1995
----------- ------------
<S> <C> <C>
Short-term borrowings $ 15,168 $ 11,703
Financial instruments sold, not yet purchased:
U.S. government and agency securities 8,606 6,459
Other sovereign government obligations 9,365 8,972
Corporate and other debt 1,019 1,076
Corporate equities 9,273 3,585
Derivative contracts 6,902 7,537
Physical commodities 53 71
Securities sold under agreements to repurchase 75,442 60,738
Securities loaned 9,119 9,340
Payables:
Customers 14,795 13,818
Brokers, dealers and clearing organizations 2,506 1,974
Interest and dividends 1,053 1,019
Other liabilities and accrued expenses 1,304 595
Accrued compensation and benefits 1,309 1,192
Long-term borrowings 12,631 9,635
--------- ---------
168,545 137,714
--------- ---------
Capital Units 865 865
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock 817 818
Common stock, $1.00 par value; authorized
600,000,000 shares; issued 165,476,289
shares at May 31, 1996 and 162,838,920
shares at November 30, 1995 165 163
Paid-in capital 672 730
Retained earnings 4,296 3,815
Cumulative translation adjustments (16) (9)
--------- ---------
Subtotal 5,934 5,517
Less:
Note receivable related to sale of
preferred stock to ESOP 87 89
Common stock held in treasury, at cost
(13,000,468 shares at May 31, 1996 and
7,635,174 shares at November 30, 1995) 530 254
--------- ---------
Total stockholders' equity 5,317 5,174
--------- ---------
Total liabilities and stockholders' equity $ 174,727 $ 143,753
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements. Page 4
<PAGE> 5
MORGAN STANLEY GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Investment banking $ 542 $ 273 $ 941 $ 516
Principal transactions:
Trading 565 438 1,269 637
Investments 38 (6) 31 13
Commissions 159 131 313 242
Interest and dividends 1,946 1,742 3,879 3,602
Asset management and administration 143 88 265 179
Other -- 1 3 3
------------- ------------- ------------- -------------
Total revenues 3,393 2,667 6,701 5,192
Interest expense 1,865 1,656 3,724 3,388
------------- ------------- ------------- -------------
Net revenues 1,528 1,011 2,977 1,804
------------- ------------- ------------- -------------
Expenses excluding interest:
Compensation and benefits 750 475 1,455 841
Occupancy and equipment 86 80 172 163
Brokerage, clearing and exchange
fees 68 66 134 121
Communications 34 34 67 68
Business development 42 34 79 77
Professional services 53 40 95 84
Other 39 31 79 68
Relocation charge -- -- -- 59
------------- ------------- ------------- -------------
Total expenses excluding
interest 1,072 760 2,081 1,481
------------- ------------- ------------- -------------
Income before income taxes 456 251 896 323
Provision for income taxes 155 85 322 110
------------- ------------- ------------- -------------
Net income $ 301 $ 166 $ 574 $ 213
============= ============= ============= =============
Earnings applicable to common shares (1) $ 284 $ 150 $ 541 $ 181
============= ============= ============= =============
Average common and common equivalent
shares outstanding (1)(2) 155,143,633 157,595,614 155,652,016 155,513,120
============= ============= ============= =============
Primary earnings per share (2) $ 1.83 $ 0.95 $ 3.48 $ 1.17
============= ============= ============= =============
Fully diluted earnings per share (2) $ 1.75 $ 0.91 $ 3.32 $ 1.11
============= ============= ============= =============
</TABLE>
(1) Amounts shown are used to calculate primary earnings per share.
(2) 1995 share and per share amounts have been retroactively adjusted to give
effect for the two-for-one common stock split, effected in the form of a
100% stock dividend, which became effective in January, 1996.
See Notes to Condensed Consolidated Financial Statements. Page 5
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MORGAN STANLEY GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Six Months Ended
May 31, May 31,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 574 $ 213
Adjustments to reconcile net income
to net cash used for operating activities:
Relocation Charge -- 59
Non-cash charges included in net income 77 216
Changes in assets and liabilities:
Cash and securities deposited with
clearing organizations or segregated
under federal and other regulations (940) 624
Financial instruments owned, net of
financial instruments sold, not yet
purchased 7,839 319
Securities borrowed, net of securities
loaned (10,973) 1,959
Receivables and other assets (2,592) (696)
Payables and other liabilities 2,335 (2,744)
-------- --------
Net cash used for operating activities (3,680) (50)
Cash flows from investing activities:
Net payments for:
Property, equipment and leasehold
improvements (76) (236)
-------- --------
Net cash used for investing activities (76) (236)
Cash flows from financing activities:
Net proceeds related to short-term borrowings 3,451 2,802
Securities sold under agreements to
repurchase, net of securities
purchased under agreements to resell (737) (2,271)
Proceeds from:
Issuance of common stock 66 17
Issuance of long-term borrowings 4,406 991
Issuance of Capital Units -- 144
Payments for:
Purchase of Miller Anderson & Sherrerd, LLP, net
of cash acquired (200) --
Repurchases of common stock (465) (110)
Repayments of long-term borrowings (1,409) (818)
Cash dividends (85) (56)
-------- --------
Net cash provided by financing activities 5,027 699
-------- --------
Net increase in cash and interest-bearing equivalents 1,271 413
Cash and interest-bearing equivalents, at
beginning of period 2,471 2,135
-------- --------
Cash and interest-bearing equivalents, at
end of period $ 3,742 $ 2,548
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements. Page 6
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MORGAN STANLEY GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
In connection with the Company's acquisition of Miller Anderson & Sherrerd, LLP,
the Company issued approximately $66 million of notes payable, as well as
2,012,264 shares of common stock having a fair value on the date of acquisition,
January 3, 1996, of approximately $83 million.
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MORGAN STANLEY GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
On February 28, 1995, the Board of Directors approved a change in the
Company's fiscal year-end from January 31 to November 30. The change became
effective for the fiscal period ended November 30, 1995, and, accordingly,
this report includes the results for the second quarter and six months
ended May 31, 1996. As a result of this change, the comparable six month
period of the prior year includes the final two months of fiscal 1994
(December 1994 and January 1995) and the first four months of fiscal 1995.
The information furnished in this quarterly report has been prepared
pursuant to the Securities and Exchange Commission's rules and regulations.
The Condensed Consolidated Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for the fair statement of the results for the
interim period and should be read in connection with the Annual Report on
Form 10-K for the fiscal period ended November 30, 1995 (file no.
1-9085)("Form 10-K"). The nature of the business of Morgan Stanley Group
Inc. and its domestic and foreign subsidiaries (collectively, the
"Company") is such that the results of any interim period may not be
indicative of the results for the full year. Prior period financial
statements have been reclassified, where appropriate, to conform to the
fiscal 1996 presentation.
Financial instruments, including derivatives, used in the Company's trading
activities are recorded at fair value, and unrealized gains and losses are
reflected in trading revenues. Interest revenue and expense arising from
financial instruments used in trading activities are reflected in the
Condensed Consolidated Statement of Income as interest income or expense.
The fair values of the trading positions generally are based on listed
market prices. If listed market prices are not available or if liquidating
the Company's positions would reasonably be expected to impact market
prices, fair value is determined based on other relevant factors, including
dealer price quotations and price quotations for similar instruments traded
in different markets, including markets located in different geographic
areas. Fair values for certain derivatives contracts are derived from
pricing models which consider current market and contractual prices for the
underlying financial instruments or commodities, as well as time value and
yield curve or volatility factors underlying the positions. Purchases and
sales of financial instruments are recorded in the accounts on trade date.
Unrealized gains and losses arising from the Company's dealings in
over-the-counter ("OTC") financial instruments, including derivative
contracts related to financial instruments and commodities, are presented
in the accompanying Condensed Consolidated Statement of Financial Condition
on a net-by-counterparty basis consistent with Financial Accounting
Standards Board ("FASB") Interpretation No. 39, "Offsetting of Amounts
Related to Certain Contracts". Reverse repurchase and repurchase agreements
are presented net-by-counterparty where net presentation is consistent
with FASB Interpretation No. 41, "Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements."
The Company also enters into various financial instrument related
derivative contracts, such as interest rate swaps, currency swaps and
forward contracts, as an end user to manage the interest rate and currency
exposure arising from certain borrowings. Net revenues from derivatives
used in the Company's own asset and liability management are recognized
ratably over the term of the contract as an adjustment to interest expense.
Equity securities purchased in connection with merchant banking and other
principal investment activities are initially carried in the Condensed
Consolidated Financial Statements at their original cost; the carrying
value of such investments is adjusted upward only when changes in the
underlying fair values are readily ascertainable, generally as evidenced by
substantial transactions occurring in the marketplace which directly affect
their value. Downward adjustments relating to such equity securities are
made in the event that the Company determines that the eventual realizable
value is less than the carrying value. Loans made in connection with such
activities are carried at unpaid principal balances plus accrued interest
less reserves, if deemed necessary, for estimated losses.
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Included in the Company's Condensed Consolidated Statement of Financial
Condition at May 31, 1996 and November 30, 1995 are $865 million of Capital
Units issued by the Company and Morgan Stanley Finance plc., a U.K.
subsidiary ("MS plc"). A Capital Unit consists of (a) a Subordinated
Debenture of MS plc in the principal amount of $25 guaranteed by the
Company and having maturities from 2013 to 2015, and (b) a related Purchase
Contract issued by the Company, which may be accelerated by the Company
beginning approximately one year after the issuance of each Capital Unit,
requiring the holder to purchase one Depository Share representing
ownership of a 1/8 interest in the Company's Cumulative Preferred Stock.
Earnings per share is based on the weighted average number of common shares
and share equivalents outstanding and gives effect to preferred stock
dividend requirements. Common share data for fiscal 1995 have been
retroactively adjusted to reflect a two-for-one common stock split,
effected in the form of a 100% stock dividend, declared on January 4, 1996
and payable on January 26, 1996 to holders of record on January 16, 1996.
On April 3, 1996, the Company's stockholders approved an increase in the
number of authorized shares of common stock from 300,000,000 to
600,000,000.
2. Long-Term Borrowings
Long-term borrowings at May 31, 1996 scheduled to mature within one year
aggregate $2,175 million.
During the six month period ended May 31, 1996, the Company issued senior
notes aggregating $4,481 million, including non-U.S. dollar currency notes
aggregating $780 million, primarily pursuant to its public debt shelf
registration statements. The weighted average coupon interest rate of these
notes at May 31, 1996 was 5.2%; the Company has entered into certain
transactions to obtain floating interest rates based on either short-term
LIBOR or repurchase agreement rates for Treasury securities. Maturities in
the aggregate of these notes for the fiscal years ending November 30 are as
follows: 1998, $1,342 million; 1999, $1,423 million; 2000, $84 million;
2001, $1,333 million; and thereafter, $299 million. As of May 31, 1996, the
aggregate outstanding principal amount of the Company's Senior Indebtedness
(as defined in the aforementioned registration statements) was
approximately $24.2 billion.
From June 1, 1996 to June 30, 1996, additional senior notes aggregating
$602 million were issued primarily pursuant to the Company's public debt
shelf registration statements. These notes have maturities from 1997 to
2011.
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<PAGE> 10
3. Derivative Contracts and Other Commitments and Contingencies
In the normal course of business, the Company enters into a variety of
derivative contracts related to financial instruments and commodities. The
Company uses swap agreements in its trading activities and in managing its
interest rate exposure. The Company also uses forward and option contracts,
futures and swaps in its trading activities; these financial instruments
also are used to hedge the U.S. dollar cost of certain foreign currency
exposures. In addition, financial futures and forward contracts are
actively traded by the Company and are used to hedge proprietary inventory.
The Company also enters into delayed delivery, when-issued, and warrant and
option contracts involving securities. These instruments generally
represent future commitments to swap interest payment streams, exchange
currencies or purchase or sell other financial instruments on specific
terms at specified future dates. Many of these products have maturities
that do not extend beyond one year; swaps and options and warrants on
equities typically have longer maturities. For further discussion of these
matters, refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Derivative Financial Instruments",
and Note 5 to the Consolidated Financial Statements, included in the Form
10-K.
These derivative instruments involve varying degrees of off-balance sheet
market risk. Future changes in interest rates, foreign currency exchange
rates or the fair values of the financial instruments, commodities or
indices underlying these contracts ultimately may result in cash
settlements exceeding fair value amounts recognized in the Condensed
Consolidated Statement of Financial Condition, which, as described in Note
1, are recorded at fair value, representing the cost of replacing those
instruments.
The Company's exposure to credit risk with respect to these derivative
instruments at any point in time is represented by the fair value of the
contracts reported as assets. These amounts are presented on a
net-by-counterparty basis consistent with FASB Interpretation No. 39, but
are not reported net of collateral, which the Company obtains with respect
to certain of these transactions to reduce its exposure to credit losses.
The credit quality of the Company's trading-related derivatives at May 31,
1996 and November 30, 1995 is summarized in the tables below, showing the
fair value of the related assets by counterparty credit rating. The actual
credit ratings are determined by external rating agencies or by equivalent
ratings used by the Company's Credit Department:
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May 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Collater-
alized Other
Non- Non-
Invest- Invest-
ment ment
(Dollars in millions) AAA AA A BBB Grade Grade Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate
and currency
swaps and options
(including caps,
floors and swap
options) $ 606 $1,088 $1,227 $ 409 $ 21 $ 116 $3,467
Foreign exchange
forward contracts
and options 555 687 407 41 -- 33 1,723
Mortgage-backed
securities forward
contracts, swaps
and options 55 41 132 10 -- 10 248
Other fixed income
securities contracts
(including options) 17 10 17 22 -- 14 80
Equity securities
contracts
(including equity
swaps, warrants
and options) 540 232 295 131 221 13 1,432
Commodity forwards,
options and swaps 196 227 265 235 -- 404 1,327
------ ------ ------ ------ ------ ------ ------
Total $1,969 $2,285 $2,343 $ 848 $ 242 $ 590 $8,277
====== ====== ====== ====== ====== ====== ======
Percent of total 24% 28% 28% 10% 3% 7% 100%
====== ====== ====== ====== ====== ====== ======
</TABLE>
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November 30, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Collater-
alized Other
Non- Non-
Invest- Invest-
ment ment
(Dollars in millions) AAA AA A BBB Grade Grade Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate
and currency
swaps and options
(including caps,
floors and swap
options) $ 660 $1,269 $1,148 $ 535 $ 88 $ 141 $3,841
Foreign exchange
forward contracts
and options 548 531 674 83 -- 27 1,863
Mortgage-backed
securities forward
contracts, swaps
and options 23 31 36 7 12 14 123
Other fixed income
securities contracts
(including options) 25 33 33 42 -- 4 137
Equity securities
contracts
(including equity
swaps, warrants
and options) 612 98 232 143 178 159 1,422
Commodity forwards,
options and swaps 103 129 152 126 -- 147 657
------ ------ ------ ------ ------ ------ ------
Total $1,971 $2,091 $2,275 $ 936 $ 278 $ 492 $8,043
====== ====== ====== ====== ====== ====== ======
Percent of total 25% 26% 28% 12% 3% 6% 100%
====== ====== ====== ====== ====== ====== ======
</TABLE>
A substantial portion of the Company's securities and commodities transactions
are collateralized and are executed with and on behalf of commercial banks and
other institutional investors, including other brokers and dealers. Positions
taken and commitments made by the Company, including positions taken and
underwriting and financing commitments made in connection with its merchant
banking and other principal investment activities, often involve substantial
amounts and significant exposure to individual issuers and businesses, including
non-investment grade issuers. The Company seeks to limit concentration risk
created in its businesses through a variety of separate but complementary
financial, position and credit exposure reporting systems, including the use of
trading limits based in part upon the Company's review of the financial
condition and credit ratings of its counterparties.
See also "Business -- Risk Management" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Risk Management" in the Form
10-K for discussions of the Company's risk management policies and procedures.
The Company had approximately $3.8 billion of letters of credit outstanding at
May 31, 1996 to satisfy various collateral requirements.
The Company and its subsidiaries have been named as defendants in certain legal
actions and have been involved in certain investigations and proceedings in the
ordinary course of business. It is the opinion of management, based on current
knowledge and after consultation with counsel, that the outcome of such matters
will not have a material adverse effect on the Company's Condensed Consolidated
Financial Statements contained herein.
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4. Preferred Stock
Preferred stock is composed of the following issues. Each issue of preferred
stock ranks in parity with all other preferred stock.
<TABLE>
<CAPTION>
Shares Outstanding at Balance at
------- -------- ------- --------
May 31, November May 31, November
30, 30,
1996 1995 1996 1995
------- -------- ------- --------
(in millions)
<S> <C> <C> <C> <C>
ESOP Convertible
Preferred Stock,
liquidation
preference
$35.88 3,727,448 3,758,133 $134 $135
9.36% Cumulative
Preferred Stock,
stated value $25 5,500,000 5,500,000 138 138
7-3/8% Cumulative
Preferred Stock,
stated value $200 1,000,000 1,000,000 200 200
8.88% Cumulative
Preferred Stock,
stated value $200 975,000 975,000 195 195
8-3/4% Cumulative
Preferred Stock,
stated value $200 750,000 750,000 150 150
---- ----
Total $817 $818
==== ====
</TABLE>
On May 23, 1996, the Company announced that it had called for redemption, on
June 24, 1996, all 5,500,000 shares of its 9.36% Cumulative Preferred Stock at a
redemption price of $25.156 per share, which reflects the stated value of $25
per share together with an amount equal to all dividends accrued and unpaid to,
but excluding, June 24, 1996.
5. Stockholders' Equity
Morgan Stanley & Co. Incorporated ("MS & Co.") is a registered broker-dealer and
a registered futures commission merchant and, accordingly, is subject to the
minimum net capital requirements of the Securities and Exchange Commission, the
New York Stock Exchange and the Commodity Futures Trading Commission. MS&Co. has
consistently operated in excess of these requirements with aggregate net
capital, as defined, totaling $942 million at May 31, 1996, which exceeded the
amount required by $747 million. Morgan Stanley & Co. International Limited
("MSIL"), a London-based broker-dealer subsidiary, is subject to capital
requirements of the Securities and Futures Authority, and Morgan Stanley Japan
Limited ("MSJL"), a Tokyo-based broker-dealer, is subject to the capital
requirements of the Japanese Ministry of Finance. MSIL and MSJL have
consistently operated in excess of their respective regulatory capital
requirements.
Certain other U.S. and non-U.S. subsidiaries are subject to various securities,
commodities and banking regulations, and capital adequacy requirements
promulgated by the regulatory and exchange authorities of the countries in which
they operate. These subsidiaries have consistently operated in excess of their
applicable local capital adequacy requirements.
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6. Miller Anderson & Sherrerd, LLP ("MAS")
During the first quarter of fiscal 1996, the Company completed its acquisition
of MAS, a Philadelphia-based investment manager, for approximately $350 million.
The goodwill associated with this transaction is being amortized on a
straight-line basis over 25 years. The Company's results for the six months
ended May 31, 1996 include the results of MAS since January 3, 1996, the date of
acquisition.
7. Van Kampen/American Capital, Inc.
The Company announced on June 24, 1996 that it had signed a definitive agreement
to purchase VK/AC Holdings, Inc. ("VK/AC"), the parent of Van Kampen/American
Capital, Inc. ("Van Kampen"), for $745 million. Van Kampen is the fourth largest
non-proprietary mutual fund provider in the United States with more than $57
billion in assets under management or supervision. The consideration for the
purchase of the equity of VK/AC will consist of cash and $25 million of
preferred securities exchangeable into common stock of the Company. As of May
31, 1996, VK/AC had long-term debt outstanding of approximately $430 million.
The acquisition is expected to close by November 30, 1996 and is subject to
customary closing conditions. The acquisition will be accounted for as a
purchase.
Page 14
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS *
Results of Operations
The Company's business, particularly its involvement in primary and secondary
markets for all types of financial products, including derivatives, is subject
to substantial positive and negative fluctuations due to a variety of factors
that cannot be predicted with great certainty, including variations in the fair
value of securities and other financial products, the volatility and liquidity
of trading markets, and the level of market activity. As a result, net income
and revenues in any particular period may not be representative of full-year
results and may vary significantly from year to year and from quarter to
quarter. In addition, results of operations in the past have been and in the
future may continue to be materially affected by many factors of a national and
international nature, including economic and market conditions; the availability
of capital; the level and volatility of interest rates; currency values and
other market indices; the availability of credit; inflation; and legislative and
regulatory developments, as well as the size, number and timing of transactions
or assignments (including realization of returns from the Company's principal
and merchant banking investments). In addition, such factors also may have an
impact on the Company's ability to achieve its strategic objectives, including
(without limitation) profitable global expansion. The Company's results of
operations also may be materially affected by competitive factors, including new
entrants into the Company's traditional business activities and its ability to
attract and retain highly skilled individuals and by the ability to
cost-effectively develop and maintain the technology necessary to support its
trading, clearing and risk management systems.
The Company's financial results for the second quarter of fiscal 1996 surpassed
the record levels of net revenues and earnings attained during the first quarter
of 1996, benefiting from continued favorable market and economic conditions,
including noninflationary growth, high levels of cash inflows into mutual funds
and stable interest rates. Buoyed by a strong market for initial public
offerings, high levels of merger, acquisition and restructuring transactions and
increased investor activity, the Company's core businesses - investment banking,
asset management and sales and trading - generated higher profits than the
comparable prior year period.
The possibility of renewed inflationary fears and higher interest rates in the
U.S. and weak growth and higher unemployment in Western Europe may lead to less
favorable market conditions in the future. The Company's financial results for
the remainder of fiscal 1996 will reflect whether favorable market and economic
conditions continue to exist, as well as the effectiveness of the Company's
efforts to manage costs and risk management processes.
- --------
* Except for the historical information contained herein, this
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements that could be
affected by the risks and uncertainties involved in the Company's
business, including (without limitation) the risks and uncertainties
set forth herein and in the Company's Annual Report on Form 10-K for
the fiscal period ended November 30, 1995 (Part I, Item 1 and Part II,
Item 7).
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<PAGE> 16
Consistent with the Company's long-term strategic goal of expanding recurring
fee-based revenues, the Company announced on June 24, 1996 that it had signed a
definitive agreement to purchase VK/AC Holdings, Inc. ("VK/AC"), the parent of
Van Kampen/American Capital, Inc. ("Van Kampen"), for $745 million. Van Kampen
is the fourth largest non-proprietary mutual fund provider in the United States
with more than $57 billion is assets under management or supervision. The
consideration for the purchase of the equity of VK/AC will consist of cash and
$25 million of preferred securities exchangeable into common stock of the
Company. As of May 31, 1996, VK/AC had long-term debt outstanding of
approximately $430 million. To the extent that operating cash flow between
signing and closing permits paydown of such long-term debt, the purchase price
of the equity will be increased, but in no circumstances will the sum of the
equity purchase price and the remaining long-term debt exceed $1.175 billion.
The acquisition is expected to close by November 30, 1996 and is subject to
customary closing conditions. Including VK/AC and Miller Anderson & Sherrerd,
LLP ("MAS"), an institutional investment management firm acquired by the Company
in January 1996, the Company's asset management division will manage assets
totaling approximately $160 billion on a pro forma basis.
For a description of the Company's business, including its trading in cash
instruments and derivative products, its merchant banking and other principal
investment activities, and its high-yield underwriting and trading policies, and
their respective risks, and the Company's risk management policies and
procedures, see Part I, Item I, of the Company's Annual Report on Form 10-K for
the fiscal period ended November 30, 1995 ("Form 10-K").
In February 1995, the Board of Directors approved a change in the Company's
fiscal year-end from January 31 to November 30, effective for the fiscal period
ended November 30, 1995. The discussion which follows compares the results of
operations for the three and six months ended May 31, 1996 to the three and six
months ended May 31, 1995. Due to the Company's change in fiscal year-end, the
results for the six months ended May 31, 1995 includes the final two months of
fiscal 1994 (December 1994 and January 1995) and the first four months of fiscal
1995.
Three Months Ended May 31, 1996 Compared with Three Months Ended May 31, 1995
(Amounts for the three months ended May 31, 1995 are given in parentheses).
Revenues net of interest expense (net revenues) were $1,528 million ($1,011
million) and net income totaled $301 million ($166 million), primarily
reflecting record levels of investment banking revenues and increased principal
transaction trading revenues, partially offset by higher incentive-based
compensation.
Investment banking revenues increased to $542 million ($273 million), the
highest quarterly level achieved by the Company. Revenues from merger,
acquisition and restructuring activities increased significantly benefiting from
increased transaction volumes coupled with the Company's strong global presence.
Equity underwriting revenues increased significantly, resulting from a strong
primary calendar in the U.S. and Europe. Fixed income revenues increased
primarily reflecting higher levels of high yield issuance activity.
Page 16
<PAGE> 17
Secondary revenues (combined principal trading, commissions and net interest
revenues) increased to $805 million ($655 million). Principal transaction
revenues from trading activities, including derivatives, were $565 million ($438
million). Equity trading revenues were substantially higher, driven by strong
revenues across all business product lines. Equity cash products were positively
affected as individuals continued to infuse money into mutual funds at a record
level, and equity derivatives revenues increased due to heightened trading
activities in these products and higher levels of volatility in the U.S.
markets. Fixed income trading revenues were comparable to prior year levels,
reflecting improved performance in agency mortgage-backed securities trading,
offset by lower revenues from global high-yield activities reflecting a slight
weakening in the global fixed income markets as well as a decreased interest in
the secondary markets as compared to the new issue market. Revenues from
commodities trading rose significantly, benefiting from increased volatility in
refined energy products as a result of uncertainty over Iraq's reentry into the
world crude oil markets and low inventory levels. Foreign exchange trading
revenues decreased, largely due to lower market volatility in the major
currencies.
Principal transaction investment gains aggregating $38 million ($6 million loss)
were recognized in the second quarter of fiscal 1996, primarily in connection
with increases in the carrying value of certain merchant banking investments.
Commission revenues increased to $159 million ($131 million), principally
reflecting heightened customer demand for equity cash products resulting from a
strong primary calendar, as well as increased cash inflows into the equity
markets from institutional investors.
Net interest and dividend revenues decreased to $81 million ($86 million).
Interest and dividend revenues rose to $1,946 million ($1,742 million), and
interest and dividend expense increased to $1,865 million ($1,656 million),
principally reflecting growth in interest-bearing assets and liabilities.
Interest and dividend revenues and expense are a function of the level and mix
of total assets, including financial instruments owned and resale and repurchase
agreements, and the prevailing level, term structure and volatility of interest
rates. Interest and dividend revenues and expense should be viewed in the
broader context of principal trading and investment banking results. Decisions
relating to principal transactions in securities are based on an overall review
of aggregate revenues and costs associated with each transaction or series of
transactions. This review includes an assessment of the potential gain or loss
associated with a trade, the interest income or expense associated with
financing or hedging the Company's positions, and potential underwriting,
commission or other revenues associated with related primary or secondary market
sales.
Asset management and administration revenues, which include fees for asset
management and non-interest revenues earned from correspondent clearing and
custody services, increased to $143 million ($88 million), primarily reflecting
contributions from MAS. Revenues from international equity and emerging market
products increased resulting from new products, inflows of client assets and
market appreciation. Customer assets under management increased to $100 billion
($49 billion), including $36 billion associated with the acquisition of MAS as
well as continued inflows of new assets and appreciation in the value of
existing customer portfolios. Customer assets under administration increased to
$130 billion ($104 billion), primarily reflecting appreciation in the value of
customer portfolios, as well as additional assets placed under custody with the
Company.
Page 17
<PAGE> 18
Total expenses excluding interest increased to $1,072 million ($760 million).
Within that total, compensation and benefits expense increased $275 million to
$750 million ($475 million), principally reflecting increased levels of
incentive compensation based on record levels of revenues and earnings.
Non-compensation expenses, excluding brokerage, clearing and exchange fees,
increased $35 million to $254 million. Brokerage, clearing and exchange fees
increased $2 million to $68 million, reflecting increased securities volumes,
particularly in the U.S. and Europe. Occupancy and equipment expenses increased
$6 million, primarily related to increased costs associated with the Company's
move to 1585 Broadway, new leased office space in Tokyo and occupancy costs of
MAS. Business development expenses increased $8 million, reflecting increased
travel and entertainment and advertising costs as the Company developed new
business and products. Professional services expenses increased $13 million
reflecting increased consulting and executive recruitment costs associated with
the Company's increased global business activities. Other expenses increased $8
million, partly attributable to the amortization of goodwill associated with the
acquisition of MAS.
A portion of the increase in non-compensation expenses is due to significantly
higher overall levels of business activity resulting from the favorable market
conditions which enhanced the Company's earnings. Nevertheless, the Company
continuously monitors these expenses in order to control the level of
discretionary spending.
Six Months Ended May 31, 1996 Compared with Six Months Ended May 31, 1995
(Amounts for the six months ended May 31, 1995 are given in parentheses).
Revenues net of interest expense (net revenues) were $2,977 million ($1,804
million), and net income totaled $574 million ($213 million), reflecting
increased revenues among all three of the Company's core businesses - investment
banking, asset management and sales and trading - partially offset by higher
incentive-based compensation.
Investment banking revenues increased to $941 million ($516 million) reflecting
significantly higher levels of merger, acquisition and restructuring revenues as
well as increased equity and debt underwriting revenues, resulting from a higher
level of equity and debt financing activity as well as increased market share.
Secondary revenues (combined principal trading, commissions and net interest
revenues) increased to $1,737 million ($1,093 million). Principal transaction
revenues from trading activities were $1,269 million ($637 million), reflecting
substantially higher revenues from trading in equity and fixed income products,
including derivative related products. Equity trading revenues were
substantially higher, driven by strong revenues across all business product
lines as increased trading volumes and customer demand positively impacted the
markets. Fixed income trading revenues were also substantially higher, including
improved trading revenues from emerging market and high-yield activities as
economic conditions stabilized globally, including in Mexico and certain
emerging markets. Commodities trading revenues also increased significantly,
reflecting higher revenues from refined energy products. Revenues from foreign
exchange trading decreased due to lower volatility in the markets for major
currencies.
Principal transaction investment revenues aggregating $31 million ($13 million)
were recognized during the six month period ended May 31, 1996, primarily
reflecting revenues related to the increase in carrying value of certain of the
Company's merchant banking investments.
Commission revenues increased to $313 million ($242 million), principally
reflecting increased customer activity in the global markets for equity
securities, including revenues related to a strong primary calendar in the U.S.
and Europe.
Page 18
<PAGE> 19
Net interest and dividend revenues were $155 million ($214 million). Interest
and dividend revenues rose to $3,879 million ($3,602 million) and interest
expense increased to $3,724 million ($3,388 million). As noted in the quarter to
quarter comparison of net interest, interest and dividend revenues and expense
reflect principal trading strategies and should be viewed in the broader context
of principal trading and investment banking results.
Asset management and administration revenues increased to $265 million ($179
million), primarily attributable to revenues associated with MAS, as well as
increased revenues in international equity and emerging markets products and
continued growth in customer assets under management and administration.
Total expenses excluding interest increased to $2,081 million ($1,481 million).
Within that total, employee compensation and benefits expense increased to
$1,455 million ($841 million), principally reflecting increased levels of
incentive compensation based on higher revenues and earnings. Non-compensation
expenses, excluding brokerage, clearing and exchange fees and fiscal 1994's $59
million relocation charge, increased to $492 million ($460 million). Brokerage,
clearing and exchange fees increased $13 million, reflecting increased
securities trading volumes. Professional services expenses increased $11
million, reflecting higher executive recruitment and consulting costs as a
result of the increased level of overall business activity. Occupancy and
equipment expense increased $9 million, reflecting increased costs associated
with the Company's move to 1585 Broadway, new leased office space in Tokyo and
the occupancy costs of MAS. Other expenses increased by $11 million primarily as
a result of goodwill amortization associated with the acquisition of MAS, as
well as the increase in the overall level of business activity.
Page 19
<PAGE> 20
Liquidity and Capital Resources
The Company's total assets increased from $143.8 billion at November 30, 1995 to
$174.7 billion at May 31, 1996, primarily reflecting growth in resale agreements
and securities borrowed. A substantial portion of the Company's total assets
consists of highly liquid marketable securities and short-term receivables
arising principally from securities transactions. The highly liquid nature of
these assets provides the Company with flexibility in financing and managing its
business. Balance sheet leverage ratios are often reviewed by counterparties and
creditors in order to evaluate a securities firm's overall financial risk.
Details of ending assets, month-end average assets and leverage ratios for the
six months ended May 31, 1996 and for fiscal 1995 are as follows:
<TABLE>
<CAPTION>
Average
Assets for
the Six Average
Months Assets
Assets at Ended Assets at for
May 31, May 31, November 30, Fiscal
(Dollars in Millions) 1996 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash, deposits and receivables $ 14,905 $ 15,065 10,286 12,690
Financial instruments owned 58,279 60,241 58,600 52,387
Securities purchased under
agreements to resell and
securities borrowed 99,147 89,237 72,955 66,539
Property, equipment and
leasehold improvements
and other assets 2,396 2,291 1,912 1,725
-------- -------- -------- --------
Total assets $174,727 $166,834 $143,753 $133,341
======== ======== ======== ========
Leverage ratios:
Total assets/equity 32.9x 32.2x 27.8x 27.8x
Net assets (1)/equity 21.3x 21.4x 18.9x 18.6x
</TABLE>
(1) Net assets represent total assets less the lower of securities purchased
under agreements to resell or securities sold under agreements to
repurchase.
The Company's Finance and Risk Committee, which includes senior officers from
each of the major capital commitment areas, among other things, establishes the
overall funding and capital policies of the Company, reviews the Company's
performance relative to these policies, allocates capital among business
activities of the Company, monitors the availability of sources of financing,
reviews the foreign exchange risk of the Company, and oversees the liquidity and
interest rate sensitivity of the Company's asset and liability position. The
primary goal of the Company's funding and liquidity activities is to ensure the
stability of the Company's funding base and provide adequate financing sources
over a wide range of potential credit ratings and market environments.
The Company actively manages its consolidated capital position based upon, among
other things, business opportunities, capital availability and rates of return
together with internal capital policies, regulatory requirements and rating
agency guidelines and, therefore, may in the future expand or contract its
capital base to address the changing needs of its businesses. The Company
returns internally generated equity capital which is in excess of the needs of
its businesses through common stock repurchases and dividends.
Page 20
<PAGE> 21
The Company funds its balance sheet on a global basis. The Company's funding
needs are satisfied from capital, including equity and long-term debt;
medium-term notes; internally generated funds; repurchase agreements; U.S.,
Canadian, French and Euro commercial paper; German Schuldschein loans;
securities lending; buy/sell agreements; municipal re-investments; master
notes; deposits; and committed and uncommitted lines of credit. All repurchase
transactions and a portion of the Company's bank borrowings are made on a
collateralized basis.
The Company maintains borrowing relationships with a broad range of banks,
financial institutions, counterparties and others from which it draws funds in a
variety of currencies. The volume of the Company's borrowings generally
fluctuates in response to changes in the amount of resale transactions
outstanding, the level of the Company's securities inventories and overall
market conditions. Availability and cost of financing to the Company can vary
depending upon market conditions, the volume of certain trading activities, the
Company's credit ratings and the overall availability of credit to the
securities industry.
The Company's reliance on external sources to finance a significant portion of
its day-to-day operations makes access to global sources of financing important.
The cost of such financing is generally dependent on the Company's short-term
and long-term debt ratings. In addition, the Company's debt ratings have a
significant impact on certain trading revenues, particularly in those businesses
where longer term counterparty performance is critical, such as over-the-counter
derivative transactions. The Company's short-term and long-term senior debt
ratings as of May 31, 1996 are as follows:
<TABLE>
<CAPTION>
Agency Short-Term Rating Long-Term Rating
- ------------------------------------------------- -------------------------------- -------------------------------
<S> <C> <C>
Moody's Investors Service P1 A1
Standard & Poor's A1+ A+
IBCA A1+ AA-
Thomson BankWatch TBW1 AA
Dominion Bond Rating Service (1) R1 (Middle) n/a
</TABLE>
(1) Dominion Bond Rating Service rates the Company's Canadian commercial paper
program.
As the Company continues its global expansion and as revenues are increasingly
derived from various currencies, foreign currency management is a key element of
the Company's financial policies. The Company benefits from operating in a
number of different currencies because weakness in any particular currency is
often offset by strength in another currency. The Company closely monitors its
exposure to fluctuations in currencies and, where cost-justified, adopts
strategies to reduce the impact of these fluctuations on the Company's financial
performance. These strategies include engaging in various hedging activities to
manage income and cash flows denominated in foreign currencies and using foreign
currency borrowings, when appropriate, to finance investments outside the U.S.
During the six month period ended May 31, 1996, the Company issued senior notes
aggregating $4,481 million, including non-U.S. dollar currency notes aggregating
$780 million. These notes have maturities from 1997 to 2011 and a weighted
average coupon interest rate of 5.2%. As of May 31, 1996, the aggregate
outstanding principal amount of the Company's Senior Indebtedness (as defined in
the Company's public debt shelf registration statements) was approximately $24.2
billion. During the second quarter of fiscal 1996, the Company filed a shelf
registration statement for the issuance of up to $4,286 million of debt
securities, warrants to purchase debt securities, or preferred stock.
Between June 1, 1996 and June 30, 1996, additional senior notes aggregating $602
million were issued. These notes have maturities from 1997 to 2011.
Page 21
<PAGE> 22
The Company maintains a senior revolving credit facility with a group of banks.
Under the terms of the credit agreement, the banks are committed to provide up
to $2.5 billion for up to 364 days. Any loans outstanding on the commitment
termination date will mature on the first anniversary of the commitment
termination date.
The Company also maintains a master collateral facility that enables Morgan
Stanley & Co. Incorporated ("MS&Co."), the Company's U.S. broker-dealer
subsidiary, to pledge certain collateral to secure loan arrangements, letters of
credit and other financial accommodations. As part of this facility, MS&Co. also
maintains a secured committed credit agreement with a group of banks that are
parties to the master collateral facility under which such banks are committed
to provide up to $1.25 billion for up to 364 days. Any loans outstanding on the
commitment termination date will mature on the first anniversary of the
commitment termination date.
In December, 1995, the Company established a revolving committed financing
facility that enables Morgan Stanley & Co. International Limited ("MSIL"), the
Company's U.K. broker-dealer subsidiary, to secure committed funding from a
syndicate of banks by providing a broad range of collateral under repurchase
agreements. Such banks are committed to provide up to an aggregate of $1.25
billion available in twelve major currencies for up to 364 days. Any amounts
outstanding on the commitment termination date may, at MSIL's option, be
extended to mature on or before the first anniversary of the commitment
termination date.
There were no borrowings outstanding under any of the foregoing credit,
collateral or committed financing facilities at May 31, 1996; however, the
Company anticipates utilizing these facilities for short-term funding from time
to time.
On May 23, 1996, the Company announced that it had called for redemption, on
June 24, 1996, all 5,500,000 shares of its 9.36% Cumulative Preferred Stock at a
redemption price of $25.156 per share, which reflects the stated value of $25
per share together with an amount equal to all dividends accrued and unpaid to,
but excluding, June 24, 1996.
During the six month period ended May 31, 1996, the Company repurchased
approximately 11 million shares of its common stock at an aggregate cost of
approximately $465 million. On March 27, 1996, the Board of Directors authorized
the purchase, in the open market or otherwise, subject to market conditions and
certain other factors, of an additional $150 million of the Company's common
stock. Common stock repurchases between June 1, 1996 and June 30, 1996
aggregated $31 million; the unused portion of the Company's stock repurchase
authorization at such date was approximately $267 million.
Certain assets of the Company, such as real property, equipment, leasehold
improvements, certain equity investments made in connection with the Company's
merchant banking and other principal investment activities, and certain
high-yield debt securities, emerging market debt and collateralized mortgage
obligations and mortgage-related loan products, are not highly liquid. In
connection with its merchant banking and other principal investment activities,
the Company has equity investments (directly and indirectly through funds
managed by the Company) in privately or publicly held companies. As of May 31,
1996, the aggregate carrying value of the Company's equity investments
(including direct investments and partnership interests) in privately held
companies was $100 million, and its aggregate investment in publicly held
companies was $305 million.
In its capacity as an underwriter of and a market-maker in mortgage-backed
securities, collateralized mortgage obligations and related instruments, and a
market-maker in commercial, residential and real estate loan products, the
Company takes positions in market segments where liquidity can vary greatly from
time to time. The carrying value of such financial instruments traded in markets
currently experiencing lower levels of liquidity approximated $824 million at
May 31, 1996.
Page 22
<PAGE> 23
In addition, at May 31, 1996, the aggregate value of high-yield debt securities
and emerging market loans and securitized instruments held in inventory was
$1,372 million (a substantial portion of which was subordinated debt) with not
more than 5%, 12% and 12% of all such securities, loans and instruments
attributable to any one issuer, industry or geographic region, respectively.
Non-investment grade securities generally involve greater risk than investment
grade securities due to the lower credit ratings of the issuers, which typically
have relatively high levels of indebtedness and are, therefore, more sensitive
to adverse economic conditions. In addition, the market for non-investment grade
securities and emerging markets loans and securitized instruments has been, and
may in the future be, characterized by periods of volatility and illiquidity.
The Company has in place credit and other risk policies and procedures to
control total inventory positions and risk concentrations for non-investment
grade securities and emerging market loans and securitized instruments.
The Company may, from time to time, also provide financing or financing
commitments to companies in connection with its investment banking activities
that may subject the Company to increased credit and liquidity risks. At May 31,
1996, no such loans were outstanding.
At May 31, 1996, financial instruments owned by the Company included derivative
products (generally in the form of futures, forwards, swaps, caps, collars,
floors, swap options and similar instruments which derive their value from
underlying interest rates, foreign exchange rates or commodity or equity
instruments and indices) related to financial instruments and commodities with
an aggregate net replacement cost of $8.3 billion. The net replacement cost of
all derivative products in a gain position represents the Company's maximum
exposure to derivatives related credit risk. Derivative products may have both
on- and off-balance sheet risk implications, depending on the nature of the
contract. It should be noted, however, that in many cases derivatives serve to
reduce, rather than increase, the Company's exposure to losses from market,
credit and other risks. The risks associated with the Company's derivative
activities, including market and credit risks, are managed on an integrated
basis with associated cash instruments in a manner consistent with the Company's
overall risk management policies and procedures. The Company manages its
exposure to derivative products through various means, which include monitoring
the creditworthiness of counterparties and credit limits on an ongoing basis;
entering into master netting agreements and collateral arrangements with
counterparties in appropriate circumstances; and limiting the duration of
exposure.
Page 23
<PAGE> 24
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(a) The following litigation was recently commenced against Morgan
Stanley & Co. Incorporated.
County of Orange and Moorlach v. Morgan Stanley & Co., Inc. On June 11,
1996, an adversary proceeding was commenced by Orange County and its
Treasurer-Tax Collector against Morgan Stanley & Co. Incorporated ("Morgan
Stanley") in the United States Bankruptcy Court for the Central District of
California. The adversary proceeding is related to Orange County's Chapter 9
bankruptcy proceeding pending before the same court. The complaint asserts that
Orange County, acting through its former Treasurer-Tax Collector, entered into
various reverse repurchase agreements and other transactions with Morgan Stanley
which were beyond the County's authority or ultra vires, and, therefore, void.
The complaint also asserts that Morgan Stanley allowed Orange County to enter
into unsuitable transactions. In addition, the complaint alleges that Morgan
Stanley violated the automatic stay provisions of the Bankruptcy Code when it
liquidated the County's collateral and closed out certain reverse repurchase
transactions subsequent to the County's December 6, 1994 bankruptcy filing. The
complaint asserts claims for ultra vires, setoff, equitable subordination,
restitution, enforcement of the automatic stay, avoidance of post-petition
transfers and negligence, and seeks compensatory damages in an unspecified
amount, declaratory and injunctive relief, restitution, interest, various costs
and attorneys' fees.
(b) The following developments have occurred with respect to certain
matters previously reported in the Form 10-K and/or the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended February 29, 1996.
State of West Virginia v. Morgan Stanley & Co. Incorporated. The
recommendation in the February 26, 1996 report that the recusal motion be denied
was subsequently adopted by the Supreme Court of Appeals. The retrial has been
scheduled for December 2, 1996.
ITEM 2. CHANGES IN SECURITIES.
On May 23, 1996, the Company announced that it had called for redemption
all 5,500,000 issued and outstanding shares of the Company's 9.36% Cumulative
Preferred Stock. The shares were redeemed on June 24, 1996 at a price of $25.156
per share, reflecting the stated value of $25 per share together with an amount
equal to all dividends accrued and accumulated and unpaid to, but excluding,
June 24, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of stockholders of the Company was held on April 3,
1996. A Proxy Statement, dated February 26, 1996 (the "Proxy Statement"), was
distributed by management pursuant to Regulation 14 of the Securities Exchange
Act of 1934.
The stockholders voted on proposals to (1) approve the election of
directors, (2) approve the Company's 1995 Equity Incentive Compensation Plan
("EICP"), (3) amend the Restated Certificate of Incorporation to increase from
300,000,000 to 600,000,000 the total number of shares of Common Stock, par value
$1.00 per share, which the Company will have authority to issue and (4) approve
the ratification of the appointment of independent accountants. All nominees for
election to the board were elected to the terms of office set forth in the Proxy
Statement. In addition, the vote of the stockholders also resulted in the
approval of the EICP, the approval of the amendment of the Restated Certificate
of Incorporation and the ratification of the appointment of the independent
accountants. The number of votes cast for, against or withheld, and the number
of abstentions with respect to each proposal is set forth below.
Page 24
<PAGE> 25
<TABLE>
<CAPTION>
Election of Directors % of % of % of
Votes Against/ Votes Votes
Nominee: For Cast Withheld Cast Abstain Cast
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. Fisher 142,158,542 99.320 972,998 .680 N/A
John J. Mack 142,025,077 99.227 1,106,463 .773 N/A
Barton M. Biggs 133,166,003 93.037 9,965,537 6.963 N/A
Peter F. Karches 142,043,588 99.240 1,087,952 .760 N/A
Sir David A. Walker 142,040,478 99.238 1,091,062 .762 N/A
Robert P. Bauman 142,149,720 99.314 981,820 .686 N/A
Daniel B. Burke 141,890,569 99.133 1,240,971 .867 N/A
S. Parker Gilbert 141,928,609 99.160 1,202,931 .840 N/A
Allen E. Murray 141,899,327 99.139 1,232,213 .861 N/A
Paul J. Rizzo 133,065,963 92.968 10,065,577 7.032 N/A
Approval of the 1995 Equity
Incentive Compensation Plan* 97,093,052 74.915 32,184,655 24.833 327,106 .252
Approval of an Amendment to the
Restated Certificate of
Incorporation: 133,121,690 93.007 9,719,483 6.791 290,367 .203
Ratification of Independent
Auditors: 142,635,842 99.654 221,514 .155 274,184 .192
</TABLE>
* There was a total of 13,526,727 broker non-votes with respect to the proposal
to approve the 1995 Equity Incentive Compensation Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 2 - Agreement and Plan of Merger, dated as
of June 21, 1996, among VK/AC Holdings,
Inc., Morgan Stanley Group Inc., MSAM
Holdings II, Inc. and MSAM Acquisition Inc.
Exhibit 4 - Restated Certificate of Incorporation of the
Company, as amended to date.
Exhibit 11 - Statement Re: Computation of Earnings per
Share.
Exhibit 12 - Statement Re: Computation of Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends.
Exhibit 27 - Financial Data Schedule.
Page 25
<PAGE> 26
(b) Reports on Form 8-K
1. Form 8-K dated February 20, 1996, Item 7 only.**
2. Form 8-K dated February 20, 1996, Item 7 only.**
3. Form 8-K dated February 23, 1996, Item 7 only.**
4. Form 8-K dated February 28, 1996, Item 7 only.**
5. Form 8-K dated March 7, 1996, Item 7 only.
6. Form 8-K dated March 15, 1996, Item 7 only.
7. Form 8-K dated March 27, 1996, Items 5 and 7.
8. Form 8-K dated April 8, 1996, Item 7 only.
9. Form 8-K dated May 6, 1996, Items 5 and 7.
10. Form 8-K dated May 9, 1996, Item 7 only.
11. Form 8-K dated May 23, 1996, Items 5 and 7.
12. Form 8-K dated May 30, 1996, Item 7 only.
** Filed with the Securities and Exchange Commission in March 1996.
Page 26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORGAN STANLEY GROUP INC.
Registrant
Date: July 12, 1996 /s/ Eileen K. Murray
---------------------
Eileen K. Murray
Treasurer and Chief Accounting Officer
Date: July 12, 1996 /s/ Jonathan M. Clark
----------------------
Jonathan M. Clark
General Counsel and Secretary
Page 27
<PAGE> 28
EXHIBIT INDEX
- -------------
Exhibit 2 - Agreement and Plan of Merger, dated as
of June 21, 1996, among VK/AC Holdings,
Inc., Morgan Stanley Group Inc., MSAM
Holdings II, Inc. and MSAM Acquisition Inc.
Exhibit 4 - Restated Certificate of Incorporation of the
Company, as amended to date.
Exhibit 11 - Statement Re: Computation of Earnings per
Share.
Exhibit 12 - Statement Re: Computation of Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends.
Exhibit 27 - Financial Data Schedule.
Page 28
<PAGE> 1
EXHIBIT 2
CONFORMED COPY
============================================================
AGREEMENT AND PLAN OF MERGER
AMONG
VK/AC HOLDING, INC.,
MORGAN STANLEY GROUP INC.,
MSAM HOLDINGS II, INC.
AND
MSAM ACQUISITION INC.
DATED AS OF JUNE 21, 1996
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
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1.1. The Merger..................................................................................................2
1.2. Effective Time..............................................................................................2
1.3. Organizational Documents, Directors and Officers of
the Surviving Corporation............................................................................3
1.4. Further Assurances..........................................................................................3
1.5. Conversion of Common Stock, Preferred Stock and
Options..............................................................................................4
1.6. Acquisition Price...........................................................................................6
1.7. Dissenting Shares...........................................................................................7
1.8. Payment of Merger Consideration and Other Amounts...........................................................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company...............................................................9
2.1.1. Authorization; No Conflicts; Status of
VKAC Group, etc...................................................................9
2.1.2. Capitalization..............................................................................11
2.1.3. Financial Information.......................................................................12
2.1.4. Undisclosed Liabilities.....................................................................13
2.1.5. Absence of Changes..........................................................................13
2.1.6. Taxes.......................................................................................17
2.1.7. Properties and Assets.......................................................................21
2.1.8. Contracts...................................................................................22
2.1.9. Intellectual Property.......................................................................24
2.1.10. Insurance ..................................................................................25
2.1.11. Litigation..................................................................................26
2.1.12. Compliance with Laws and Other
Instruments; Governmental Approvals...............................................26
2.1.13. Environmental Matters.......................................................................27
2.1.14. Affiliate Transactions......................................................................28
2.1.15. Government Regulation.......................................................................28
2.1.16. Funds; Sub-Advisory Funds; Clients..........................................................32
2.1.17. Labor Matters, etc..........................................................................34
2.1.18. ERISA.......................................................................................34
2.1.19. Brokers, Finders, etc.......................................................................36
2.1.20. List of ERISA Clients.......................................................................36
2.1.21. Hedging Activities..........................................................................36
2.1.22. Financial Projections.......................................................................36
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2.1.23. Assets Under Management....................................................................37
2.2. Representations and Warranties of the Parent, Holdco
and the Buyer.......................................................................................37
2.2.1. Corporate Status; Authority for
Agreement...........................................................................37
2.2.2. No Conflicts, etc...........................................................................37
2.2.3. Litigation..................................................................................38
2.2.4. Brokers, Finders, etc.......................................................................38
2.2.5. No Disqualifying Participants...............................................................38
2.2.6. Financing...................................................................................39
2.2.7. Section 15(f) Materials.....................................................................39
ARTICLE III
COVENANTS
3.1. Covenants of the Company...................................................................................39
3.1.1. Conduct of Business.........................................................................39
3.1.2. No Solicitation.............................................................................40
3.1.3. Access and Information......................................................................41
3.1.4. Subsequent Financial Statements, Debt
Prepayments and Filings.............................................................42
3.1.5. Public Announcements........................................................................42
3.1.6. Further Actions.............................................................................43
3.1.7. Compliance with Investment Company
Act Section 15......................................................................45
3.1.8. Qualification of the Funds; Tax Affairs.....................................................46
3.1.9. ERISA Clients...............................................................................48
3.2. Covenants of the Parent, Holdco and the Buyer..............................................................48
3.2.1. Public Announcements........................................................................48
3.2.2. Further Actions.............................................................................48
3.2.3. Compliance with Investment Company
Act Section 15......................................................................49
3.2.4. Employee Matters Subsequent to the
Effective Time......................................................................51
3.2.5. List of Affiliates..........................................................................52
3.2.6. Contribution Agreement......................................................................52
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party....................................................................53
4.1.1. HSR Act Notification........................................................................53
4.1.2. No Injunction, etc..........................................................................53
4.1.3. Contribution Agreement......................................................................53
4.1.4. Assets Under Management.....................................................................53
4.2. Conditions to Obligations of the Parent, Holdco and
the Buyer...........................................................................................53
4.2.1. Representations; Performance................................................................54
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4.2.2. Consents....................................................................................54
4.2.3. MCM Indemnity...............................................................................54
4.2.4. Resignation of Directors....................................................................55
4.2.5. Opinion of Counsel..........................................................................55
4.2.6. Proceedings.................................................................................55
4.2.7. Govett Agreements...........................................................................55
4.2.8. FIRPTA Certification........................................................................55
4.3. Conditions to Obligations of the Company...................................................................55
4.3.1. Representations, Performance, etc...........................................................56
4.3.2. Consents....................................................................................56
4.3.3. Merger Consideration........................................................................56
4.3.4. Certain Indebtedness........................................................................57
4.3.5. Opinions of Counsel.........................................................................57
4.3.6. Corporate Proceedings.......................................................................57
ARTICLE V
TERMINATION
5.1. Termination................................................................................................57
5.2. Effect of Termination......................................................................................58
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms................................................................................58
6.2. Survival of Representations and Warranties.................................................................74
6.3. Expenses; Transfer Taxes...................................................................................75
6.4. Severability...............................................................................................75
6.5. Notices....................................................................................................75
6.6. Miscellaneous..............................................................................................76
6.6.1. Headings....................................................................................76
6.6.2. Entire Agreement............................................................................77
6.6.3. Counterparts................................................................................77
6.6.4. Governing Law...............................................................................77
6.6.5. Binding Effect..............................................................................77
6.6.6. Assignment..................................................................................77
6.6.7. No Third Party Beneficiaries................................................................78
6.6.8. Waiver of Jury Trial........................................................................78
6.6.9. Amendment; Waivers..........................................................................78
6.6.10. Certain Disclosures.........................................................................78
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SCHEDULES AND EXHIBITS
Exhibit A -- Adjustment Based on Assets Under
Management
Exhibit B -- Form of MCM Indemnification Agreement
Exhibit C-1 -- Form of Opinion of General Counsel of
the Company
Exhibit C-2 -- Form of Opinion of Special Counsel to
the Company
Exhibit D -- Form of Opinion of Special Counsel to
the Buyer
Schedule 2.1.1(b) -- Company Conflicts and Governmental
Approvals
Schedule 2.1.1(c) -- Due Organization
Schedule 2.1.2(a) -- Owners of Preferred Stock and Common
Stock
Schedule 2.1.2(b) -- Equity Interests of the VKAC Group
Schedule 2.1.2(c) -- Option Holders
Schedule 2.1.2(d) -- Agreements with Respect to Capital
Stock
Schedule 2.1.2(e) -- Other Investments
Schedule 2.1.5 -- Changes Since December 31, 1995
Schedule 2.1.6(a) -- Tax Returns; Payment of Taxes
Schedule 2.1.6(b) -- Tax Extensions
Schedule 2.1.6(c) -- Group For Tax Purposes; Tax Filing
Jurisdictions
Schedule 2.1.6(d) -- Tax Audits and Assessments
Schedule 2.1.6(f) -- Tax Sharing Arrangements
Schedule 2.1.6(g) -- Regulated Investment Company Exceptions
Schedule 2.1.6(j) -- Real Property in Transfer Tax
Jurisdictions
Schedule 2.1.6(k) -- Qualified Stock Purchases
Schedule 2.1.7 -- Real Property
Schedule 2.1.8(a) -- Contracts
Schedule 2.1.8(b) -- Contract Exceptions
Schedule 2.1.8(c) -- Investment Advisory Clients
Schedule 2.1.8(f) -- Proprietary and Preferred Vendors
Schedule 2.1.9(a) -- Intellectual Property
Schedule 2.1.9(b) -- Intellectual Property Infringements
Schedule 2.1.10 -- Insurance Policies
Schedule 2.1.11 -- Litigation
Schedule 2.1.12(a) -- Compliance with Laws
Schedule 2.1.12(b) -- Governmental Approvals
Schedule 2.1.14 -- Affiliate Transactions
Schedule 2.1.15(a) -- Regulatory Compliance: Investment
Advisers
Schedule 2.1.15(b) -- Regulatory Compliance: Broker-Dealers
Schedule 2.1.15(c) -- Funds and Sub-Advisory Funds
Schedule 2.1.15(f) -- Regulatory Compliance: Transfer Agent
Schedule 2.1.15(g) -- Regulatory Compliance: Trust Companies
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Schedule 2.1.18(a) -- ERISA Plans
Schedule 2.1.19 -- Brokers, Finders, etc.
Schedule 2.1.20 -- ERISA Accounts
Schedule 2.2.2 -- Parent and Buyer Conflicts and
Governmental Approvals
Schedule 3.1.1 -- Conduct of Business
Schedule 3.1.6(f) -- Other Consents
Schedule 3.2.4(c) -- Change of Control
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 21, 1996, among
VK/AC Holding, Inc., a Delaware corporation (the "Company"), Morgan Stanley
Group Inc., a Delaware corporation (the "Parent"), MSAM Holdings II, Inc., a
Delaware corporation and a wholly owned subsidiary of the Parent ("Holdco"), and
MSAM Acquisition Inc., a Delaware corporation and a wholly owned subsidiary of
Holdco (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Company is a Delaware corporation having
authorized capital of (i) 32,500 shares of Preferred Stock, all of which shares
are issued and outstanding on the date hereof, (ii) 3,250,000 shares of Class A
Common Stock, of which 2,317,474 shares are issued and outstanding on the date
hereof and (iii) 3,250,000 shares of Class B Common Stock, of which 117,817
shares are issued and outstanding on the date hereof;
WHEREAS, the Company owns all of the issued and outstanding
capital stock of Van Kampen American Capital, Inc., a Delaware corporation
("VKAC");
WHEREAS, the Buyer wishes to acquire the Company on the terms
and conditions and for the consideration described in this Agreement
(capitalized terms used herein without definition having the meanings specified
therefor in Section 6.1);
WHEREAS, the Parent, Holdco and the Designated Managers have
entered into a Contribution Agreement dated as of the date hereof (the
"Contribution Agreement");
WHEREAS, in furtherance of such acquisition, (i) the Boards of
Directors of the Company and the Buyer have approved a merger of the Buyer with
and into the Company (the "Merger") upon the terms and subject to the conditions
set forth in this Agreement, and have directed that this Agreement be submitted
to their respective stockholders for adoption, and (ii) each of the holder of a
majority of the shares of Common Stock issued and outstanding on the date hereof
and Holdco, as the sole stockholder of the Buyer, has approved the Merger, upon
the terms and subject to the conditions set forth in this
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Agreement, in each case pursuant to a written stockholder consent; and
WHEREAS, the Company, the Parent, Holdco and the Buyer desire
to make certain representations, warranties and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual promises,
covenants, representations and warranties made herein and of the mutual benefits
to be derived therefrom, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. In accordance with and subject to the terms
and provisions of this Agreement and the DGCL, at the Effective Time: (i) the
Buyer shall be merged with and into the Company, the separate existence of the
Buyer shall cease and the Company shall be the surviving corporation (the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Delaware; (ii) all rights, privileges, immunities, powers,
purposes, franchises, properties and assets of the Company and the Buyer shall
vest in the Surviving Corporation; and (iii) all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and the Buyer
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
1.2. Effective Time. Upon the terms and subject to the
conditions of this Agreement, no later than the second Business Day after the
satisfaction or waiver of the conditions set forth in Article IV, the Company
shall execute and file a Certificate of Merger (together with any other
documents required by Applicable Law to effectuate the Merger) with the
Secretary of State of the State of Delaware in accordance with Sections 251 and
103 of the DGCL (the "Certificate of Merger"). Prior to such filing, a closing
(the "Closing") will be held at the offices of Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York (or such other place as the parties may
agree), for the purpose of confirming all of the foregoing. The Merger shall
become effective simultaneously with the filing of the Certificate of Merger.
The date and time when the Merger shall become effective is referred to in this
Agreement as the "Effective Time."
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1.3. Organizational Documents, Directors and Officers of the
Surviving Corporation. (a) Certificate of Incorporation. From and after the
Effective Time, the Certificate of Incorporation of the Buyer in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended, altered or
repealed as provided therein or by Applicable Law.
(b) By-Laws. From and after the Effective Time, the by-laws of
the Buyer in effect immediately prior to the Effective Time shall be the by-laws
of the Surviving Corporation until thereafter amended, altered or repealed as
provided therein.
(c) Directors and Officers. From and after the Effective Time,
the directors of the Buyer immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation until his or her
successor is elected or appointed, as the case may be, and qualified or until
his or her earlier death, resignation, disqualification or removal.
1.4. Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, immunities, powers, purposes, franchises,
properties or assets of the Company or the Buyer, or (b) otherwise to carry out
the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to solicit in the
name of the Company or the Buyer any third party consents or other documents
required to be delivered by any third party, to execute and deliver, in the name
and on behalf of the Company or the Buyer, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
the Buyer, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, immunities, powers, purposes, franchises, properties or
assets of the Company or the Buyer and otherwise to carry out the purposes of
this Agreement.
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1.5. Conversion of Common Stock, Preferred Stock and Options.
(a) Common Stock and Preferred Stock in General. Each share of Common Stock and
Preferred Stock outstanding at the Effective Time (except for (x) any shares of
Common Stock then held in the treasury of the Company or by any Subsidiary of
the Company, (y) Dissenting Shares and (z) any shares of Common Stock then held
by Holdco) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the Per Share Merger Consideration (such
amounts, in the aggregate, the "Merger Consideration").
(b) Shares Held by the Company, a Subsidiary or Holdco. Each
share of Common Stock that at the Effective Time is held in the treasury of the
Company, by any Subsidiary of the Company or by Holdco shall, by virtue of the
Merger and without any action on the part of the Company, any such Subsidiary or
Holdco, be cancelled and retired and cease to exist, without any conversion
thereof.
(c) No Rights as Stockholders. The holders of certificates
representing shares of Common Stock shall as of the Effective Time cease to have
any rights as stockholders of the Company, except such rights, if any, as
holders of Dissenting Shares may have pursuant to the DGCL, and, except as
aforesaid, their sole right shall be the right to receive their share of the
Merger Consideration, as determined and paid in the manner set forth in this
Agreement.
(d) Employee Options. At the Effective Time, each option
outstanding at such time under the VK/AC Holding, Inc. Stock Option Plan (the
"Option Plan") and the Management Stock Option Agreements entered into pursuant
to the Option Plan (each, an "Employee Option"), whether or not vested, other
than any Employee Option subject to an Acknowledgment, Waiver and Agreement
between the Company and the holder thereof (each such agreement, a "Stock Option
Waiver"), shall, by virtue of the Merger and without any action on the part of
the holder thereof, be cancelled for the right to receive from the Surviving
Corporation at the Effective Time an amount of cash in dollars (subject to
reduction for any applicable withholding Taxes) equal to the product of (i) the
excess of the Per Share Merger Consideration over the exercise price per share
of such Employee Option, and (ii) the number of shares of Class A Common Stock
subject to such Employee Option. On the Business Day immediately preceding the
Effective Time, the Company shall deliver to the Buyer a certificate, signed by
an officer of the Company, setting forth (A) the aggregate amount (the "Total
Employee Option Cancellation Amount")
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payable by the Surviving Corporation under this Section 1.5(d) without reduction
for applicable withholding Taxes and (B) the aggregate applicable withholding
Taxes payable with respect thereto.
(e) Deferred Stock Units. Each deferred stock unit outstanding
at such time under the separate Deferred Stock Agreements between the Company
and employees of members of the VKAC Group (each such employee, a "Grantee,"
each such agreement, a "Deferred Stock Agreement" and each such unit, a
"Deferred Stock Unit") and each Employee Option outstanding at such time that is
subject to a Stock Option Waiver, in each case whether or not vested, shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be cancelled in exchange for the right, subject to and in accordance with the
terms of the applicable Deferred Stock Agreement in the case of the Deferred
Stock Units, or the applicable Stock Option Waiver in the case of the Employee
Options, to receive from the Surviving Corporation an amount of cash in dollars
(subject to reduction for any applicable withholding Taxes) equal to (i) in the
case of such Deferred Stock Unit, the Per Share Merger Consideration, and (ii)
in the case of such Employee Option, the product of (A) the excess of the Per
Share Merger Consideration over the exercise price per share of such Employee
Option, and (B) the number of shares of Class A Common Stock subject to such
Employee Option.
(f) Travelers Option and Jones Option. On the Business Day
immediately preceding the Effective Time, the Company shall prepare and deliver
to the Parent, Holdco and the Buyer: (i) in the event that the Effective Time
occurs after January 1, 1997, a certificate setting forth (x) the number of
shares of Class B Common Stock for which the Travelers Option would become
exercisable on the Closing Date (the "Travelers Option Shares"), based upon the
Average Annual Net Asset Value Increase (as defined in the Travelers Option
Agreement) as of the Business Day immediately preceding the date such
certificate is delivered and (y) (A) the aggregate amount payable by the
Surviving Corporation at the Effective Time to Travelers in respect of the
cancellation of the Travelers Option without reduction for applicable
withholding Taxes (such amount, the "Travelers Option Cancellation Amount"), and
(B) the aggregate applicable withholding Taxes payable with respect thereto, if
any; and (ii) a certificate setting forth (x) the number of shares of Class A
Common Stock for which the Jones Option would become exercisable on the
Effective Time (the "Jones Option Shares"), based upon the Average Annual Net
Asset Value Increase (as defined in the Jones Option
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Agreement) as of the Business Day immediately preceding the date such
certificate is delivered and (y) (A) the aggregate amount, if any, payable by
the Surviving Corporation at the Effective Time to E.D. Jones in respect of the
cancellation of the E.D. Jones Option without reduction for applicable
withholding Taxes (such amount, the "Jones Option Cancellation Amount") and
(B) the aggregate applicable withholding Taxes payable with respect thereto.
(g) Common Stock of the Buyer. At the Effective Time, each
share of common stock of the Buyer then issued and outstanding shall, by virtue
of the Merger and without any action on the part of the Buyer, be converted into
and become one fully paid and nonassessable share of common stock, par value
$1.00 per share, of the Surviving Corporation.
1.6. Acquisition Price. (a) Amount. The "Acquisition Price"
shall be $1,175,000,000, subject to adjustment as provided in Section 1.6(b).
(b) Adjustments to Acquisition Price. The Acquisition Price
shall be subject to the following two adjustments:
(i) The Acquisition Price shall be adjusted prior to the
Effective Time in accordance with the formula set forth in Exhibit A
hereto. At or prior to 12:00 noon, New York City time, on the Business
Day immediately preceding the Effective Time, the Company shall deliver
to the Buyer a certificate, signed by an officer of the Company,
setting forth the Closing Assets Under Management and the Market Assets
Under Management as of the close of business on the second Business Day
immediately preceding the Effective Time. Such certificate will include
information with respect to each open end Fund, the Prime Rate Trust
and the Institutional Accounts (including each Sub-Advisory Fund), and
will show the amount and calculation of the adjustment, if any, to the
Acquisition Price pursuant to Exhibit A hereto and this Section
1.6(b)(i).
(ii) In addition to the adjustment provided for in clause (i),
the Acquisition Price shall be reduced by: (A) the Adjusted Senior
Notes Amount; (B) the Adjusted Bank Debt Amount; and (C) 50% of the
Transaction Expenses up to an amount of such Expenses not to exceed
$16,000,000 and 100% of any such Expenses in excess of $16,000,000. Two
Business Days prior to the Effective Time, the Company shall deliver to
the
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Buyer a certificate, executed by the president and the chief financial
officer of the Company, setting forth the individual amounts, if any,
by which the Acquisition Price will be adjusted pursuant to the
foregoing clauses (A), (B) and (C), together with reasonable supporting
calculations for each component of such adjustments, such
determinations to be made as of the Business Day (the "Determination
Date") that is six Business Days prior to the Effective Time.
(iii) The Acquisition Price shall be increased by an amount
equal to the product of (i) the Acquisition Price, as adjusted pursuant
to Section 1.6(b)(ii) but without regard to Section 1.6(b)(i) and this
Section 1.6(b)(iii), times (ii) Base LIBOR (as defined in the Credit
Agreement) plus .15 of 1%, times (iii) a fraction, the numerator of
which shall be the number of days from and including the Determination
Date to the Effective Time and the denominator of which shall be 360.
The Buyer and the Company shall for federal Income Tax purposes treat
the increase in the Acquisition Price pursuant to this Section
1.6(b)(iii) as a portion of the acquisition price for the Company, not
as interest.
1.7. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Common Stock which are held by stockholders
who shall have effectively dissented from the Merger and perfected their
appraisal rights in accordance with the provisions of Section 262 of the DGCL
(the "Dissenting Shares"), shall not be converted into or be exchangeable for
the right to receive the Merger Consideration, but the holders thereof shall be
entitled to payment from the Surviving Corporation of the appraised value of
such shares in accordance with the provisions of Section 262 of the DGCL.
1.8. Payment of Merger Consideration and Other Amounts. (a)
Surrender of Certificates, etc. Prior to the Effective Time, the Parent, Holdco,
the Buyer and the Company shall enter into an exchange agent agreement (the
"Exchange Agent Agreement") with a bank or trust company designated by the
Company and reasonably acceptable to the Buyer pursuant to which such bank or
trust company shall act as exchange agent (the "Exchange Agent") for the
payment of the Merger Consideration. As soon as practicable after the Effective
Time, each holder of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Common Stock or Preferred
Stock (the "Certificates") shall, upon surrender to the Exchange Agent
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of such Certificate or Certificates and acceptance thereof by the Exchange
Agent, be entitled to the amount of cash (rounded to the nearest $0.01) into
which the aggregate number of shares of Common Stock or Preferred Stock
previously represented by such Certificate or Certificates surrendered shall
have been converted pursuant to Section 1.5(a) of this Agreement. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. The Exchange Agent shall
deliver all funds which each holder of Common Stock or Preferred Stock is
entitled to receive pursuant to this Section 1.8 within one Business Day
following such holder's surrender of such holder's Certificates. The Buyer shall
furnish to the Exchange Agent prior to or at the Effective Time all funds
required to make such payments. No interest will be paid or accrued on the
Merger Consideration upon the surrender of the Certificates. All payments in
respect of shares of Common Stock or Preferred Stock which are made in
accordance with the terms hereof shall be deemed to have been made in full
satisfaction of all rights pertaining to such shares. With respect to any
Certificate alleged to have been lost, stolen or destroyed, the owner or owners
of such Certificate shall be entitled to the Merger Consideration in respect of
such Certificate upon delivery to the Exchange Agent of an affidavit of such
owner or owners setting forth such allegation and a bond sufficient to indemnify
the Parent, Holdco and the Surviving Corporation against any claim that may be
made against any of them on account of the alleged loss, theft or destruction of
any such Certificate or the delivery of such Merger Consideration.
(b) Payments in Respect of Options. At or prior to the
Effective Time, the Buyer shall pay to the Company an amount equal to the Total
Employee Option Cancellation Amount, the Jones Option Cancellation Amount and,
if the Effective Time occurs after January 1, 1997, the Travelers Option
Cancellation Amount, net in each case of withholding Taxes, if any, which
amounts shall be paid by the Surviving Corporation to the Persons entitled to
receive such amounts pursuant to Sections 1.5(d) and (f).
(c) Endorsement of Certificates; Transfer Taxes. If Merger
Consideration is to be delivered to a Person other than the Person in whose name
the Certificate surrendered in exchange therefor is registered, it shall be a
condition to delivery of such Merger Consideration that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such
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Merger Consideration shall pay any transfer or other Taxes required by reason of
the payment to a Person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and the
Surviving Corporation that such Tax has been paid or is not applicable.
(d) Status of Certificates. Until surrendered in accordance
with the provisions of this Section 1.8, from and after the Effective Time, each
Certificate (other than (i) Certificates representing shares of Common Stock
held in the treasury of the Surviving Corporation, by any Subsidiary of the
Surviving Corporation or by Holdco and (ii) Dissenting Shares in respect of
which appraisal rights are perfected) shall represent for all purposes only the
right to receive a portion of the Merger Consideration as determined and paid in
the manner set forth in this Agreement.
(e) No Further Transfers. After the Effective Time there shall
be no transfers on the stock transfer books of the Surviving Corporation of the
shares of Common Stock or Preferred Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration as provided in Section 1.8(d).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Company. The
Company represents and warrants to the Parent, Holdco and the Buyer as follows:
2.1.1. Authorization; No Conflicts; Status of VKAC Group, etc.
(a) Authorization, etc. The Company has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, by the Company have been duly authorized by
all requisite corporate action of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
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(b) No Conflicts. Except as set forth in Schedule 2.1.1(b),
the execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby will not contravene,
result in any violation of, loss of rights or default under, constitute an event
creating rights of acceleration, termination, repayment or cancellation under,
entitle any party to receive any payment pursuant to, or result in the creation
of any Lien upon any of the properties or assets of any member of the VKAC Group
under, (i) any provision of the Organizational Documents of any member of the
VKAC Group, (ii) any Applicable Law applicable to any member of the VKAC Group
or any Fund or any of their respective properties or (iii) any Contract, except
for, in the case of this clause (iii), any such contraventions, violations,
losses, defaults, accelerations, terminations, repayments, cancellations or
Liens that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Schedule 2.1.1(b), no
Governmental Approval (other than pursuant to the HSR Act) or other Consent is
required to be obtained or made by any member of the VKAC Group or any Fund in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby.
(c) Due Organization, etc. Schedule 2.1.1(c) sets forth a
correct and complete list of each member of the VKAC Group, its form and
jurisdiction of organization and each jurisdiction in which such member is
qualified to do business. Each member of the VKAC Group is a corporation,
partnership, limited liability company, trust or trust company duly organized,
validly existing and in good standing under the laws of such member's
jurisdiction of organization, with the requisite corporate, partnership,
company, trust or trust company power and authority, as applicable, to carry on
its business as now conducted and to own or lease and to operate its properties
as and in the places where such business is now conducted and such properties
are now owned, leased or operated. Each member of the VKAC Group is duly
qualified to do business and is in good standing as a foreign corporation,
partnership, limited liability company, trust or trust company, as applicable,
in all jurisdictions in which the failure to be so qualified, individually or in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
such member of the VKAC Group.
(d) Organizational Documents, etc. The Company has made
available to the Buyer complete and correct copies
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<PAGE> 17
of the Organizational Documents, as in effect on the date hereof, of each member
of the VKAC Group. The Buyer has been given the opportunity to inspect the
corporate minutes and stock transfer books of the Company and VKAC.
2.1.2. Capitalization. (a) The Company. The authorized capital
stock of the Company consists of (i) 3,250,000 shares of Class A Common Stock,
of which 2,317,474 shares as of the date hereof are issued and outstanding,
(ii) 3,250,000 shares of Class B Common Stock, of which 117,817 shares as of
the date hereof are issued and outstanding and (iii) 32,500 shares of Preferred
Stock, all of which shares as of the date hereof are issued and outstanding.
All of the outstanding shares of Preferred Stock and Common Stock have been duly
authorized, validly issued, fully paid and nonassessable. The record owners as
of the date hereof of the Preferred Stock and the Common Stock are listed in
Schedule 2.1.2(a).
(b) Other Members of the VKAC Group. Schedule 2.1.2(b) sets
forth a complete and correct description of the authorized stock or other equity
interests of each member of the VKAC Group (other than the Company) and the
amount of such stock or other equity interests that are issued and outstanding
as of the date hereof. All of such outstanding shares of stock or other equity
interests of each member of the VKAC Group (other than the Company) have been
duly authorized and validly issued and are fully paid and nonassessable, and are
owned beneficially and of record by the member of the VKAC Group or other Person
specified on such Schedule 2.1.2(b).
(c) Options. There are 358,301 shares of Class A Common Stock
reserved for issuance upon exercise of the Employee Options outstanding on the
date hereof, 57,750 shares of Class A Common Stock reserved for issuance upon
exercise of the Jones Option, 120,222 shares of Class B Common Stock reserved
for issuance upon exercise of the Travelers Option (the Employee Options, the
Jones Option and the Travelers Option, collectively, the "Options"), 3,350
shares of Class A Common Stock reserved for issuance in connection with Deferred
Stock Units outstanding on the date hereof, 32,500 shares of Class A Common
Stock reserved for issuance upon exchange of the Preferred Stock for such shares
and 3,132,183 shares of Class B Common Stock reserved for issuance upon exchange
of shares of Class A Common Stock for such shares. There are Options relating to
536,273 shares of Common Stock outstanding as of the date hereof, and the
Company has not agreed to, nor does it have commitments to, issue options
relating to any additional shares
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<PAGE> 18
of Common Stock. The Travelers Option will terminate without having become
exercisable so long as the Effective Time occurs prior to January 1, 1997.
Schedule 2.1.2(c) sets forth a complete and correct list of all holders of
Options as of the date hereof (collectively, the "Option Holders") and all
holders of Deferred Stock Units as of the date hereof, including the exercise
price of each such Option and the number of shares of Common Stock issuable upon
exercise thereof and upon vesting of each such Deferred Stock Unit.
(d) Other Agreements with Respect to Capital Stock. There are
no preemptive or similar rights on the part of any Person with respect to the
issuance of any shares of capital stock of the Company or any other member of
the VKAC Group, except for such rights as may be set forth in the Registration
and Participation Agreement. Except (i) for this Agreement, (ii) in respect of
the Options and the Deferred Stock Agreements, (iii) in respect of certain
repurchase rights with respect to the shares of Class A Common Stock held by
current or former officers or employees of the Company or any of its
Subsidiaries and (iv) and as set forth in Schedule 2.1.2(c) or 2.1.2(d),
currently there are no subscriptions, options, warrants or other similar rights,
agreements or commitments of any kind obligating the Company or any other member
of the VKAC Group to issue or sell, or to cause to be issued or sold, or to
repurchase or otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable for, or any options, warrants or
other similar rights relating to, any such shares.
(e) Other Investments. Except as set forth in Schedule
2.1.2(e) and except for securities of and other interests in members of the VKAC
Group, investments in publicly traded securities acquired or held in the
ordinary course of business as trading inventory, investments in the Company's
investment products and cash equivalents, no VKAC Company holds any outstanding
securities or other interests in any corporation, partnership, company, joint
venture or other entity.
2.1.3. Financial Information. The Company has delivered to the
Buyer the Financial Statements. The Financial Statements have been prepared in
all material respects in accordance with generally accepted accounting
principles in the United States applied on a consistent basis ("GAAP")
throughout the periods presented in the Financial Statements, except, in the
case of the Company Financial Statements as at and for the three months ended
March 31,
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<PAGE> 19
1996, for normal year-end audit adjustments and the absence of footnotes. The
consolidated balance sheets of the Company and its Subsidiaries included in the
Company Financial Statements present fairly in all material respects the
financial position of the Company and its Subsidiaries as at the respective
dates thereof; and the consolidated statements of income, statements of
stockholders' equity and statements of cash flow of the Company and its
Subsidiaries included in the Company Financial Statements present fairly in all
material respects the results of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for the respective periods indicated. The
statements of net assets or statements of assets and liabilities and investment
portfolio included in the Fund Financial Statements for each of the Funds
present fairly in all material respects the financial position of such Fund as
at the respective dates thereof, and the statements of operations and statements
of changes in net assets included in the Fund Financial Statements for each of
the Funds present fairly in all material respects the results of operations and
changes in net assets of such Funds for the respective periods indicated.
2.1.4. Undisclosed Liabilities. The VKAC Group is not subject
to any obligation or liability of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, and, to the knowledge
of the Company, there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such an obligation
or liability, that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, other than (i) obligations and
liabilities contemplated by or in connection with this Agreement or the
transactions contemplated hereby, (ii) as and to the extent disclosed or
reserved against in the audited consolidated balance sheet as at December 31,
1995 included in the Company Financial Statements and (iii) obligations and
liabilities incurred since December 31, 1995 in the ordinary course of business
consistent with past practices and not prohibited by this Agreement.
2.1.5. Absence of Changes. Since December 31, 1995, except (i)
as set forth in Schedule 2.1.5, (ii) as reflected or reserved against in the
Financial Statements, or (iii) as contemplated by (including, without
limitation, Section 3.1.1) or in connection with this Agreement or the
transactions contemplated hereby, the business of the VKAC Group and, to the
knowledge of the Company, the Funds have been conducted in the ordinary course
consistent with past
13
<PAGE> 20
practices and no member of the VKAC Group and, to the knowledge of the Company,
no Fund has:
(a) undergone any change in its business, financial
condition, results of operations or properties (other than changes of a
general economic or political nature, including but not limited to
changes in the net asset value of any Fund or Sub-Advisory Fund
resulting from fluctuations in market price) that, individually or in
the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect;
(b) in the case of the Company or the Funds, declared, set
aside, made or paid any dividend or other distribution in respect of
its capital stock or repurchased, redeemed or otherwise acquired any
shares of its capital stock, except, in the case of the Funds, in the
ordinary course of business consistent with past practices;
(c) issued or sold any shares of its capital stock of any
class or any options, warrants or other similar rights, agreements or
commitments of any kind to purchase any such shares or any securities
convertible into or exchangeable for any such shares, except (i) for
issuances or sales of shares of capital stock of the Funds in the
ordinary course of business consistent with past practices and (ii) as
permitted under Section 3.1.2;
(d) in the case of any member of the VKAC Group, incurred,
assumed, guaranteed or prepaid any indebtedness for borrowed money
(including, without limitation, letters of credit) or issued or sold
any debt securities, except for any such incurrence, assumption,
guarantee or prepayment of (i) indebtedness under the Credit Agreement
which, in the case of prepayments after the date hereof, shall not
exceed the Permitted Debt Prepayment Amount for the applicable period,
(ii) indebtedness under the BONY Loan Agreement for the purpose of
financing trading inventory in the ordinary course of business
consistent with past practices or (iii) other indebtedness in the
ordinary course of business consistent with past practices in an
aggregate amount not exceeding $5,000,000;
(e) mortgaged, pledged or otherwise subjected to any Lien any
of its properties or assets, tangible or intangible, except for
Permitted Encumbrances or in the
14
<PAGE> 21
ordinary course of business consistent with past practices;
(f) entered into (i) any agreement or commitment involving
more than $1,000,000 that, pursuant to its terms, is not cancelable
without penalty on 60 days' notice or less or (ii) any other agreement,
commitment or other transaction, other than (A) any agreement,
commitment or other transaction involving an expenditure of not more
than $500,000 or (B) Investment Advisory Contracts, distribution
agreements, Underwriting Agreements and Custodian/Transfer Agent
Agreements entered into in the ordinary course of business consistent
with past practices;
(g) paid (or committed to pay) any bonus or other incentive
compensation to any officer, director, partner, employee or sales
representative or granted (or committed to grant) to any officer,
director, partner, employee or sales representative any other increase
in compensation, except in each case in the ordinary course of business
consistent with past practices or pursuant to the terms of any
agreement or commitment existing at December 31, 1995;
(h) (i) entered into, adopted or amended in any material
respect, any employment, collective bargaining, deferred compensation,
severance, retirement, bonus, profit-sharing, stock option or other
equity, pension or welfare plan or agreement maintained for the benefit
of any officer, director, partner, employee or sales representative or
(ii) granted any severance or termination pay to any officer, director,
partner, employee or sales representative, except in any such case in
the ordinary course of business consistent with past practices, as
required under Applicable Law or, in the case of clause (ii), for any
such grant required to be made pursuant to any plan, agreement or
commitment existing at December 31, 1995;
(i) suffered any strike or other labor dispute that has had or
would reasonably be expected to have a Material Adverse Effect;
(j) suffered any loss of employees or customers that has had
or would reasonably be expected to have a Material Adverse Effect;
15
<PAGE> 22
(k) amended its certificate of incorporation or by-laws or any
other Organizational Documents;
(l) granted any rights or licenses under any of its trademarks
or trade names or other Company Intellectual Property or entered into
any licensing or similar agreements or arrangements other than in the
ordinary course of business consistent with past practices;
(m) made any material changes in policies or practices
relating to selling practices, returns, discounts or other material
terms of sale or accounting therefor, including any material change in
sales load reallowance policies with respect to sales of shares of the
Funds;
(n) in the case of any Fund, had any action taken by the Board
of Directors or Trustees of such Fund other than in the ordinary course
of business consistent with past practices or as contemplated by or in
connection with this Agreement;
(o) changed in any material respect its accounting practices,
policies or principles, other than any such changes as may be required
under GAAP;
(p) in the case of any VKAC Company, amended or agreed to
amend (i) any fee arrangement with respect to services provided by it
to any Fund, (ii) any fee arrangement with any Person relating to the
distribution of shares of any Fund or (iii) any fee arrangement
existing under any Investment Advisory Contract;
(q) in the case of any Fund, amended or agreed to amend the
distribution-related fees payable to any Person in connection with the
distribution of its shares, or otherwise amended the terms applicable
to any existing class of its shares, or authorized the creation of a
new class of shares;
(r) suffered any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting its properties or
assets which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; or
16
<PAGE> 23
(s) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
2.1.6. Taxes. (a) Filing of Returns and Payment of Taxes.
Except as set forth on Schedule 2.1.6(a), all material Returns required to be
filed on or before the date hereof have been filed in accordance with Applicable
Law and all material Returns required to be filed on or before the Closing Date
will have been filed by the Closing Date in accordance with Applicable Law or,
in each case, the time for filing such Returns shall have been validly extended
as set forth in Schedule 2.1.6(b). Except for Taxes set forth on Schedule
2.1.6(a), the following Taxes (collectively, "Company Taxes") have (or, in the
case of Taxes that become due after the date hereof and on or before the Closing
Date, by the Closing Date will have) been duly paid: (i) all Taxes shown to be
due on such Returns and (ii) all material Taxes due and payable on or before the
date hereof and all material Taxes due and payable on or before the Closing Date
that are or may become payable by the VKAC Companies or chargeable as a Lien
upon the assets thereof (whether or not shown on any Return). Except as set
forth on Schedule 2.1.6(a), all material Employment and Withholding Taxes
required to be withheld and paid on or before the date hereof, and all material
Employment and Withholding Taxes required to be withheld and paid on or before
the Closing Date, have been or by the Closing Date will have been duly paid to
the proper Governmental Authority or properly set aside in accounts for such
purpose. Except as set forth on Schedule 2.1.6(a), all interest and penalties in
respect of material Taxes that were not timely paid have been paid.
(b) Extensions, etc. Except as set forth on Schedule 2.1.6(b),
(i) no agreement or document extending or waiving, or having the effect of
extending or waiving, the period of assessment or collection of any Company
Taxes or Employment and Withholding Taxes, and no power of attorney with respect
to any such Taxes, has been executed or filed with the IRS or any other taxing
authority; (ii) none of the VKAC Companies has requested any extension of time
within which to file any Return and has not yet filed such Return; and (iii)
there are no requests for rulings in respect of any Company Taxes or Employment
and Withholding Taxes pending between any VKAC Company and any Governmental
Authority.
(c) Tax Filing Groups; Income Tax Jurisdictions. Except as set
forth on Schedule 2.1.6(c), none of the VKAC Companies is or has been at any
time a member of any affili-
17
<PAGE> 24
ated, consolidated, combined or unitary group for Tax purposes. Set forth on
Schedule 2.1.6(c) for the VKAC Companies are all countries, states, provinces,
cities or other jurisdictions in which any material Tax is properly payable by
any VKAC Company.
(d) Copies of Returns; Audits; etc. The Company has (or by the
Closing Date will have) made available to the Buyer complete and accurate copies
of all Returns as filed and, if applicable, as amended, with respect to all open
Tax periods that have been filed or will be required to be filed (after giving
effect to all valid extensions of time for filing) on or before the Closing
Date. Except as set forth on Schedule 2.1.6(d), (i) no Company Taxes or
Employment and Withholding Taxes have been asserted in writing (or, to the
knowledge of the Company, after January 31, 1995, orally) by any Governmental
Authority to be due in respect of any open Tax period, (ii) no revenue agent's
report or written (or, to the knowledge of the Company, after January 31, 1995,
orally) assessment for Taxes has been issued by any Governmental Authority in
the course of any audit with respect to Company Taxes or Employment and
Withholding Taxes for any open Tax period and (iii) no issue has been raised by
any Governmental Authority in writing (in a writing that has been received by
the VKAC Companies) or, to the knowledge of the Company, after January 31, 1995,
orally in the course of any audit that has not been completed with respect to
Company Taxes or Employment and Withholding Taxes. Except as set forth on
Schedule 2.1.6(d), all Returns filed with respect to Tax years of the VKAC
Companies through the Tax year ended December 31, 1983, have been closed or are
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired. The
audits of the Returns with respect to federal Income Taxes for the following
taxable periods have been completed: All taxable periods beginning on or after
September 9, 1983 and ended on or prior to December 31, 1986. The Returns with
respect to federal Income Taxes for the following taxable periods are currently
under audit by the IRS: 1987 through 1992. Except as set forth on Schedule
2.1.6(d), there is no judicial or administrative claim, audit, action, suit,
proceeding or, to the knowledge of the Company, investigation now pending or
threatened against or with respect to any VKAC Company in respect of any
Company Tax, Employment and Withholding Tax or Tax Asset. Except as set forth
on Schedule 2.1.6(d), there is no reasonable basis for any deficiency, claim or
adjustment of additional Company Taxes or Employment and Withholding Taxes of
which the Company is aware. Except as set forth on Schedule 2.1.6(d),
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<PAGE> 25
there are no Liens for Taxes upon the assets of any VKAC Company except Liens
for current Taxes not yet due or being contested in good faith and by
appropriate proceedings.
(e) Section 1445(a) of the Code. The Buyer will not be
required to deduct and withhold any amount pursuant to section 1445(a) of the
Code upon the payment of the Merger Consideration pursuant to this Agreement.
(f) Tax Sharing Agreements. Except as set forth on Schedule
2.1.6(f), (i) none of the VKAC Companies is a party to or bound by or has any
obligation under any Tax sharing agreement or arrangement and (ii) no VKAC
Company is currently under any contractual obligation to pay any amounts of the
type described in clause (ii) or (iii) or the definition of "Tax."
(g) Regulated Investment Company, etc. (i) As to each of the
Funds other than those to which the provisions of paragraph (ii) or (iii) of
this Section 2.1.6(g) apply: Except as set forth on Schedule 2.1.6(g), (A) each
of such Funds made or will make the election set forth in section 851(b) of
the Code for its first taxable year for which it represented to its shareholders
that it was a RIC; (B) except for its current taxable year and other than Van
Kampen American Capital Pace Fund prior to June 30, 1977, each of such Funds has
qualified as a RIC, for such first taxable year and for each succeeding taxable
year; (C) except for failure to comply with the provisions of section
852(a)(1) of the Code, each of such Funds would qualify as a RIC, for its
current taxable year if the last day of its most recent fiscal quarter ended on
or prior to the date of this Agreement were treated as the last date of such
taxable year and (D) no such Fund has any earnings and profits accumulated in
any taxable year in which it did not qualify as a RIC.
As of the Closing Date, each of such Funds will have qualified
as a RIC, for each of its taxable years ended prior to the Closing Date, other
than Van Kampen American Capital Pace Fund prior to June 30, 1977. As of the
Closing Date, except for failure to comply with the provisions of section
852(a)(1) of the Code, (E) each of such Funds whose taxable years end within
three months after the Closing Date would so qualify for its taxable year during
which the Closing Date occurs if the Business Day immediately preceding the
Closing Date were treated as the last date of such taxable year, and (F) except
for a failure to comply with section 851(b)(4) of the Code that would not
prevent such Fund from curing such failure under section 851(d) of
19
<PAGE> 26
the Code and that is consistent with past practice of such Fund and with such
Fund's fiduciary obligations, each of such Funds would so qualify for its
taxable year in which the Closing Date occurs if the last day of its most recent
fiscal quarter ended on or prior to the Closing Date were treated as the last
date of such taxable year.
(ii) In the case of Van Kampen American Capital Exchange Fund,
Van Kampen American Capital Monthly Accumulation Plans and each of the Funds
that is a unit investment trust, other than those unit investment trusts that
have made the election set forth in section 851(b) of the Code (to which the
provisions of paragraph (i) of this Section 2.1.6(g) shall apply), such Fund is
not and has not been at any time since its inception (or, if later, the
effective date of section 851(f) of the Code) an association taxable as a
corporation for federal Income Tax purposes. Van Kampen American Capital
Exchange Fund is and has been since its inception treated as a partnership for
federal Income Tax purposes. Van Kampen American Capital Monthly Accumulation
Plans is and has been since its inception (or, if later, the effective date of
section 851(f) of the Code) treated as a business arrangement to which the
provisions of such section 851(f) apply. All portions of each Fund that is a
unit investment trust, other than a unit investment trust that has made the
election set forth in section 851(b) of the Code, are and have been since their
inception subject to subpart E of part I of subchapter J of chapter 1 of
subtitle A of the Code.
(iii) Each of the Van Kampen American Capital Navigator Funds
is organized as a "societe d'investissement a capital variable a compartiments
multiples" under the laws of Luxembourg. Each such Fund maintains its principal
office, as defined for purposes of section 864(b)(2)(A)(ii) of the Code, outside
the United States.
(iv) Except as set forth on Schedule 2.1.6(g), all material
Tax returns, reports, declarations, forms or information statements relating to
Taxes required to be filed by any Fund with any Governmental Authority, or
provided by any Fund to any other Person, on or before the Closing Date (the
"Fund Returns") have been duly filed, or provided to the appropriate Person, by
or on behalf of such Fund in accordance with all applicable laws. Except as set
forth on Schedule 2.1.6(g), as of the time each Fund Return was filed or
provided to the relevant Person, such Fund Return was accurate and complete in
all material respects. Except as set forth on Schedule 2.1.6(g), all material
Taxes payable by or on behalf of any Fund on or before the date
20
<PAGE> 27
hereof have been timely paid, or withheld and remitted, to the appropriate
Governmental Authority. Except as set forth on Schedule 2.1.6(g), there is no
judicial or administrative claim, audit, action, suit, proceeding or
investigation now pending or to the knowledge of the Company, threatened against
or with respect to any Fund in respect of any Tax.
(h) Reserves for Taxes. As of the date hereof, the financial
statements of the VKAC Companies reflect charges, accruals and reserves to cover
taxes and deferred taxes that are adequate in all material respects in
accordance with GAAP. As of the Closing Date, the financial statements of the
VKAC Companies will reflect charges, accruals and reserves to cover taxes and
deferred taxes that are adequate in all material respects in accordance with
GAAP. All information set forth in the Financial Statements, including the
notes thereto, relating to tax matters is true and complete in all material
respects in accordance with GAAP.
(i) Section 481 Adjustment. No VKAC Company is or will be
required to include any adjustment in taxable income for any Post-Closing Tax
Period under Section 481(c) of the Code (or any similar provision of the Tax
laws of any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement entered
into with any Taxing Authority on or before the Closing Date with regard to the
Tax liability of any VKAC Company for any Pre-Closing Tax Period.
(j) Real Property. Except as set forth on Schedule 2.1.6(j),
none of the VKAC Companies owns any interest in real property in the State of
New York or in any other jurisdiction in which a Tax is imposed on the transfer
of a controlling interest in an entity that owns any interest in real property.
(k) Qualified Stock Purchases. Except as set forth on Schedule
2.1.6(k), no VKAC Company has consummated a "qualified stock purchase" within
the meaning of section 338 of the Code since December 20, 1994.
2.1.7. Properties and Assets. Schedule 2.1.7 sets forth a
complete and correct list, as of the date hereof, of all real property leased by
any member of the VKAC Group (the "Real Property"), including the names of each
of the parties to such lease and the location of the applicable property. None
of the members of the VKAC Group owns any real property. Each member of the VKAC
Group has
21
<PAGE> 28
valid title to all material personal property owned by it, and valid
leasehold interests in all real and material personal property leased by it, in
each case free and clear of all Liens, except (i) Liens specified in Schedule
2.1.7 or reflected in the Financial Statements, (ii) Liens for Taxes not yet
delinquent or which are being contested in good faith by appropriate proceedings
if adequate reserves with respect thereto are maintained on its books in
accordance with GAAP, (iii) statutory Liens incurred in the ordinary course of
business consistent with past practices that have not had and would not
reasonably be expected to have a Material Adverse Effect and (iv) Liens which do
not materially detract from the value or materially interfere with the use of
the properties affected thereby (the exceptions described in the foregoing
clauses (i), (ii), (iii) and (iv) being referred to collectively as "Permitted
Encumbrances"). Schedule 2.1.7 sets forth a list of each real property lease
under which any VKAC Company is a lessee as to which the consummation by the
Company of the transactions contemplated hereby would result in a violation of,
loss of rights or default under or constitute an event creating rights of
acceleration, termination or cancellation under such lease.
2.1.8. Contracts. (a) Schedule of Contracts, etc. Schedule
2.1.8(a) sets forth a correct and complete list, as of the date hereof, of all
Contracts. The term "Contracts" means all written agreements, contracts and
commitments of the following types to which any member of the VKAC Group is a
party or by which any member of the VKAC Group or its respective properties is
bound and which is currently in effect, as amended, supplemented, waived or
otherwise modified as of the date hereof: (i) agreements, contracts and
commitments for the performance of investment advisory or investment management
services for clients (the "Investment Advisory Contracts"); (ii) agreements,
contracts and commitments for the distribution of shares of the Funds or any
other mutual funds, closed end companies, variable annuities or other similar
products to which any of the top 20 selling agents (which such agents
represented more than 54% of the sales of such products during the year ended
December 31, 1995) of the investment products of the VKAC Group (measured by
sales of such products during the year ended December 31, 1995) is a party (the
"Selling Agreements") and underwriting agreements with the Funds as to which
any member of the VKAC Group is the principal underwriter (the "Underwriting
Agreements"); (iii) custody, transfer agent and other similar material
agreements (the "Custodian/Transfer Agent Agreements"); (iv) employment,
consulting, retention and collective bargaining agreements,
22
<PAGE> 29
if any, with officers, directors, key employees, former employees or sales
representatives; (v) mortgages, indentures, security agreements relating to
indebtedness for borrowed money, letters of credit, loan agreements and other
material agreements, guarantees and instruments relating to the borrowing of
money or extension of credit; (vi) material licenses and other similar material
agreements involving Intellectual Property rights; (vii) joint venture, partner-
ship and similar agreements; (viii) stock purchase agreements (other than any
such agreements pursuant to which the Company issued Preferred Stock or Common
Stock to any Person), asset purchase agreements and other acquisition or
divestiture agreements; (ix) material agreements, contracts and commitments with
respect to the sharing or capping of fees or other payments received from any
Client or other Person or the sharing of expenses of any other Person; (x)
personal property leases providing for annual rentals of $1,000,000 or more;
(xi) agreements, contracts and commitments for the purchase of supplies,
services, equipment or other assets that provide for either (A) annual payments
by the VKAC Group of $500,000 or more or (B) aggregate payments by the VKAC
Group of $1,000,000 or more; (xii) any other agreements, contracts or
commitments that are material to the business, financial condition, results of
operations or properties of the VKAC Group, taken as a whole; and (xiii) any
guaranty of any of the foregoing. The Company has made available to the Buyer
for inspection complete and correct copies of all Contracts, including a fee
schedule, where applicable.
(b) No Defaults, etc. Except as set forth in Schedule 2.1.8(b)
and excluding any failure to obtain Consents with respect to the Contracts
listed in Schedule 2.1.1(b), (i) each Contract is in full force and effect in
all material respects, and (ii) there does not exist under any material Contract
any material event of default, or any event or condition that, after notice or
lapse of time or both, would constitute a material event of default, on the part
of any member of the VKAC Group or, to the knowledge of the Company, on the part
of any other party to any material Contract. Except as disclosed in Schedule
2.1.8(b), no member of the VKAC Group is subject to any contract, agreement or
commitment materially restricting or limiting the type or scope of business or
operations that it may conduct now or immediately after the Effective Time.
(c) Certain Investment Advisory Clients. Schedule 2.1.8(c)
sets forth a correct and complete list of each investment advisory client of the
VKAC Companies as of the date hereof. Except as set forth on Schedule 2.1.8(c),
as
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of the date hereof each such client is being served by the VKAC Company
specified on such Schedule and the Company has not received written notice from
any such client of, and, to the knowledge of the Company, no such client has
stated orally, its intention to terminate its Investment Advisory Contract.
(d) Certain Selling Agents. As of the date hereof, the Company
has not received written notice from any selling agent that is a party to any
Selling Agreement of, and, to the knowledge of the Company, no such party has
stated orally, its intention to terminate its Selling Agreement.
(e) Investment Contracts. To the knowledge of the Company, and
except as would not reasonably be expected to have a Material Adverse Effect on
any VKAC Company or Fund party thereto, (x) each Investment Advisory Contract,
Selling Agreement, Underwriting Agreement and Custodian/Transfer Agent Agreement
and any renewal thereof after the date hereof and prior to the Effective Time
has been duly authorized, executed and delivered by each party thereto and, to
the extent applicable, has been adopted in compliance with Section 15 of the
Investment Company Act and is a valid and binding agreement of each such party,
enforceable in accordance with its terms (subject to bankruptcy, insolvency,
moratorium, fraudulent transfer and similar laws affecting creditors' rights
generally and to general equity principles) and (y) each of the Company and, to
the knowledge of the Company, the other party thereto is in compliance in all
material respects with the terms of each Investment Advisory Contract, Selling
Agreement, Underwriting Agreement and Custodian/Transfer Agent Agreement to
which it is a party, and no event has occurred or condition exists that
constitutes or with notice or the passage of time would constitute a material
default by any member of the VKAC Group thereunder.
(f) Status. Schedule 2.1.8(f) sets forth a complete and
correct list of the top 20 firms (measured by sales of Fund shares during the
year ended December 31, 1995) that distribute shares of the Funds with whom the
VKAC Group has a proprietary vendor or preferred vendor relationship as of the
date hereof.
2.1.9 Intellectual Property. (a) Schedule of Intellectual
Property. Schedule 2.1.9(a) sets forth a correct and complete list of all of
the trade or service marks and all other material Intellectual Property used
in the business and operations of the VKAC Group as of the date
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<PAGE> 31
hereof (the "Company Intellectual Property") and sets forth the owner and nature
of the interest of the VKAC Group therein. The Company has previously made
available to the Buyer correct and complete copies of all licenses, sublicenses
or other similar agreements (including any amendments thereto) set forth on
Schedule 2.1.9(a). Except as set forth in Schedule 2.1.9(a), the VKAC Group has
the legal right to use the Company Intellectual Property in connection with the
business as currently conducted by the VKAC Group and, except as set forth on
Schedule 2.1.1(b), immediately after the Effective Time, the Surviving
Corporation or its Subsidiaries will have such right to the same extent and on
the same terms as the VKAC Group was entitled to use the Company Intellectual
Property immediately prior to the Effective Time.
(b) No Infringement, etc. To the knowledge of the Company, the
business and operations of the VKAC Group as currently conducted do not infringe
or otherwise conflict with any rights of any Person in respect of any
Intellectual Property. To the knowledge of the Company, none of the Company
Intellectual Property owned by any member of the VKAC Group is being materially
infringed or otherwise materially used or available for use by any Person other
than a member of the VKAC Group, except as set forth in Schedule 2.1.9(a) or
(b). No Company Intellectual Property owned by any member of the VKAC Group is
subject to any out standing judgment, injunction, order, decree or agreement
restricting the use thereof by any member of the VKAC Group with respect to its
business or restricting the licensing thereof by such member to any Person.
Except as set forth on Schedule 2.1.9(b), no member of the VKAC Group has
entered into any agreement to indemnify any other Person against any charge of
infringement of Intellectual Property, other than pursuant to any such
agreements entered into in connection with the use of commercially available
information systems applications.
2.1.10. Insurance. Schedule 2.1.10 sets forth a correct and
complete list of all insurance policies and fidelity bonds maintained on the
date hereof by or for the benefit of the members of the VKAC Group and the
Funds. The Company has made available to the Buyer complete and correct copies
of all such policies and bonds, together with all riders and amendments thereto
as of the date hereof. As of the date hereof, such policies and bonds are in
full force and effect, and all premiums due thereon have been paid. The members
of the VKAC Group have complied in all material respects with the terms and
provisions of such policies and bonds. Except as set forth on Schedule 2.1.10,
there is no
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<PAGE> 32
claim in excess of $100,000 by any member of the VKAC Group or any
Fund pending as of the date hereof under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. Such policies and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
the Relevant Date and are of the type and in amounts customarily carried by
Persons conducting businesses similar to the businesses of the VKAC Group. If so
requested by the Parent, the VKAC Companies will have their insurance broker(s)
notify the underwriters of such policies and bonds of the transactions
contemplated by this Agreement and advise such insurance broker(s) to maintain
all such policies and bonds in accordance with their terms until further notice.
Immediately after the Effective Time, the members of the VKAC Group shall
continue to have coverage under the policies and bonds set forth in items 2, 3,
4, 5, 6, 7, 8, 10 and 11 of Schedule 2.1.10. The fidelity insurance, the
directors and officers liability insurance, and errors and omissions policies
and all other insurance coverage of each member of the VKAC Group and, to the
knowledge of the Company, each Fund has been since the Relevant Date maintained
in accordance with Applicable Law.
2.1.11. Litigation. Except as set forth in Schedule 2.1.11,
there is no judicial or administrative action, suit, investigation, inquiry or
proceeding pending or, to the knowledge of the Company, threatened that (a)
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or result in any liability on the part of the VKAC Group
in an amount in excess of $2,000,000 individually or $5,000,000 in the aggregate
or (b) questions the validity of this Agreement or of any action taken or to be
taken by any member of the VKAC Group in connection herewith.
2.1.12. Compliance with Laws and Other Instruments;
Governmental Approvals. (a) Compliance with Laws, etc. Except as disclosed in
Schedule 2.1.12(a), no member of the VKAC Group and, to the knowledge of the
Company, no Fund is in material violation of or material default under, or has
at any time since the Relevant Date materially violated or been in material
default under, (i) any Applicable Law applicable to it or any of its properties
or business or (ii) any provision of its Organizational Documents. Schedule
2.1.12(a) sets forth a correct and complete list of all consent decrees or other
similar agreements entered into by any member of the VKAC Group with any
Governmental Authority after the Relevant Date or prior to the Relevant Date if
currently in effect.
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(b) Governmental Approvals. Except as disclosed in Schedule
2.1.12(b), all material Governmental Approvals necessary for the conduct of the
business and operations of each member of the VKAC Group have been duly obtained
and are in full force and effect. There are no proceedings pending or, to the
knowledge of the Company, threatened that would reasonably be expected to result
in the revocation, cancellation or suspension, or any materially adverse
modification, of any such Governmental Approval, and except with respect to
Governmental Approvals set forth on Schedule 2.1.1(b), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any such revocation, cancellation, suspension or
modification.
(c) Filings. Since the Relevant Date, the VKAC Group has filed
all material registrations, reports, statements, notices and other material
filings required to be filed with the Commission or any other Governmental
Authority by any member of the VKAC Group, including all required amendments or
supplements to any of the above (the "Filings"). The Filings complied in all
material respects, where applicable, with the requirements of the Securities
Act, the Exchange Act, the Advisers Act and the Investment Company Act. As of
their respective dates, each of the Filings constituting prospectuses,
statements of additional information, Part II of Form ADVs or annual reports on
Form 10-K did not contain any untrue statement of 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. The Company has made
or will make available to the Buyer complete and correct copies of (i) all
Filings made within the past two years (including but not limited to all filings
on Form ADV, Form TA, Form NSAR and Form BD), (ii) of all audit reports
received by any member of the VKAC Group from the Commission or any other
Governmental Authority and all written responses thereto made by any such member
during the past two years, (iii) copies of all inspection reports provided to
any VKAC Company by the Commission or any state regulatory authority during the
past two years and (iv) all correspondence relating to any inquiry or
investigation provided to any VKAC Company by the Commission or any state
regulatory authority during the past two years.
2.1.13. Environmental Matters. Each member of the VKAC Group
is and has been in compliance in all material respects with all Environmental
Laws applicable to it and its properties, and no Environmental Activity has
otherwise occurred in material violation of any Environmental Law for
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<PAGE> 34
which any member of the VKAC Group may be responsible. No member of the VKAC
Group has any material liabilities, absolute or contingent, in connection with
any Environmental Activity or under any Environmental Law. To the knowledge of
the Company, all Real Property is free from contamination in all material
respects from any Hazardous Materials (including but not limited to asbestos).
All material permits, licenses, registrations and authorizations required under
applicable Environmental Laws as currently in effect for the conduct of the
business and operations of the VKAC Group have been obtained and are presently
in effect, and there are no material violations thereof outstanding.
2.1.14. Affiliate Transactions. Schedule 2.1.14 sets forth a
correct and complete list of all agreements, arrangements or other commitments
in effect as of December 31, 1995 between any member of the VKAC Group, on the
one hand, and any Affiliate of any member of the VKAC Group, other than another
member of the VKAC Group or the Funds and other than, in the case of any officer
or employee of the Company or any of its Subsidiaries who may be deemed to be an
Affiliate, in the ordinary course of business consistent with past practices, on
the other hand. Since December 31, 1995, except as set forth in Schedule 2.1.14,
no member of the VKAC Group has entered into any agreement, arrangement or other
commitment or transaction with any Affiliate of the Company, other than another
member of the VKAC Group or the Funds and other than, in the case of any officer
or employee of the Company or any of its Subsidiaries who may be deemed to be an
Affiliate, in the ordinary course of business consistent with past practices.
2.1.15. Government Regulation. (a) Investment Advisers. Each
of Van Kampen American Capital Investment Advisory Corp., Van Kampen American
Capital Management, Inc., Van Kampen American Capital Advisors, Inc., Van Kampen
American Capital Asset Management, Inc. and Van Kampen Merritt Equity Advisors
Corp. (collectively, the "Registered Investment Advisers") is, and at all times
required by the Advisers Act during the past five years has been, duly
registered as an investment adviser under the Advisers Act. Except as set forth
in Schedule 2.1.15(a), each of the Registered Investment Advisers is, and at all
times required by Applicable Law (other than the Advisers Act) during the past
two years has been, duly registered, licensed or qualified as an investment
adviser in each state where the conduct of its business required such
registration, licensing or qualification, except for any such failure to be so
registered, licensed or qualified that would not reasonably be expected to have
a Material Adverse Effect on
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<PAGE> 35
such Registered Investment Adviser. Each such United States federal and state
registration, license or qualification, as of the date hereof, is listed in
Schedule 2.1.15(a) and is in full force and effect. No VKAC Company other than
the Registered Investment Advisers is or has been during the past five years an
"investment adviser" within the meaning of the Advisers Act, required to be
registered, licensed or qualified as an investment adviser under the Advisers
Act or subject to any material liability or disability by reason of any failure
to be so registered, licensed or qualified. None of the VKAC Companies is or has
been during the past five years an Investment Company.
(b) Broker-Dealers. Each of Van Kampen American Capital
Distributors, Inc. and American Capital Contractual Services, Inc.
(collectively, the "Registered Broker-Dealers") is, and at all times required
by the Exchange Act during the past five years has been, a broker-dealer duly
registered under the Exchange Act and a member firm in good standing of the NASD
and, to the extent required, the Municipal Securities Rulemaking Board. Except
for any Registered Broker-Dealer set forth on Schedule 2.1.15(b), each of the
Registered Broker-Dealers is, and at all times required by Applicable Law (other
than the Exchange Act) during the past two years has been, duly registered,
licensed or qualified as a broker-dealer in each state where the conduct of its
business required such registration, licensing or qualification, except for any
such failure to be so registered, licensed or qualified that would not
reasonably be expected to have a Material Adverse Effect on such Registered
Broker-Dealer. Each such United States federal and state registration, license
or qualification, as of the date hereof, is listed in Schedule 2.1.15(b) and is
in full force and effect. Except for any Registered Broker-Dealer set forth on
Schedule 2.1.15(b), no VKAC Company other than the Registered Broker-Dealers is
or has been during the past five years required to be registered, licensed or
qualified as a broker-dealer under the Exchange Act, or subject to any material
liability or disability by reason of any failure to be so registered, licensed
or qualified, except for any such failure that would not reasonably be expected
to have a Material Adverse Effect on such VKAC Company.
(c) Funds and Sub-Advisory Funds. Schedule 2.1.15(c) sets
forth each Investment Company for which a VKAC Company acts as investment
adviser, sponsor or manager as of the date hereof, including but not limited to
mutual funds, closed end companies, unit investment trusts and any other pooled
investment vehicle (whether or not registered)
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(collectively, the "Funds"), and each Investment Company for which a VKAC
Company acts as an investment subadviser as of the date hereof (the
"Sub-Advisory Funds"). Each of the Funds and, to the knowledge of the Company,
the Sub-Advisory Funds that is or during the past five years in the case of the
Funds and two years in the case of the Sub-Advisory Funds has been required by
the Investment Company Act to be registered with the Commission as an investment
company under the Investment Company Act is, and at all times required by the
Investment Company Act during the past five years or two years, as the case may
be, has been, so registered. Except with respect to the Funds and the
Sub-Advisory Funds, no VKAC Company acts as investment adviser or subadviser to
any Investment Company. Each VKAC Company that acts as investment adviser or
subadviser to a Fund or Sub-Advisory Fund has a written Investment Advisory
Contract pursuant to which such VKAC Company serves as investment adviser or
subadviser to such Fund or Sub-Advisory Fund. As of the date hereof, no VKAC
Company and no "interested person" of any VKAC Company, as such term is defined
in the Investment Company Act, receives or is entitled to receive any
compensation directly or indirectly (a) from any Person in connection with the
purchase or sale of securities or other property to, from or on behalf of any of
the Funds or Sub-Advisory Funds, other than bona fide ordinary compensation as
principal underwriter, distributor or sponsor for the Funds, or (b) from the
Funds or Sub-Advisory Funds or their respective security holders for other than
bona fide investment advisory, sub-advisory or other services.
(d) Codes of Ethics, etc. (i) The VKAC Companies have adopted
a formal code of ethics and a written policy regarding insider trading, a
complete and accurate copy of each of which has been made available to the
Buyer. Such code of ethics complies in all material respects with Section 17(j)
of the Investment Company Act, Rule 17j-1 thereunder and Section 204A of the
Advisers Act. Such insider trading policy complies in all material respects with
Section 204A of the Advisers Act and Section 15(f) of the Exchange Act. The
policies of the VKAC Companies as of the date hereof with respect to avoiding
conflicts of interest are as set forth in the most recent Form ADV or policy
manual of the VKAC Companies, as amended, which has been made available to the
Buyer. To the knowledge of the Company, there have been no violations of such
code of ethics or such policies that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
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(ii) Each Fund that is registered under the Investment Company
Act has duly adopted procedures pursuant to Rules 17a-7, 17e-1 and 10f-3 under
the Investment Company Act, to the extent applicable. Each Fund that is
registered under the Investment Company Act has for the past two years been
operated and is currently operating in compliance in all material respects with
Rules 17a-7, 17e-1 and 10f-3 thereunder, to the extent applicable.
(e) No Disqualifications. (i) No member of the VKAC Group,
(ii) no Person "associated" (as defined under the Advisers Act) with any member
of the VKAC Group and (iii) with respect to the Funds, no Person within the
scope of Section 9(a) of the Investment Company Act, is or has been during the
past two years subject to any disqualification that would be a basis (A) for
denial, suspension or revocation of registration of an investment adviser under
Section 203(e) of the Advisers Act or Rule 206(4)-4(b) thereunder or of a
broker-dealer under Section 15 of the Exchange Act, (B) for disqualification as
an investment adviser or a principal underwriter for an investment company
pursuant to Section 9(a) of the Investment Company Act or (C) for prohibition
from holding certain positions pursuant to Section 411 of ERISA and, to the
knowledge of the Company, there is no proceeding or investigation, and no basis
for any proceeding or investigation, that would reasonably be expected to
become the basis for any such disqualification, denial, suspension, revocation
or prohibition.
(f) Transfer Agent. ACCESS Investor Services, Inc. (the
"Transfer Agent") is, and at all times required by the Exchange Act during the
past five years has been, duly registered as a transfer agent under the Exchange
Act. Except as set forth in Schedule 2.1.15(f), the Transfer Agent is, and at
all times required by Applicable Law (other than the Exchange Act) during the
past two years has been, duly registered, licensed or qualified as a transfer
agent in each state where the conduct of its business required such
registration, licensing or qualification, except for any such failure to be so
registered, licensed or qualified that would not reasonably be expected to have
a Material Adverse Effect on the Transfer Agent. Each such United States federal
and state registration, license or qualification, as of the date hereof, is
listed in Sched ule 2.1.15(f) and is in full force and effect. No VKAC Company
other than the Transfer Agent is or has been during the past five years a
"transfer agent" within the meaning of the Exchange Act, or required to be
registered, licensed or qualified as a transfer agent under the Exchange Act,
or
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subject to any material liability or disability by reason of any failure to be
so registered, licensed or qualified, except for any such failure that would not
reasonably be expected to have a Material Adverse Effect on such VKAC Company.
(g) Trust Companies. Except as set forth in Schedule
2.1.15(g), Van Kampen American Capital Trust Com pany is, and at all times
required by Applicable Law during the past two years has been, duly registered,
licensed or qualified as a trust company in each state, if any, where the
conduct of its business required such registration, licensing or qualification,
except for any such failure to be so registered, licensed or qualified that
would not reasonably be expected to have a Material Adverse Effect on such
company. Each such registration, license or qualification, as of the date
hereof, is listed in Schedule 2.1.15(g) and is in full force and effect. No VKAC
Company other than Van Kampen American Capital Trust Company is or has been
during the past two years required to be registered, licensed or qualified as a
trust company under any Applicable Law, or subject to any material liability or
disability by reason of any failure to be so registered, licensed or qualified,
except for any such failure that would not reasonably be expected to have a
Material Adverse Effect on such VKAC Company.
(h) Other Entities. The members of the VKAC Group and each of
their partners or employees which are or who are required to be registered as a
registered representative, an investment adviser representative, insurance agent
or a sales person with the Commission, the securities or insurance commission of
any state or any self-regulatory body is duly registered as such and such
registration is in full force and effect, except where the failure to be so
registered or to have such registration in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.1.16. Funds; Sub-Advisory Funds; Clients. (a) Fund
Compliance with Legal and Other Requirements. (i) Each Investment Advisory
Contract with respect to any Fund and, to the knowledge of the Company, with
respect to any Sub-Advisory Fund, and each Underwriting Agreement, during the
past five years in the case of a Fund and two years in the case of a
Sub-Advisory Fund, has been duly adopted and maintained in compliance in all
material respects with Section 15 of the Investment Company Act.
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(ii) Since the Relevant Date, each Fund has been operated in
compliance with its respective objectives, policies and restrictions, including
without limitation those set forth in the applicable prospectus and registration
statement for a Fund or governing instruments for a client, except where lack of
compliance would not reasonably be expected to have a Material Adverse Effect.
(iii) To the extent that any VKAC Company has acted as a
fiduciary, plan administrator or other service provider where such VKAC Company
is deemed to be a fiduciary to any employee benefit plan that is subject to
ERISA, such VKAC Company during the past four years has complied with the
requirements of ERISA and the Code in the performance of its duties and
responsibilities with respect to such plan, except any such failures to comply
that would not reasonably be expected to have a Material Adverse Effect on such
VKAC Company.
(b) Status of the Funds and Sub-Advisory Funds. Except where
the violation of any of the representations and warranties contained in this
Section 2.1.16(b) would not reasonably be expected to have a Material Adverse
Effect:
(i) (A) The shares of each Fund are qualified for sale, or an
exemption therefrom is in full force and effect, in each state and
territory of the United States and the District of Columbia to the
extent required by Applicable Law; (B) all outstanding shares of each
Fund that were required to be registered under the Securities Act have
been sold pursuant to an effective registration statement filed
thereunder; (C) all outstanding shares of each Fund have been duly
authorized, validly issued and are fully paid and nonassessable and (D)
each Fund and, to the knowledge of the Company, each Sub-Advisory Fund
is currently operating in compliance with Applicable Law, has been
operating in compliance with Applicable Law of (1) any U.S. federal
Governmental Authority for the past five years and (2) any other
Governmental Authority for the past two years and is not subject to any
stop order or similar order restricting the sale of its shares.
(ii) To the knowledge of the Company, (a) no Fund registration
statement contained, as of its effective date, (b) no Fund proxy
statement contained, as of its date, and (c) no current prospectus
(which term, as used in this Agreement, shall include any related
statement of additional information and any private placement
memorandum), as amended or supplemented,
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relating to a Fund, contained or contains any untrue statement of a
material fact or omitted or (in the case of any such current
prospectus) omits to state a material fact required to be stated
therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the
knowledge of the Company, each such current prospectus and all current
advertising and marketing materials relating to a Fund and, to the
extent applicable, relating to any VKAC Company complies in all
material respects with the Securities Act, the Investment Company Act,
applicable provisions of state law and, in the case of such advertising
and marketing materials only, in form and substance with the applicable
rules of the NASD.
(iii) Each Fund and, to the knowledge of the Company, each
Sub-Advisory Fund that is a juridical entity is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate, trust or partnership
power and authority to own its properties and to carry on its business
as it is now conducted, and is qualified to do business in each
jurisdiction where it is required to do so under Applicable Law.
2.1.17. Labor Matters, etc. No member of the VKAC Group is a
party to or bound by any collective bargaining agreement. Each member of the
VKAC Group has materially complied for the past four years and is in material
compliance with all applicable provisions of United States federal, state and
local laws pertaining to the employment or termination of their respective
employees.
2.1.18. ERISA. (a) Schedule of Plans, etc. Schedule 2.1.18(a)
sets forth a list of each written "employee benefit plan," within the meaning
of section 3(3) of ERISA, and each written bonus, incentive or deferred
compensation, stock option or other equity, severance, retention, change in
control or other employee benefit plan, program or arrangement, including, but
not limited to, those providing for insurance coverage (including any self-
insured arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits and retirement benefits, (x) that is
maintained by any member of the VKAC Group or any ERISA Affiliate of any member
of the VKAC Group or to which any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group contributes or is obligated to
contribute and (y) under which any employee of any member of the VKAC Group is
or may become
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entitled to, or any former employee thereof is currently entitled to, an accrued
benefit (collectively, the "Plans"). For purposes of this Section 2.1.18, "ERISA
Affiliate" of any entity means any other entity which, together with such
entity, is treated as a single employer under section 414(b), (c) or (m) of the
Code. The Company has made available to the Buyer correct and complete copies of
all written Plans, all related trust agreements and the most recent IRS Form
5500 filed in respect of any such Plan. Except as disclosed on Schedule
2.1.18(a), each Plan intended to be qualified under section 401(a) of the Code
has received a favorable determination letter from the IRS as to its
qualification under the Code and, to the knowledge of the Company, (x) no
amendment has been made to any such Plan since the date of its most recent
determination letter that would reasonably be expected to result in the
disqualification of such Plan and (y) no other event has occurred with respect
to any such Plan which would reasonably be expected to adversely affect the
qualification of such Plan. The Company has provided to the Buyer copies of the
most recent Internal Revenue Service determination letters received with respect
to each such Plan.
(b) No Minimum Funding Standards, etc. No Plan is subject to
the minimum funding standards of section 302 of ERISA or section 412 of the
Code. No Plan is a multiemployer plan (as defined in section 3(37) of ERISA) or
a multiple employer plan and no Plan is maintained in connection with any trust
described in section 501(c)(9) of the Code. No material liability to the Pension
Benefit Guaranty Corporation in respect of any Plan or any other plan subject to
Title IV of ERISA maintained by any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group has been incurred pursuant to the
provisions of Title IV of ERISA by any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group.
(c) Operation of the Plans, etc. Each of the Plans has been
operated and administered in material compliance with its terms and all
Applicable Law, including but not limited to ERISA and the Code. There are no
material claims pending or, to the knowledge of the Company, threatened by or on
behalf of any employee of any member of the VKAC Group involving any such Plan
(other than routine claims for benefits under the terms of any such Plan). All
contributions required to have been made to any Plan or any other plan subject
to Title IV of ERISA maintained by any member of the VKAC Group or any ERISA
Affiliate of any member of the VKAC Group by any member of the VKAC Group or any
ERISA Affiliate of any member of the VKAC Group pursuant
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to Applicable Law (including, without limitation, ERISA and the Code) have
been made.
(d) Code Section 280G. There is no contract, agreement, plan
or arrangement covering any employee of any member of the VKAC Group that, to
the knowledge of the Company, individually or collectively, would reasonably be
expected to give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
2.1.19. Brokers, Finders, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Company in such
manner as to give rise to any valid claim against any member of the VKAC Group
or the Buyer for any brokerage or finder's commission, fee or similar
compensation, other than as set forth in Schedule 2.1.19, and by Goldman, Sachs
& Co. and Merrill Lynch & Co., Inc., in each case whose fee for services
provided in respect of this Agreement and the transactions contemplated hereby
shall be paid by the Company.
2.1.20. List of ERISA Clients. Schedule 2.1.20 sets forth a
correct and complete list of each Client (other than a Client that is a Client
solely by reason of its investment in a Fund that is an Investment Company)
that, to the knowledge of the Company, is (i) an employee benefit plan, as
defined in Section 3(3) of ERISA (unless the Client has represented to the
Company that it is a governmental plan, church plan or otherwise not subject to
Title I of ERISA or Code section 4975 or the Company reasonably believes that it
is not subject to Title I of ERISA or Code section 4975) or (ii) a person acting
on behalf of such a plan (hereinafter referred to as an "ERISA Client").
2.1.21. Hedging Activities. The derivative products held by
any VKAC Company were acquired (i) for the purpose of hedging against market
value changes in such VKAC Company's trading inventory relating to its unit
investment trust business in the ordinary course of business consistent with
past practices or (ii) to hedge its variable rate debt.
2.1.22. Financial Projections. The financial projections
relating to the VKAC Companies that have been delivered to the Parent or the
Buyer by the Company were made in good faith and, to the knowledge of the
Company, were not unreasonable when made.
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2.1.23. Assets Under Management. As of the close of business
on June 20, 1996, the aggregate amount of assets under management for (i) the
open end Funds was $27,797,424,000, (ii) the Prime Rate Trust was $4,804,106,000
and (iii) the Institutional Accounts (including the Sub-Advisory Funds) was
$3,310,303,000.
2.2. Representations and Warranties of the Parent, Holdco and
the Buyer. The Parent, Holdco and the Buyer represent and warrant to the Company
as follows:
2.2.1. Corporate Status; Authority for Agreement. Each of the
Parent, Holdco and the Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Each of the Parent, Holdco and
the Buyer has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby to be consummated by it. The execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, by the Parent, Holdco and the Buyer have been duly
authorized (except for the authorization of the shares of common stock of the
Parent that will be issuable to the Designated Managers in exchange for certain
shares of preferred stock of Holdco as contemplated by the Contribution
Agreement) by all requisite corporate action of the Parent, Holdco and the
Buyer. This Agreement has been duly executed and delivered by each of the
Parent, Holdco and the Buyer and constitutes the valid and legally binding
obligation of the Parent, Holdco and the Buyer, enforceable against each of them
in accordance with its terms. Each of the Parent, Holdco and the Buyer has all
requisite corporate power and authority to carry on its business as now
conducted and to own or lease or to operate its properties as and in the places
where such business is now conducted and such properties are now owned, leased
or operated.
2.2.2. No Conflicts, etc. Except as set forth in Schedule
2.2.2, the execution and delivery by the Parent, Holdco and the Buyer of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation of, loss of rights or default under, constitute an event
creating rights of acceleration, termination, repayment or cancellation under,
entitle any party to receive any payment pursuant to, or result in the creation
of any Lien upon any of the properties or assets of the Buyer under, (i) any
provision of the Organizational Documents of the Parent, Holdco or the Buyer,
(ii) any Applicable Law applicable to the Parent, Holdco, the Buyer
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or any of their respective properties or (iii) any agreement or other instrument
to which the Parent, Holdco or the Buyer is a party or by which the Parent,
Holdco or the Buyer or any of its properties is bound, except, in the case of
clause (iii), for violations, losses, defaults, accelerations, terminations,
repayments, cancellations or Liens that would not reasonably be expected to have
a material adverse effect on the ability of the Parent, Holdco or the Buyer to
consummate the Merger and the other transactions contemplated hereby. Except as
set forth in Schedule 2.2.2, no Governmental Approval or other Consent (other
than pursuant to the HSR Act) is required to be obtained or made by the Parent,
Holdco or the Buyer in connection with the execution and delivery of this
Agreement or the consummation by the Parent, Holdco and the Buyer of the
transactions contemplated hereby.
2.2.3. Litigation. There is no judicial or administrative
action, proceeding or investigation pending or, to the knowledge of the Parent,
Holdco or the Buyer, threatened which (a) questions the validity of this
Agreement or any action taken or to be taken by the Parent, Holdco or the Buyer
in connection herewith, or (b) would reasonably be expected to have a material
adverse effect on the business, financial condition, results of operations or
properties of the Parent, Holdco or the Buyer or the ability of the Parent,
Holdco or the Buyer to consummate the Merger and the other transactions
contemplated hereby.
2.2.4. Brokers, Finders, etc. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the participation of any Person acting on behalf of the Parent, Holdco,
the Buyer or any of their Affiliates in such manner as to give rise to any valid
claim against the Company, any other member or Affiliate of the VKAC Group or
any stockholder of the Company for any brokerage or finder's commission, fee or
similar compensation.
2.2.5. No Disqualifying Participants. The consummation of the
Merger will not cause any member of the VKAC Group to become subject to any
disqualification that would be a basis (i) for denial, suspension or revocation
of registration as an investment adviser under Section 203(e) of the Advisers
Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the
Exchange Act, (ii) for disqualification as an investment adviser or a principal
underwriter for an investment company pursuant to Section 9(a) of the Investment
Company Act or (iii) for
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prohibition from holding certain positions pursuant to Section 411 of ERISA.
2.2.6. Financing. The Buyer will have available as of the
Effective Time immediately available funds sufficient to consummate the
transactions contemplated by this Agreement.
2.2.7. Section 15(f) Materials. Neither the Parent, Holdco,
the Buyer nor any of their respective Affiliates is aware of any documents,
records, memoranda, work papers or other written materials that would reasonably
be likely to be evidence that the requirements of any of the provisions of
Section 15(f) of the Investment Company Act have not been or will not be met in
respect of this Agreement and the transactions contemplated hereby, except for
such as have been furnished to the Company or described in writing to the
Company in reasonable detail.
ARTICLE III
COVENANTS
3.1. Covenants of the Company.
3.1.1. Conduct of Business. From the date hereof to the
Effective Time, except as contemplated by or in connection with this Agreement
or the transactions contemplated hereby, as described on Schedule 3.1.1 or as
consented to by the Parent, any request for such consent to be considered by the
Parent in good faith, the Company will, and will cause each of the VKAC
Companies to and, subject to applicable fiduciary duties to the Funds, will use
its reasonable best efforts to cause each of the Funds to:
(a) carry on its business in the ordinary course consistent
with past practices, and use all reasonable best efforts (to the extent
consistent with good business judgment) to preserve intact its present
business organization, keep available the services of its executive
officers and key employees, and preserve its relationships with
customers, clients, suppliers and others having material business
dealings with it;
(b) not amend its certificate of incorporation or by-laws or
other Organizational Document;
(c) not merge or consolidate with, or agree to merge or
consolidate with, or purchase substantially
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all of the assets of, or otherwise acquire any business or any
corporation, partnership, association or other business organization
or division thereof;
(d) not engage in any transaction with the Buyer, the Parent
or their Affiliates that would be a violation of the Investment Company
Act, the Advisers Act, ERISA or other Applicable Law, provided that
none of the Company, any other VKAC Company or any Fund will be in
breach of this Section 3.1.1(d) if it engages in a transaction with an
Affiliate of the Buyer or the Parent that violates ERISA unless the
Company, such other VKAC Company or such Fund engaging in such
transaction has or reasonably should have had knowledge of such
affiliation;
(e) not take any action or omit to take any action, which
action or omission would result in a breach or inaccuracy of any of the
representations and warranties set forth in Section 2.1.5 at, or as of
any time prior to, the Effective Time;
(f) not sell any assets outside the ordinary course of
business consistent with past practices;
(g) not sell, transfer or otherwise dispose of any CDSC
Assets;
(h) not agree or commit to do any of the foregoing referred to
in clauses (a)-(g); and
(i) promptly advise the Buyer of any fact, condition,
occurrence or change known to the Company that is reasonably expected
to have a Material Adverse Effect or cause a breach of this Section
3.1.1.
3.1.2. No Solicitation. From the date hereof to the earlier of
the Effective Time and the termination of this Agreement, the Company shall not,
and shall not permit any member of the VKAC Group or any officer, director,
partner, employee, agent or advisor of any member of the VKAC Group to, directly
or indirectly, (a) solicit, initiate or encourage any proposals for, or enter
into any discussions with respect to, a merger or other business combination
involving the Company or VKAC or the acquisition of shares of capital stock of
any member of the VKAC Group or all, or substantially all, of the assets of any
member of the VKAC Group (an "Acquisition Proposal") or (b) furnish or cause to
be furnished in connection with any proposals described in clause (a) above any
non-public information
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concerning the business and operations of any member of the VKAC Group to any
Person (other than the Parent, Holdco, the Buyer and their agents and
representatives and the Company and their agents and representatives). From the
date hereof to the Effective Time, the Company shall not, and shall not permit
any member of the VKAC Group to, sell, transfer or otherwise dispose of, grant
any option or proxy to any Person with respect to, create any Lien upon, or
transfer any interest in, any shares of capital stock of any VKAC Company, other
than (i) as contemplated by or in connection with this Agreement or the
transactions contemplated hereby, (ii) such sales, transfers, dispositions,
grants and creations to or in favor of the Company or (iii) pursuant to any
agreement or commitment existing on the date hereof. If at any time after the
date hereof and prior to the Effective Time, the Company or any of its
representatives is approached by, or receives an offer from, any third party
concerning an Acquisition Proposal or a request to provide information referred
to in clause (b) above, the Company will promptly disclose such offer or request
to the Parent and will keep the Parent fully informed of the nature, details and
status of any such offer or request.
3.1.3. Access and Information. From the date hereof to the
Effective Time, the Company will, and will cause each member of the VKAC Group
to, give to the Parent and the Parent's accountants, counsel and other
representatives reasonable access during normal business hours to such of the
VKAC Companies' and the Funds' respective offices, properties, books, contracts,
commitments, reports and records relating to the VKAC Companies and the Funds,
and to furnish them or provide them access to all such documents, financial
data, records and information with respect to the properties and businesses of
the VKAC Companies as the Parent shall from time to time reasonably request,
provided that the foregoing shall be under the general coordination of the
Company and shall be subject to the Confidentiality Agreement. In addition, from
the date hereof to the Effective Time the Company will, and will cause each
member of the VKAC Group to, permit the Parent and the Parent's accountants,
counsel and other representatives reasonable access to such personnel of the
VKAC Group during normal business hours as may be necessary to or reasonably
requested by the Parent in its review of the properties of the VKAC Group and
the Funds, the business affairs of the VKAC Group and the Funds and the
above-mentioned documents and records, provided that the Company shall have the
right to have its representatives participate in such discussions with personnel
of the VKAC Group and the
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Funds and such discussions shall be subject to the Confidentiality Agreement.
3.1.4. Subsequent Financial Statements, Debt Prepayments and
Filings. (a) From the date hereof to the Effective Time, the Company will cause
the members of the VKAC Group to make available to the Parent, promptly after
the same become available, copies of (i) the monthly management reports for the
VKAC Group substantially in the form furnished to the senior management of the
Company, together with such monthly financial statements furnished to such
management and (ii) the financial statements of the Funds as the same are filed
with the Commission.
(b) After the date hereof and until the Effective Time, within
five Business Days after the end of each month, the Company shall deliver a
certificate to the Buyer, signed by the chief financial officer of the Company,
setting forth the aggregate amount of loans that were prepaid under the Credit
Agreement during such month and the Pre-Tax Income as of the end of such month.
(c) From the date hereof to the Effective Time, the Company
will file, or cause to be filed, with the Commission or other relevant
Governmental Authority, and promptly thereafter make available to the Parent,
copies of each registration, report, statement, notice or other filing required
to be filed by any member of the VKAC Group with the Commission or any other
Governmental Authority under the Exchange Act, the Advisers Act, the Investment
Company Act, the Securities Act or any other Applicable Law. All such
registrations, reports, statements, notices or other filings shall comply in all
material respects with Applicable Law.
(d) From the date hereof to the Effective Time, the Company
will cause the members of the VKAC Group to make available to the Parent,
promptly after the same become available, (i) copies of all inspection reports
provided to any VKAC Company by the Commission or any state regulatory authority
or any self-regulatory agency and (ii) all correspondence and other documents
relating to any inquiry or investigation provided to any VKAC Company by the
Commission or any state regulatory authority or any self-regulatory agency.
3.1.5. Public Announcements. From the date hereof to the
Effective Time, except as required by Applicable Law, the Company shall not, and
shall not permit any member of the VKAC Group to, make any public announcement
in respect of this Agreement or the
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transactions contemplated hereby without the prior consent of the Parent.
3.1.6. Further Actions. (a) Generally. From the date hereof to
the Effective Time, the Company will, and will cause each member of the VKAC
Group 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 to consummate and make effective the transactions contemplated hereby.
(b) Filings, etc. From the date hereof to the Effective Time,
the Company will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all applications, notifications and information required to
be filed or supplied by or on behalf of the Company or any member of the VKAC
Group pursuant to Applicable Law in connection with this Agreement, the Merger
or the consummation of the other transactions contemplated hereby, including but
not limited to filings pursuant to the HSR Act. From the date hereof to the
Effective Time, the Company, as promptly as practicable, will make, or cause to
be made, all such other filings and submissions under any Applicable Law
applicable to the Company or any member of the VKAC Group and give such
reasonable undertakings, as may be required for the Company to consummate the
Merger and the other transactions contemplated hereby.
(c) Investment Company Consents. The members of the VKAC Group
shall use their reasonable best efforts to (i) cause the boards of
trustees/directors of Investment Company Clients to approve, and to solicit
their respective shareholders as promptly as practicable with regard to the
approval of, new investment advisory agreements and related ancillary agreements
for such Clients, and (ii) cause the boards of trustees/directors of Investment
Company Clients to approve, to the extent such approval is required by
Applicable Law or the terms of existing agreements relating to such services,
new agreements relating to any other services provided by members of the VKAC
Group to Investment Company Clients, including, but not limited to, such
agreements relating to the distribution of fund shares, fund administration,
accounting and transfer agency, in each case referred to in clauses (i) and (ii)
above, such approval to be effective on or as promptly as practicable after the
Effective Time, pursuant to the provisions of Section 15 of the Investment
Company Act, and consistent with all requirements of the Investment Company Act
applicable thereto, provided that, in the case of both such clauses (i) and
(ii), such agreements are identical in all material
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respects to the existing agreements other than the term of the agreement and
other than such non-material changes as may be made in order to make any such
agreement consistent with other agreements of the same type to which any VKAC
Company is a party.
(d) Certain Other Consents. As promptly as practicable after
execution of this Agreement, the Company shall cause the Clients of the VKAC
Group listed on Schedule 2.1.8(c)(A)(9) to be informed of the transactions
contemplated by this Agreement and shall request the written Consent of such
Clients to the transaction, such Consents to be in form and substance
satisfactory to the Parent in its reasonable judgment. If such Consent is not
received from any such Client within 60 days, the Company will promptly send a
new notice advising such Client of its intention to continue the advisory
services, pursuant to the Company's existing contracts with such Clients,
subject to such Client's right to terminate such contract within 45 days of
receipt of such notice, and that each such Client's consent will be implied if
it continues to accept the services without rejection during such specified
45-day period. At least two weeks prior to the Effective Time, the Company shall
also use its reasonable best efforts to contact personally each such Client
which has not yet executed a Consent to inquire as to such Client's intentions
unless the Parent in its sole discretion agrees to waive this requirement with
respect to any such Client.
(e) Consent Procedures. In connection with obtaining the
Consents required by subsections (c) and (d), the Company shall (i) keep the
Parent informed of the status of obtaining Client Consents, (ii) facilitate the
Parent's or the Buyer's communication with Clients regarding Consents, (iii)
provide to the Parent draft proxy statements and (iv) to the extent applicable,
deliver to the Parent prior to the Closing copies of all executed Client
Consents and make available for inspection the originals of such Consents prior
to the Closing.
(f) Other Consents. The Company, as promptly as practicable,
will use its reasonable best efforts to obtain, or cause to be obtained, the
Consents listed on Schedule 3.1.6(f).
(g) Other Actions. The Company will use, and cause each member
of the VKAC Group to use, its reasonable best efforts to take, or cause to be
taken, all other actions necessary, proper or advisable in order for them to
fulfill their obligations in respect of this Agreement and
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the transactions contemplated hereby. The Company will, and will cause each
member of the VKAC Group to, coordinate and cooperate with the Parent in
exchanging such information and supplying such reasonable assistance as may be
reasonably requested by the Parent in connection with the filings and other
actions contemplated by Section 3.2.2.
(h) Notice of Certain Events. From the date hereof to the
Effective Time, the Company shall promptly notify the Parent of:
(i) any fact, condition, event or occurrence known to the
Company that will or reasonably may be expected to result in the
failure of any of the conditions contained in Sections 4.1 and 4.2 to
be satisfied;
(ii) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(iii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement; and
(iv) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Company, threatened against,
relating to or involving or otherwise affecting any member of the VKAC
Group which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 2.1.11 or which
relate to the consummation of the transactions contemplated by this
Agreement.
3.1.7. Compliance with Investment Company Act Section 15. The
Company will not take and, prior to the Effective Time, will cause each member
of the VKAC Group not to take, any action not contemplated by this Agreement
that would have the effect, directly or indirectly, of causing the requirements
of any of the provisions of Section 15(f) of the Investment Company Act not to
be met in respect of this Agreement and the transactions contemplated hereby. In
addition, the Company will not fail to take, and, prior to the Effective Time,
will not cause any member of the VKAC Group to fail to take, any action if the
failure to take such action would have the effect, directly or indirectly, of
causing the requirements of any of the provisions of Section 15(f) of the
Investment Company Act not to be met in
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respect of this Agreement and the transactions contemplated hereby.
3.1.8. Qualification of the Funds; Tax Affairs. (a) Subject to
applicable fiduciary duties to the Funds, the Company will cause the VKAC
Companies to refrain from, and will use its reasonable best efforts to cause
each of the Funds to refrain from, taking any action after the date hereof and
on or prior to the Closing Date (a) (i) in the case of each of the Funds to
which the provisions of paragraph (i) of Section 2.1.6(g) apply, that would
prevent such Fund from qualifying as a RIC, or that would require such Fund to
take actions in order to so qualify that would have a material adverse effect on
such Fund, (ii) in the case of each of the Funds to which the provisions of
paragraph (ii) of Section 2.1.6(g) apply, that would cause it to be an
association taxable as a corporation for federal Income Tax purposes, (iii) in
the case of Van Kampen American Capital Monthly Accumulation Plans, that would
prevent any portion thereof from being treated as a business arrangement to
which the provisions of section 851(f) of the Code apply, (iv) in the case of
Van Kampen American Capital Exchange Fund, that would prevent it from being
treated as a partnership for federal Income Tax purposes or (v) in the case of
the unit investment trusts to which the provisions of paragraph (ii) of Section
2.1.6(g) apply, that would prevent any portion thereof from being subject to
subpart E of part I of subchapter J of chapter 1 of subtitle A of the Code, or
(b) that would conflict in any material respect with the registration statement,
prospectus and other offering materials of such Fund.
(b) After the date hereof and until the Closing Date, the
Company shall supply to the Parent all calculations and other written
information it produces or receives with respect to the qualification as RICs of
the Funds to which the provisions of paragraph (i) of Section 2.1.6(g) apply
within 5 Business Days after such calculations or information are produced or
received. As promptly as possible, and in no event later than the Closing Date,
the Company shall deliver to the Parent (i) with respect to each of such Funds,
a full description of the reasons, if any (other than failure to comply with the
provisions of section 852(a)(1) of the Code) that such Fund would fail to
qualify as a RIC for its then-current taxable year if the last day of its most
recent fiscal quarter ended on or prior to the Closing Date were treated as the
last date of such taxable year and (ii) with respect to each of such Funds whose
taxable year ends within three months after the Closing Date, a full description
of the reasons, if any,
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(other than failure to comply with the provisions of section 852(a)(1) of the
Code) that such Fund would fail to qualify as a RIC for its then-current taxable
year if the Business Day immediately preceding the Closing Date were treated as
the last date of such taxable year. As promptly as possible, and in no event
later than three Business Days after the date hereof, the Company shall deliver
to the Parent with respect to each of such Funds, a full description of the
reasons, if any (other than failure to comply with the provisions of section
852(a)(1) of the Code) that such Fund would fail to qualify as a RIC for its
current taxable year if June 19, 1996 were treated as the last day of such
taxable year.
(c) Without the prior written consent of the Parent, none of
the VKAC Companies shall, to the extent it may affect or relate to the VKAC
Companies, make or change any Tax election (other than making an election
pursuant to section 338(h)(10) of the Code with respect to the sale of Advantage
Capital Corporation pursuant to Section 5.8 of the Stock Purchase Agreement
between SunAmerica Inc. and the Company, dated as of December 21, 1995), change
any annual Tax accounting period, adopt or change any method of Tax accounting,
file any amended Return, enter into any closing agreement, settle any Tax claim
or assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment or take or knowingly omit to take any other similar action (but
excluding the Company's reporting the distribution of MCM and Hansberger as a
taxable disposition on its Return for the taxable year in which the
distributions occur) if (i) any such action or omission would have the effect of
increasing the Tax liability or reducing any Tax Asset of any VKAC Company, the
Parent or any Affiliate of the Parent by more than $25,000 or (ii) all such
actions or omissions would, in the aggregate, have the effect of increasing the
Tax liability or reducing any Tax Asset of any VKAC Company, the Parent or any
Affiliate of the Parent by more than $100,000. The Company shall notify Lou
Palladino of Morgan Stanley & Co. Incorporated at 1251 Avenue of the Americas,
21th floor, New York, New York 10020, in writing of any proposed action or
omission that would require the Parent's consent pursuant to this Section
3.1.8(c).
(d) After the date hereof and until the Closing Date, the VKAC
Companies shall conduct all affairs relating to Taxes only in good faith and in
a manner consistent with past practices of the VKAC Companies.
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3.1.9. ERISA Clients. As soon as practicable following the
date of this Agreement, the Company and the Parent shall cooperate and, in
connection therewith, shall each use its reasonable best efforts, to identify
each written contract or agreement in effect as of the date of this Agreement
entered into by any member of the VKAC Group with or on behalf of any ERISA
Client pursuant to which, to the knowledge of the Company or the Parent, in each
case, after due inquiry, the Parent or any of its Affiliates has agreed to: (i)
execute securities transactions; (ii) provide any other goods or services; or
(iii) purchase, sell, exchange or swap securities or other economic interests
therein or derivatives thereof, including, but not limited to, rights to receive
or obligations to pay interest or principal under any debt obligation or rights
to receive or obligations to pay interest or principal denominated in a
particular security.
3.2. Covenants of the Parent, Holdco and the Buyer.
3.2.1. Public Announcements. From the date hereof to the
Effective Time, except as required by Applicable Law, neither the Parent, Holdco
nor the Buyer shall, nor shall any of them permit any of their Affiliates to,
make any public announcement in respect of this Agreement or the transactions
contemplated hereby without the prior consent of the Company.
3.2.2. Further Actions. (a) Generally. The Parent, Holdco and
the Buyer agree to use their 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 to consummate and make effective the transactions contemplated
hereby.
(b) Filings, Consents, etc. Each of the Parent, Holdco and the
Buyer will, as promptly as practicable, file or supply, or cause to be filed or
supplied, all applications, notifications and information required to be filed
or supplied by or on behalf of it or its Affiliates pursuant to Applicable Law
in connection with this Agreement, the Merger or the consummation of the other
transactions contemplated hereby, including but not limited to filings pursuant
to the HSR Act. Each of the Parent, Holdco and the Buyer, as promptly as
practicable, (i) will make, or cause to be made, all such other filings and
submissions under any Applicable Law applicable to the Parent, Holdco, the Buyer
or any of their respective Affiliates, and give such reasonable undertakings,
as may be required for the Parent,
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Holdco and the Buyer to consummate the Merger and the other transactions
contemplated hereby, (ii) will use its reasonable best efforts to obtain, or
cause to be obtained, all Consents (including, without limitation, all
Governmental Approvals) necessary to be obtained by it or any of its Affiliates
in order for it so to consummate the Merger and such transactions, and (iii)
will use its reasonable best efforts to take, or cause to be taken, all other
actions necessary, proper or advisable in order for it to fulfill its
obligations in respect of this Agreement and the transactions contemplated
hereby. Each of the Parent, Holdco and the Buyer will coordinate and cooperate
with the Company, including by supplying such reasonable assistance and
information (which information shall be correct and complete and shall conform
in all material respects with the requirements of all Applicable Laws) as may be
reasonably requested by the Company, in connection with the filings and other
actions contemplated by Section 3.1.6.
(c) Notice of Certain Events. At all times prior to the
Effective Time, the Parent, Holdco and the Buyer shall promptly notify the
Company of:
(i) any fact, condition, event or occurrence known to either
of them that will or reasonably may be expected to result in the
failure of any of the conditions contained in Sections 4.1 and 4.3 to
be satisfied; and
(ii) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Parent, Holdco or the Buyer,
threatened against, relating to or involving or otherwise affecting the
Parent, Holdco or the Buyer which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to
Section 2.3.3 or which relate to the consummation of the transactions
contemplated by this Agreement.
3.2.3. Compliance with Investment Company Act Section 15. (a)
No Unfair Burden, etc. The Parent, Holdco and the Buyer acknowledge that the
Company has entered into this Agreement in reliance upon the benefits and
protections provided by Section 15(f) of the Investment Company Act. Each of the
Parent, Holdco and the Buyer shall not take, and each of them shall cause its
Affiliates not to take, any action not contemplated by this Agreement that would
have the effect, directly or indirectly, of causing the requirements of any of
the provisions of Section 15(f) of the Investment Company Act not to be met in
respect of this
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Agreement and the transactions contemplated hereby, and each of them shall not
fail to take, and, after the Effective Time, shall not cause any member of the
VKAC Group to fail to take, any action if the failure to take such action would
have the effect, directly or indirectly, of causing the requirements of any of
the provisions of Section 15(f) of the Investment Company Act not to be met in
respect of this Agreement and the transactions contemplated hereby. In that
regard, each of the Parent, Holdco and the Buyer shall conduct its business and
shall, subject to applicable fiduciary duties to the Funds and the Sub-Advisory
Funds, use its reasonable best efforts to cause each of its Affiliates to
conduct its business so as to assure that, insofar as within the control of the
Parent, Holdco, the Buyer or their respective Affiliates:
(i) for a period of three years after the Effective Time, at
least 75% of the members of the Board of Directors or trustees of each
of the Funds that is registered under the Investment Company Act and
that continues after the Effective Time its existing or a replacement
Investment Advisory Contract with any of the VKAC Companies, the
Parent, Holdco, the Buyer or any Affiliate of the Parent, Holdco or the
Buyer are not (A) "interested persons" of the investment manager of
such Fund after the Effective Time, or (B) "interested persons" of the
present investment manager of such Fund;
(ii) for a period of two years after the Effective Time, the
investment advisory fee paid to any VKAC Company by any Fund or
Sub-Advisory Fund that is registered under the Investment Company Act
shall not be increased, nor shall any waiver in effect on the date
hereof of any portion of such an investment advisory fee be allowed to
expire except in accordance with the terms of such waiver and except,
in each case, (x) pursuant to an exemptive order naming the Funds as
parties issued by the Commission, subject in each case to each of the
conditions set forth in such exemptive order having been satisfied in
the reasonable judgment of C&D Fund IV, or (y) with the prior written
consent of C&D Fund IV; and
(iii) for a period of two years after the Effective Time,
there shall not be imposed on any of the Funds or Sub-Advisory Funds
that is registered under the Investment Company Act an "unfair burden"
as a result of the transactions contemplated by this Agreement, or
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any terms, conditions or understandings applicable thereto.
(b) Certain Terms. The terms used in quotations in this
Section 3.2.3 shall have the meanings set forth in Section 15(f) or Section
2(a)(19) of the Investment Company Act.
(c) No Assignment of Investment Advisory Contracts. For a
period of three years from the Effective Time, none of the Parent, Holdco, the
Buyer, any of their respective Affiliates nor any of the VKAC Companies will
voluntarily engage in any transaction which would constitute an assignment of
any Investment Advisory Contract with any Fund that is registered under the
Investment Company Act currently managed by any of the VKAC Companies to which
the Parent, Holdco, the Buyer, any such Affiliate or any VKAC Company is a party
without first obtaining a covenant in all material respects the same as that
contained in this Section 3.2.3.
3.2.4. Employee Matters Subsequent to the Effective Time.
(a) Employee Plans and Agreements. From and after the
Effective Time, the Parent, Holdco and the Buyer will, and will cause each
member of the VKAC Group to, honor, without modification, perform all acts and
pay all amounts required or due under or with respect to each Plan and each
agreement which relates to any current or former employee of the VKAC Group or
the terms of any such employee's employment or termination of employment,
including without limitation, all employment, retention, change of control,
employment protection, severance, termination, consulting, deferred
compensation, executive pension and retirement, welfare and fringe benefit
agreements, plans and programs, except for any modification to any such Plan
or agreement to the extent permitted in accordance with Section 3.2.4(d).
(b) Maintenance of Employee Benefits. For a period of two
years from the Effective Time, the Parent or the Buyer will, or will cause the
VKAC Companies to, continue to maintain employee and retiree compensation and
benefit plans, programs, arrangements and policies (other than equity based
plans) for the benefit of current and former employees of the VKAC Group which
provide compensation and benefits that are substantially comparable, in the
aggregate, to those provided by the VKAC Companies for
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the benefit of such employees and former employees immediately prior to the
Effective Time.
(c) Change of Control. Each of the Parent, Holdco and the
Buyer acknowledges and agrees that the consummation of the transactions
contemplated by this Agreement will constitute a "change of control" of the
Company for purposes of each Plan and each program, policy and agreement
covering any current or former employee of the VKAC Group identified in Schedule
3.2.4(c) and, accordingly, agrees to, and to cause the Company and each other
member of the VKAC Group to, honor all provisions under such Plans, programs,
policies and agreements relating to a change of control.
(d) Modifications. Notwithstanding the foregoing, nothing in
this Section 3.2.4 shall preclude the Buyer from seeking to (i) modify any
employment agreement with the consent of the affected employee or employees or
(ii) modify any Plan to the extent such modification is permitted by the terms
of such Plan and is consistent with Section 3.2.4(b).
(e) Withholding Taxes. Following the Effective Time, the
Parent shall, or shall cause the Surviving Corporation to, pay on a timely basis
all withholding Taxes payable by the Surviving Corporation in connection with
the transactions contemplated by Sections 1.5(d), 1.5(e) and 1.5(f).
3.2.5. List of Affiliates. As soon as practicable following
the date hereof, the Parent shall deliver to the Company a list of each entity
that is an Affiliate of the Parent, Holdco or the Buyer.
3.2.6. Contribution Agreement. Each of the Parent, Holdco and
the Buyer agree to use their 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 to consummate and make effective the transactions contemplated by
the Contribution Agreement and, in connection therewith, will not agree to amend
or modify any of the closing conditions set forth in the Contribution Agreement
in a way that would impair the ability of the parties thereto to satisfy such
conditions on or before the Effective Time, provided that nothing in this
Section 3.2.6 shall prohibit the parties to the Contribution Agreement from
unilaterally agreeing to terminate such agreement.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Each Party. The obligations
of the Company, the Parent, Holdco and the Buyer to effect the Merger and to
consummate the other transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
4.1.1. HSR Act Notification. In respect of the notifications
of the Parent, Holdco and the Buyer on the one hand and the Company on the other
hand pursuant to the HSR Act, the applicable waiting period and any extensions
thereof shall have expired or been terminated.
4.1.2. No Injunction, etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree or
judgment of any court or other Governmental Authority, and no action or
proceeding brought by any Governmental Authority shall be pending at the
Effective Time before any court or other Governmental Authority to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby, and there shall not have been promulgated, entered, issued or determined
by any court or other Governmental Authority to be applicable to this Agreement
any Applicable Law making illegal the consummation of the transactions
contemplated hereby and no proceeding brought by any Governmental Authority with
respect to the application of any such Applicable Law shall be pending.
4.1.3. Contribution Agreement. If the Contribution Agreement
has not been terminated prior to the Effective Time, the transactions
contemplated by the Contribution Agreement shall have been consummated.
4.1.4. Assets Under Management. Market Assets Under Management
shall not be less than $26,933,875,000 and Closing Assets Under Management shall
not be less than $30,525,058,000 or more than $41,298,608,000.
4.2. Conditions to Obligations of the Parent, Holdco and the
Buyer. The obligations of the Parent, Holdco and the Buyer to effect the Merger
and to consummate the other transactions contemplated hereby shall be subject to
the fulfillment (or waiver by the Buyer) at or prior to the Effective Time of
the following additional conditions, which
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the Company agrees to use its reasonable best efforts to cause to be fulfilled:
4.2.1. Representations; Performance. The representations and
warranties set forth in Section 2.1 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and correct in
all respects at and as of the Effective Time as though made at and as of the
Effective Time, without regard to any qualification as to materiality or
Material Adverse Effect contained therein, except to the extent that any failure
to be true and correct at and as of the Effective Time would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
provided that the accuracy of any representation or warranty that by its terms
speaks only as of the date hereof or another date prior to the Effective Time
shall be determined solely as of the date hereof or such other date, as the case
may be. The Company shall have duly performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Effective Time. The Company
shall have delivered to the Parent and the Buyer a certificate, dated the
Effective Time and signed by the President or a Vice President of the Company,
to the effect set forth above in this Section 4.2.1 and with respect to the
matters set forth in Section 4.1.4.
4.2.2. Consents. All Consents required to be made or obtained
by the Company or any member of the VKAC Group in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby shall have been made or obtained that are (i) Governmental
Approvals, Consents of the Boards of Directors or Trustees of the Funds or
Consents of any member of the VKAC Group, (ii) Consents of shareholders of the
Prime Rate Trust and (iii) the Consents listed in Schedule 3.1.6(f). Copies of
all such Consents shall have been delivered to the Parent. All Governmental
Approvals required to be made or obtained by the Parent, Holdco, the Buyer or
their respective Affiliates in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby shall
have been made or obtained.
4.2.3. MCM Indemnity. An Indemnification Agreement, dated as
of the Effective Time, substantially in the form of Exhibit B hereto, and a tax
sharing agreement reasonably satisfactory to the Buyer, shall have been entered
into by MCM.
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4.2.4. Resignation of Directors. All directors of the VKAC
Companies whose resignations shall have been requested by the Parent in writing
not less than ten Business Days prior to the Effective Time shall have submitted
their resignations or been removed from office effective as of the Effective
Time.
4.2.5. Opinion of Counsel. The Buyer shall have received
favorable opinions, in each case addressed to it and dated the Closing Date,
from the General Counsel of the Company and from Debevoise & Plimpton, special
counsel to the Company, with respect to the matters and substantially in the
form set forth in Exhibits C-1 and C-2 hereto, respectively.
4.2.6. Proceedings. All corporate and other proceedings of the
Company and the VKAC Group that are required in connection with the transactions
contemplated by this Agreement, and all documents and instruments incident to
such proceedings, shall be reasonably satisfactory to the Buyer and its counsel,
and the Buyer and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
4.2.7. Govett Agreements. Within five Business Days following
the delivery to the Company of a notice from the Parent requesting the Company
to terminate any Govett Agreement, the Company shall have sent written notice
under such Govett Agreement to terminate such agreement.
4.2.8. FIRPTA Certification. The Parent and the Buyer shall
have received (a) a certification from the Company, dated no more than 30 days
prior to the Closing Date and signed by a responsible corporate officer of the
Company, that the Company is not, and has not been at any time during the five
years preceding the date of such certification, a United States real property
holding company, as defined in section 897(c)(2) of the Code, and (b) proof
reasonably satisfactory to the Parent and the Buyer that the Company has
provided notice of such certification to the Internal Revenue Service in
accordance with the provisions of Treasury regulations section 1.897-2(h)(2).
4.3. Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger and to consummate the other transactions
contemplated hereby shall be subject to the fulfillment (or waiver by the
Company), at or prior to the Effective Time, of the following additional
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conditions, which each of the Parent, Holdco and the Buyer agrees to use its
reasonable best efforts to cause to be fulfilled:
4.3.1. Representations, Performance, etc. The representations
and warranties set forth in Section 2.2 shall have been true and correct in all
material respects at and as of the date hereof, and shall be true and correct in
all material respects at and as of the Effective Time as though made at and as
of the Effective Time except to the extent that any failure to be true and
correct would not reasonably be expected to materially adversely affect the
ability of the Parent, Holdco and the Buyer to consummate the transactions
contemplated by this Agreement, provided that the accuracy of any representation
or warranty that by its terms speaks only as of the date hereof or another date
prior to the Effective Time shall be determined solely as of the date hereof or
such other date, as the case may be. The Parent, Holdco, the Buyer and their
respective Affiliates shall have duly performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Effective Time. The
Parent, Holdco and the Buyer shall have delivered to the Company a certificate
or certificates, dated the Effective Time and signed by the President or a Vice
President of each of them, to the effect set forth above in this Section 4.3.1.
4.3.2. Consents. All Consents required to be made or obtained
by the Buyer or its Affiliates in connection with the execution and delivery of
the Agreement or the consummation of the transactions contemplated hereby shall
have been made or obtained that are (i) Governmental Approvals or (ii) other
Consents not included in clause (i), except for any such other Consents the
failure of which to be made or obtained would not reasonably be expected to
adversely affect the ability of the Buyer or its Affiliates to consummate the
transactions contemplated hereby. Copies of all such Consents shall have been
delivered to the Company. All Governmental Approvals required to be made or
obtained by any member of the VKAC Group in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby shall have been made or obtained.
4.3.3. Merger Consideration. The Buyer shall have deposited
with the Exchange Agent the Merger Consideration, and with the Company (net of
applicable withholding Taxes, if any) the Total Employee Option Cancellation
Amount, the Jones Option Cancellation Amount
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and, if the Effective Time occurs after January 1, 1997, the Travelers Option
Cancellation Amount, in each case, in immediately available funds.
4.3.4. Certain Indebtedness. The Buyer shall have provided for
either (i) the repayment of all borrowings outstanding under the Credit
Agreement immediately prior to or as of the Effective Time, the payment of all
other amounts then due and payable thereunder and the termination of the Credit
Agreement or (ii) a waiver by the requisite lenders under the Credit Agreement
of all defaults and events of default that may occur as a result of the Merger
and the other transactions contemplated hereby.
4.3.5. Opinions of Counsel. The Company shall have received a
favorable opinion, addressed to it and dated the Closing Date, from Davis Polk &
Wardwell, special counsel to the Buyer, with respect to the matters and
substantially in the form set forth in Exhibit D hereto.
4.3.6. Corporate Proceedings. All corporate and other
proceedings of the Buyer and its Affiliates in connection with the transactions
contemplated by this Agreement, and all documents and instruments incident
thereto, shall be reasonably satisfactory to the Company and its special
counsel, and the Company and such counsel shall have received all such documents
and instruments, or copies thereof, certified if requested, as may be reasonably
requested.
ARTICLE V
TERMINATION
5.1. Termination. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by the written agreement of the Buyer and the Company;
(b) by the Company, on the one hand, or the Buyer, on the
other hand, by written notice to the other after 5:00 p.m., New York
City time, on February 1, 1997 if the Effective Time shall not have
occurred by such date (unless the failure of the Effective Time to
occur shall be due to any material breach of this Agreement by the
party seeking to terminate), unless such date is extended by the mutual
written consent of the Company and the Buyer;
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(c) by the Company if there has been a breach on the part of
the Parent, Holdco or the Buyer of the covenants of the Parent, Holdco
and the Buyer set forth herein, or any failure on the part of the
Parent, Holdco, the Buyer or any of their respective Affiliates to
perform its obligations hereunder (provided that the terminating party
shall have performed and complied with, in all material respects, all
agreements and covenants required by this Agreement to have been
performed or complied with by such terminating party) prior to such
time, such that, in any such case, any of the conditions to the
effectiveness of the Merger set forth in Section 4.1 or 4.3 could not
be satisfied on or prior to the termination date contemplated by
Section 5.1(b); or
(d) by the Buyer, if there has been a breach on the part of
the Company of its covenants set forth herein or any failure on the
part of the Company to perform its obligations hereunder (provided that
the terminating party shall have performed and complied with, in all
material respects, all agreements and covenants required by this
Agreement to have been performed or complied with by such terminating
party) prior to such time, such that, in any such case, any of the
conditions to the effectiveness of the Merger set forth in Sections 4.1
or 4.2 could not be satisfied on or prior to the termination date
contemplated by Section 5.1(b).
5.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 5.1, this Agreement shall become void and
have no effect, without any liability to any Person in respect hereof or of the
transactions contemplated hereby on the part of any party hereto, or any of its
directors, officers, employees, agents, consultants, representatives, advisers,
stockholders or Affiliates, except for any liability resulting from any party's
breach of this Agreement and except that the provisions of Article VI shall
survive any such termination.
ARTICLE VI
DEFINITIONS, MISCELLANEOUS
6.1. Definition of Certain Terms. The terms defined in this
Section 6.1, whenever used in this Agreement (including in the Schedules) shall
have the respective meanings indicated below for all purposes of this Agreement.
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All references herein to a Section, Article or Schedule are to a Section,
Article or Schedule of or to this Agreement, unless otherwise indicated.
Acquisition Price: as defined in Section 1.6(a).
Acquisition Proposal: as defined in Section 3.1.2.
Adjusted Bank Debt Amount: the sum of (i) the principal amount
of all loans outstanding on the Determination Date under the Credit
Agreement, plus any accrued and unpaid interest thereon on the
Determination Date, minus (ii) all Transaction Expenses that have been
paid prior to the Determination Date, plus (iii) the absolute amount of
Working Capital at the Determination Date, if the actual amount is a
negative number plus (iv) the amount, if any, by which the Total Debt
Prepayment Amount exceeds the Permitted Debt Prepayment Amount
determined as of the Determination Date.
Adjusted Senior Note Amount: $153,000,000 plus accrued and
unpaid interest as of the Determination Date on the outstanding
principal amount of VKAC's 9 3/4% Senior Secured Notes due 2003.
Advisers Act: the Investment Advisers Act of 1940, as amended,
and the rules and regulations of the Commission promulgated thereunder.
Affiliate: of a Person means a Person that directly, or
indirectly through one or more intermediaries, Controls, is Controlled
by, or is under common Control with, the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the
first Person is a Subsidiary, or another Subsidiary of a Person of
which the first Person is also a Subsidiary. "Control" (including the
terms "Controlled by" and "under common Control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise.
Aggregate Employee Option Exercise Price: an amount equal to
the sum of the respective exercise price under each Employee Option
outstanding immediately prior to the Effective Time, whether or not
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vested, multiplied by the respective number of shares of Class A Common
Stock subject to each such Employee Option.
Aggregate Jones Option Exercise Price: an amount equal to the
exercise price under the Jones Option multiplied by the number of Jones
Option Shares.
Aggregate Travelers Option Exercise Price: an amount equal to
the exercise price under the Travelers Option multiplied by the number
of Travelers Option Shares.
Agreement: this Agreement and Plan of Merger, including the
Schedules and Exhibits hereto.
American Capital Companies: collectively, Van Kampen American
Capital Advisors, Inc., Van Kampen American Capital Asset Management,
Inc., ACCESS Investor Services, Inc., Van Kampen American Capital
Trust Company, Van Kampen American Capital Exchange Corporation, Van
Kampen American Capital Services, Inc., American Capital Contractual
Services, Inc., American Capital Shareholders Corporation and Advantage
Capital Credit Services, Inc.
Applicable Law: all applicable provisions of all (i) statutes,
laws, rules, administrative codes, regulations or ordinances of any
Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, injunctions, judgments, awards and decrees of any
Governmental Authority.
BONY Loan Agreement: the General Loan and Security Agreement,
dated as of February 3, 1989, between Van Kampen American Capital
Distributors, Inc. and The Bank of New York, as amended, supplemented,
waived or otherwise modified from time to time.
Business Day: a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or
required by law to close.
Buyer: as defined in the introductory paragraph of this
Agreement.
C&D Fund IV: The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership.
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CDSC Assets: assets reflected on the Company's balance sheet
in respect of deferred company funded distribution costs (including
12b-1 receivables).
Certificate of Merger: as defined in Section 1.2.
Certificates: as defined in Section 1.8(a).
Class A Common Stock: the Class A Common Stock, par value $.01
per share, of the Company.
Class B Common Stock: the Class B Common Stock, par value $.01
per share, of the Company.
Client: any client (including any Fund or Sub-Advisory Fund)
to which the Company or any of its Subsidiaries or Affiliates provides
investment management, investment advisory, administration or
distribution services on the date hereof or on the Closing Date, as the
case may be.
Closing: as defined in Section 1.2.
Closing Assets Under Management: the aggregate assets of such
of the open end Funds, the Institutional Accounts (including the
Sub-Advisory Funds) and the Prime Rate Trust as to which any VKAC
Company (i) has received shareholder Consent or, in the case of
Institutional Accounts (other than a Sub-Advisory Fund), has followed
the procedures set forth in Section 3.1.6(d) or other procedures
reasonably acceptable to the Parent and no VKAC Company has been
notified, orally or in writing, as of the close of business on the
second Business Day immediately preceding the Effective Time, of any
such Institutional Account's intention to terminate its relationship
with the applicable VKAC Company and (ii) will act as investment
adviser, subadviser or manager immediately following the Effective
Time, determined as follows:
(x) in the case of open end Funds and Sub-Advisory
Funds, based on the average of such aggregate amount over the
10-day period immediately prior to the second Business Day
immediately preceding the Effective Time, provided that, as of
any date of determination, the aggregate assets of such Funds
and Sub-Advisory Funds shall be deemed to be equal to the sum
of (i) the aggregate net asset values of the outstanding
shares of such Funds and Sub-Advisory
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Funds as of June 20, 1996 or, if later, the first date on
which such Fund or Sub-Advisory Fund issued shares, plus (ii)
the aggregate number of shares of such Funds and Sub-Advisory
Funds issued since such date (including dividend
reinvestments) multiplied by the respective net asset values
of such shares when issued, minus (iii) the aggregate number
of shares of such Funds and Sub-Advisory Funds redeemed since
such date multiplied by the respective net asset values of
such shares when redeemed;
(y) in the case of the Prime Rate Trust, its
aggregate assets shall be deemed to be equal to the sum of (i)
the aggregate net asset values of the outstanding shares of
the Prime Rate Trust as of June 20, 1996, plus (ii) the
aggregate number of shares of the Prime Rate Trust issued
after June 20, 1996 to the close of business on the second
Business Day immediately preceding the Effective Time
(including dividend reinvestments), multiplied by the
respective net asset values of such shares when issued, minus
(iii) the aggregate number of shares of the Prime Rate Trust
redeemed since such date multiplied by the respective net
asset values of such shares when redeemed; and
(z) the aggregate assets of such Institutional
Accounts (other than the Sub-Advisory Funds) shall be deemed
to be equal to the sum of (i) the aggregate assets under
management of such Institutional Accounts as of June 20, 1996
or, if later, the date on which such Institutional Account was
created, plus (ii) the aggregate amount of assets deposited in
such Institutional Accounts from such date to the close of
business on the second Business Day immediately preceding the
Effective Time, based upon the respective asset values at the
time of such deposits, minus (iii) the aggregate amount of
assets withdrawn, or for which oral or written notice of
withdrawal has been given, from Institutional Accounts
(including terminated Institutional Accounts) from such date
to the close of business on the second Business Day
immediately preceding the Effective Time, based upon the
respective asset values at the time of such withdrawals or
terminations.
Closing Date: the date of the Closing.
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Code: the Internal Revenue Code of 1986, as
amended.
Commission: the Securities and Exchange Commission.
Common Stock: the Class A Common Stock and the
Class B Common Stock.
Company: as defined in the introductory paragraph
of this Agreement.
Company Financial Statements: the consolidated financial
statements of the Company and its Subsidiaries as at and for the three
months ended March 31, 1996 and the years ended December 31, 1995 and
1994, including in each case a balance sheet, a statement of income, a
statement of stockholders' equity and a statement of cash flows,
together, in the case of such financial statements as at and for the
years ended December 31, 1995 and 1994, with an audit report thereon by
KPMG Peat Marwick, dated January 26, 1996 except for the second and
following paragraphs of Note 15, as to which the date is June 4, 1996.
Company Intellectual Property: as defined in
Section 2.1.9(a).
Company Taxes: as defined in Section 2.1.6(a).
Confidentiality Agreement: that letter agreement, dated March
4, 1996, between Morgan Stanley & Co. Incorporated and the Company.
Consent: any consent, approval, authorization, waiver, permit,
license, grant, exemption or order of, or registration, declaration or
filing with, any Person, including but not limited to any Governmental
Authority.
Contract: as defined in Section 2.1.8(a).
Contribution Agreement: as defined in the fourth recital of
this Agreement.
Credit Agreement: the Amended and Restated Credit Agreement,
dated as of December 20, 1994, among VKAC, the Company, the banks named
therein and Chemical Bank, as administrative agent, collateral agent
and issuing bank, and Chemical Bank and The Chase Manhattan Bank,
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N.A., as managing agents, as amended, supplemented, waived or otherwise
modified from time to time.
Custodian/Transfer Agent Agreements: as defined in Section
2.1.8(a).
Deferred Stock Agreement: as defined in Section 1.5(e).
Deferred Stock Unit: as defined in Section 1.5(e).
Designated Managers: the employees of any member of the VKAC
Group who are parties to the Contribution Agreement as of the Effective
Time.
Determination Date: as defined in Section 1.6(b)(ii).
DGCL: the General Corporation Law of the State of Delaware, as
in effect from time to time.
Disclosed Matter: any fact that was (i) disclosed by the
Company, any of its Subsidiaries or any Fund or any of their respective
employees, attorneys, accountants or financial and other advisers
("Representatives") to Parent, Holdco, the Buyer or any of their
respective Representatives and reviewed by Parent, the Buyer or any of
their respective Representatives or (ii) discovered by Parent, Holdco,
the Buyer or any of their respective Representatives and discussed with
the Company, any of its Subsidiaries or any Fund or any of their
respective Representatives, in each case on or prior to the date
hereof.
Dissenting Shares: as defined in Section 1.7.
Effective Time: as defined in Section 1.2.
Employee Option: as defined in Section 1.5(d).
Employment and Withholding Taxes: any federal, state, local,
foreign or other employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care or other
similar tax, duty or other governmental charge or assessment or
deficiencies thereof and all Taxes required to be withheld by or on
behalf of each of the VKAC Companies in connection with amounts paid or
owing to any employee, independent contractor, creditor or other party
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(including, but not limited to, all interest and penalties thereon and
additions thereto whether disputed or not).
Environmental Activity: any storage, holding, release,
emission, discharge, generation, disposal, handling or transportation
of any Hazardous Materials.
Environmental Laws: all Applicable Laws relating to the
protection of the environment, to human health and safety, or to any
Environmental Activity, including, without limitation, (i) the
Comprehensive Environmental Response, Compensation and Liability Act,
the Resource Conservation and Recovery Act, and the Occupational Safety
and Health Act, and (ii) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of
emissions, discharges or releases of Hazardous Materials into the air,
surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport or handling of Hazardous Materials.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate: as defined in Section 2.1.18(a).
ERISA Client: as defined in Section 2.1.20.
Exchange Act: the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
Exchange Agent: as defined in Section 1.8(a).
Exchange Agent Agreement: as defined in Section 1.8(a).
Filings: as defined in Section 2.1.12(c).
Financial Statements: the Company Financial Statements and the
Fund Financial Statements.
Fund Financial Statements: the audited financial statements of
each of the Funds (excluding the unit investment trusts) for the two
most recently completed fiscal years which have been filed with the
Commission, together with reports on such year-end statements by such
Fund's independent public accountants, including,
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in each case, a statement of net assets or statement of assets and
liabilities and investment portfolio, a statement of operations and a
statement of changes in net assets.
Fund Returns: as defined in Section 2.1.6(g)(iv).
Funds: as defined in Section 2.1.15(c).
GAAP: as defined in Section 2.1.3.
Governmental Approval: any Consent of, with or to any
Governmental Authority.
Governmental Authority: any nation or government, any state or
other political subdivision thereof, including, without limitation, any
governmental agency, department, commission or instrumentality of the
United States, any State of the United States or any political
subdivision thereof, or any stock exchange or self-regulatory agency or
authority.
Govett Agreements: (i) the Master Agreement, dated September
1994, among John Govett & Co. Limited and various of its affiliates and
various members of the VKAC Group and (ii) the Underwriting Agreement,
dated November 17, 1995, between The Govett Funds, Inc. and Van Kampen
American Capital Distributors, Inc. (successor by merger to American
Capital Marketing, Inc.).
Hazardous Materials: any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum or petroleum-derived substances or wastes, (ii)
requires investigation, removal or remediation under any Environmental
Law, or is defined as a "hazardous waste" or "hazardous substance"
thereunder, or (iii) is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any Governmental Authority or
Environmental Law.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
Holdco: as defined in the introductory paragraph of this
Agreement.
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Income Tax: any federal, state, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits or windfall
profits tax or other similar tax, estimated tax, duty or other
governmental charge or assessment or deficiencies thereof (including,
but not limited to, all interest and penalties thereon and additions
thereto whether disputed or not).
Institutional Accounts: Clients, other than the Funds, OakRe
Life Insurance Company and the Cova Series Trust, as to which any VKAC
Company acts as investment adviser, subadviser or manager.
Intellectual Property: United States and foreign trademarks,
service marks, trade names, trade dress, copyrights, and similar
rights, including registrations and applications to register or renew
the registration of any of the foregoing; United States and foreign
letters patent and patent applications; and inventions, processes,
designs, formulae, trade secrets, know-how and all similar intellectual
property rights.
Investment Advisory Contracts: as defined in Section 2.1.8(a).
Investment Company: as defined in the Investment Company Act.
Investment Company Act: the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
IRS: the Internal Revenue Service.
Jones Option: the option to purchase up to 57,750 shares of
Class A Common Stock granted to The Jones Financial Companies, a
Limited Partnership, pursuant to the Jones Option Agreement.
Jones Option Agreement: The Amended and Restated Stock Option
Agreement, dated as of June 1, 1995, between the Company and The Jones
Financial Companies, a Limited Partnership.
Jones Option Cancellation Amount: as defined in
Section 1.5(f).
Jones Option Shares: as defined in Section 1.5(f).
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<PAGE> 74
knowledge of the Company: the actual knowledge, after due
inquiry, of Don G. Powell, Dennis J. McDonnell, William R. Molinari,
William R. Rybak, Ronald A. Nyberg, Paul R. Wolkenberg, Alan T.
Sachtleben, Peter W. Hegel, William N. Brown, Douglas B. Gehrman,
Robert Peck, Jack Zimmerman, Scott West, Gary DeMoss, Jeffrey W.
Maillet, Robert J. Froehlich, Gwen Shaneyfelt and Walter E. Rein.
Lien: any mortgage, pledge, hypothecation, security interest,
encumbrance, title retention agreement, lien, charge or other similar
restriction.
Market Assets Under Management: the aggregate assets of such
of the open end Funds, the Institutional Accounts (including the
Sub-Advisory Funds) and the Prime Rate Trust as to which any VKAC
Company (i) has received shareholder Consent or, in the case of
Institutional Accounts (other than a Sub-Advisory Fund), has followed
the procedures set forth in Section 3.1.6(d) or other procedures
reasonably acceptable to the Parent and no VKAC Company has been
notified, orally or in writing, as of the close of business on the
second Business Day immediately preceding the Effective Time, of any
such Institutional Account's intention to terminate its relationship
with the applicable VKAC Company and (ii) will act as investment
adviser, subadviser or manager immediately following the Effective
Time, determined as of the close of business on the second Business Day
immediately preceding the Effective Time based on the average of such
aggregate amount over the 10-day period immediately prior to such date.
Material Adverse Effect: with respect to any Person or
Persons, a materially adverse effect on the business, financial
condition, results of operations or properties of such Person or
Persons, taken as a whole in the event that there is more than one such
Person, other than any such materially adverse effect arising because
of the identity of the Buyer, the Parent or any of their respective
Affiliates, and provided that neither a decline in the securities
markets nor in assets under management of any Fund or Sub-Advisory Fund
shall be taken into account in determining if a materially adverse
effect shall have occurred. Any reference in this Agreement to
"Material Adverse Effect" without a reference to a specific Person or
Persons shall mean a Material Adverse Effect on the VKAC Group, taken
as a whole.
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MCM: McCarthy, Crisanti & Maffei, Inc., a New York
corporation.
Merger Consideration: as defined in Section 1.5(a).
NASD: National Association of Securities Dealers, Inc.
Option Holder: as defined in Section 2.1.2(c).
Option Plan: as defined in Section 1.5(d).
Options: as defined in Section 2.1.2(c).
Organizational Documents: as to any Person, if a corporation,
its articles or certificate of in corporation and by-laws; if a
partnership, its partnership agreement; and if some other entity, its
constituent documents.
Per Share Merger Consideration: an amount of cash in dollars
(rounded to the nearest $0.0001) determined by dividing (i) an amount
equal to the sum of (A) the Acquisition Price, (B) the Aggregate
Employee Option Exercise Price, (C) the Aggregate Jones Option Exercise
Price and (D) in the event that the Closing Date occurs after January
1, 1997, the Aggregate Travelers Option Exercise Price, by (ii) an
amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to the Effective Time (including the
number of shares of Common Stock subject to the Contribution
Agreement), (B) the aggregate number of shares of Class A Common Stock
subject to the Employee Options immediately prior to the Effective
Time, whether or not vested, (C) the Jones Option Shares, (D) in the
event that the Closing Date occurs after January 1, 1997, the Travelers
Option Shares, (E) the number of shares of Preferred Stock outstanding
immediately prior to the Effective Time and (F) the number of Deferred
Stock Units outstanding immediately prior to the Effective Time.
Permitted Debt Prepayment Amount: as of the end of any
calendar month, the Prepayment Target for such month, provided that (x)
if Pre-Tax Income as of the end of such month is less than Pre-Tax
Income Target as of the end of such month, then the Permitted Debt
Prepayment Amount shall be the Prepayment Target minus the amount of
such shortfall and (y) if Pre-Tax Income
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<PAGE> 76
as of the end of such month is greater than Pre-Tax Income Target as of
the end of such month, then the Permitted Debt Prepayment Amount shall
be the Prepayment Target plus 50% of such excess; provided further that
if the Determination Date is any day other than on the last Business
Day of any month, "Prepayment Target" and "Pre-Tax Income Target" for
the month in which the Determination Date occurs shall be equal to (A)
the amount therefor determined as of the end of the preceding month
plus (B) a pro rata amount (based on the number of days elapsed in the
month in which the Determination Date occurs) of the difference between
(i) the Prepayment Target or the Pre-Tax Income Target, as the case may
be, for the end of the month in which the Determination Date occurs and
(ii) the Prepayment Target or the Pre-Tax Income Target, as the case
may be, as of the end of the preceding month.
Permitted Encumbrances: as defined in Section 2.1.7.
Person: any natural person or any firm, partnership, limited
liability partnership, association, corporation, limited liability
company, trust, business trust, Governmental Authority or other entity.
Plans: as defined in Section 2.1.18(a).
Post-Closing Tax Period: any Tax period (or portion thereof)
ending after the close of business on the Closing Date.
Pre-Closing Tax Period: any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
Prepayment Target: with respect to the period as of the end of
any month, the amount set forth on Exhibit E for such month below the
heading "Cumulative Debt Repayment Target."
Pre-Tax Income: pre-tax income of the VKAC Group on a
consolidated basis determined in accordance with GAAP for the period
from July 1, 1996 to the Determination Date without giving effect to
extraordinary items.
Pre-Tax Income Target: with respect to the period as of the
end of any month, the amount set forth on
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Exhibit E for such month below the heading "Cumulative Pre-Tax Target
Income."
Preferred Stock: the Junior Non-Cumulative Participating
Preferred Stock, par value $200.00 per share, of the Company.
Preferred Stock Trustee: Van Kampen American Capital Trust
Company, as trustee with respect to The Van Kampen American Capital,
Inc. Profit Sharing and Savings Plan pursuant to the Master Defined
Contribution Trust Agreement, dated as of December 20, 1994, between
the Company and Van Kampen American Capital Trust Company, as amended,
supplemented, waived or otherwise modified from time to time.
Prime Rate Trust: the Van Kampen American Capital Prime Rate
Income Trust.
Real Property: as defined in Section 2.1.7.
Registered Broker-Dealers: as defined in Section 2.1.15(b).
Registered Investment Advisers: as defined in Section
2.1.15(a).
Registration and Participation Agreement: the Registration and
Participation Agreement, dated as of February 17, 1993, as amended by
Amendment No. 1 to Registration and Participation Agreement, dated as
of April 15, 1994, Amendment No. 2 to Registration and Participation
Agreement, dated as of December 20, 1994, and Amendment No. 3 to
Registration and Participation Agreement, dated as of May 1, 1995,
among the Company and certain stockholders of the Company.
Relevant Date: February 17, 1993, with respect to the Van
Kampen Companies (without giving effect to any merger into such
companies of the American Capital Companies); or December 20, 1994,
with respect to the American Capital Companies.
Return: any return, report, declaration, form, claim for
refund or information statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof,
required to be filed by or on behalf of any VKAC Company.
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RIC: a "regulated investment company" within the meaning of
section 851 of the Code.
Securities Act: the Securities Act of 1933, as amended.
Selling Agreements: as defined in Section 2.1.8(a).
Stock Option Waiver: as defined in Section 1.5(d).
Sub-Advisory Funds: as defined in Section 2.1.15(c).
Subsidiary: each corporation or other Person in which a Person
owns or controls, directly or indirect ly, capital stock or other
equity interests representing more than 50% of the outstanding voting
stock or other equity interests.
Surviving Corporation: as defined in Section 1.1.
Tax: (i) any federal, state, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, excise, custom
duties, transfer, registration, stamp, premium, real property, ad
valorem, intangibles, rent, occupancy, license, occupational,
employment, unemployment, social security, disability, workers'
compensation, payroll, withholding, estimated or other similar tax,
duty or other governmental charge of any kind whatsoever (including,
but not limited to, all interest and penalties thereon and additions
thereto whether disputed or not), (ii) any liability of any VKAC
Company for the payment of any amounts of the type described in clause
(i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, or of being a party to any agreement or
arrangement whereby liability of any VKAC Company for payments of such
amounts was determined or taken into account with reference to the
liability of any other Person, and (iii) any liability of any VKAC
Company for the payment of any amounts as a result of being party to
any tax sharing agreement with respect to the payment of any amounts
of the type described in clause (i) or (ii) as a result of any
obligation to indemnify any other Person.
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Tax Asset: any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any
other credit or tax attribute that could reduce Taxes through
carryovers or carrybacks to other taxable years (including, without
limitation, deductions and credits related to alternative minimum
Taxes).
Total Debt Prepayment Amount: the aggregate amount of loans
under the Credit Agreement prepaid from the date hereof to the
Determination Date.
Total Employee Option Cancellation Amount: as defined in
Section 1.5(d).
Transaction Expenses: (i) the fees and expenses payable to
Goldman, Sachs & Co. and Merrill Lynch & Co., Inc. in connection with
the Merger; (ii) the fee payable to Gordon McMahon, a director of the
Company, in connection with the Merger; (iii) the fees and expenses of
Debevoise & Plimpton, as special counsel to the Company, and of
Friedman & Kaplan, as special counsel to the Designated Managers,
incurred in connection with the transactions contemplated by the Merger
Agreement; (iv) the expenses, costs and fees incurred by the Company in
connection with any and all Consents required to be obtained by the
VKAC Companies in connection with the transactions contemplated hereby;
and (v) all transfer Taxes (including any real property transfer gains
Taxes but excluding stock transfer Taxes) that relate to or result from
the Merger.
Transfer Agent: as defined in Section 2.1.15(f).
Travelers Option: the option to purchase up to 120,222 shares
of Class B Common Stock granted to The Travelers Inc. pursuant to the
Travelers Option Agreement.
Travelers Option Agreement: The Stock Option Agreement, dated
as of December 20, 1994, between the Company and The Travelers Inc.
Travelers Option Cancellation Amount: as defined in Section
1.5(f).
Travelers Option Shares: as defined in Section 1.5(f).
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Underwriting Agreements: as defined in Section 2.1.8(a).
Van Kampen Companies: collectively, the Company, VKAC, Van
Kampen American Capital Investment Advisory Corp., Van Kampen American
Capital Management, Inc., Van Kampen American Capital Distributors,
Inc., VSM Inc., VCJ Inc., Van Kampen Merritt Equity Holdings Corp. and
Van Kampen Merritt Equity Advisors Corp.
VKAC: as defined in the second recital to this Agreement.
VKAC Companies or VKAC Group: the Company, VKAC and VKAC's
direct and indirect Subsidiaries.
Working Capital: Working Capital Assets minus Working Capital
Liabilities.
Working Capital Assets: as of any date, all cash and cash
equivalents (whether or not restricted), short-term investments,
receivables, trading inventory and investments in VKAC funds related to
deferred compensation, in each case as set forth on the consolidated
balance sheet of the VKAC Group, in accordance with GAAP.
Working Capital Liabilities: as of any date, all broker-dealer
loans (including loans outstanding under the BONY Agreement), accounts
payable and accrued expenses (excluding accrued interest on loans under
the Credit Agreement and the Senior Notes), payables to Affiliates
(MCM/ACC), payables to trustees, all outstanding indebtedness incurred
after the date of this Agreement under Section 2.1.5(d)(iii), deferred
compensation and current income taxes payable in each case as set forth
on the consolidated balance sheet of the VKAC Group, in accordance with
GAAP, excluding (i) deferred Taxes and (ii) any accrued but unpaid
Transaction Expenses.
6.2. Survival of Representations and Warranties. The
representations and warranties, and covenants and other obligations to be
performed prior to or at the Effective Time, contained in this Agreement or in
any certificate delivered in connection herewith shall survive the execution and
delivery of this Agreement but shall not survive the Effective Time, and any and
all breaches of such representations and warranties and covenants and other
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obligations shall be deemed to be waived as of the Effective Time.
6.3. Expenses; Transfer Taxes. Except as set forth below in
this Section 6.3 and except with respect to Transaction Expenses, the Company,
on the one hand, and the Parent, Holdco and the Buyer, on the other hand, shall
bear their respective expenses, costs and fees (including attorneys' fees) in
connection with the transactions contemplated hereby, including the preparation,
execution and delivery of this Agreement and compliance herewith, whether or not
the transactions contemplated hereby shall be consummated. All Transaction
Expenses shall be borne by the Company, and the Acquisition Price shall be
adjusted in respect thereof as provided in Section 1.6(b)(ii). The Parent,
Holdco and the Buyer shall bear all stock transfer Taxes that relate to or
result from the Merger.
6.4. Severability. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any
extent whatsoever. The invalidity of any one or more phrases, sentences,
clauses, Sections or subsections of this Agreement shall not affect the
remaining portions of this Agreement.
6.5. Notices. All notices, requests, demands and other
communications made in connection with this Agreement shall be in writing and
shall be (a) mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or (b) transmitted by hand delivery or reputable
overnight delivery service, addressed as follows:
(i) if to the Company, to:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
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With a copy to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Telecopy: (212) 407-5252
Telephone: (212) 407-5200
Attention: Mr. Alberto Cribiore
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Franci J. Blassberg, Esq.
(ii) if to the Parent, Holdco or the Buyer, to:
Morgan Stanley Asset Management, Inc.
1321 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: Mr. James M. Allwin
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
6.6. Miscellaneous.
6.6.1. Headings. The headings contained in this Agreement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
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6.6.2. Entire Agreement. This Agreement, including the
Schedules and Exhibits, and the Confidentiality Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
6.6.3. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
6.6.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF
DELAWARE SHALL MANDATORILY APPLY. THE PARENT, HOLDCO, THE BUYER AND THE COMPANY
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE
STATE, CITY AND COUNTY OF NEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND
ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO
IN THIS AGREEMENT, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN
ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR
OF ANY SUCH DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT
OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THE VENUE THEREOF MAY NOT BE APPROPRIATE, AND THE PARTIES HERETO IRREVOCABLY
AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD
AND DETERMINED IN SUCH A NEW YORK STATE OR FEDERAL COURT. THE PARENT, HOLDCO,
THE BUYER AND THE COMPANY HEREBY CONSENT TO AND GRANT ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY
SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 6.5, OR IN
SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT
SERVICE THEREOF.
6.6.5. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
6.6.6. Assignment. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties hereto.
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6.6.7. No Third Party Beneficiaries. Nothing in this Agreement
shall confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns, except that each
Person that is a stockholder of the Company, or that holds any Options or
Deferred Stock Units, immediately prior to the Effective Time shall be a third
party beneficiary with respect to the covenants of the Parent, Holdco and the
Buyer set forth in Section 3.2.3.
6.6.8. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDER-
STANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) IT MAKES THIS
WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.6.8.
6.6.9. Amendment; Waivers. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of
any other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder.
6.6.10. Certain Disclosures. To the extent that any Disclosed
Matter can reasonably be deemed to constitute an exception to any of the
representations or warranties made by the Company in Section 2.1.6, such
Disclosed Matter
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shall be deemed to have been adequately disclosed in the Schedules hereto for
purposes of the representations and warranties contained in Sections 2.1.6,
2.1.3 and 2.1.4.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
VK/AC HOLDING, INC.
By: /s/ Ronald A. Nyberg
-------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
MORGAN STANLEY GROUP INC.
By: /s/ Eileen K. Murray
--------------------------
Name: Eileen K. Murray
Title: Treasurer
MSAM HOLDINGS II, INC.
By: /s/ Harold Schaaff
--------------------------
Name: Harold Schaaff
Title: Vice President and Secretary
MSAM ACQUISITION INC.
By: /s/ Harold Schaaff
--------------------------
Name: Harold Schaaff
Title: Vice President and Secretary
80
<PAGE> 87
EXHIBIT A
Adjustment to Acquisition Price
Based on Assets Under Management
The amount of the increase or decrease in the Acquisition
Price pursuant to Section 1.6(a)(i) shall be equal to the amount determined
pursuant to the following formula:
1. If Closing Assets Under Management is greater than $37.707 billion but
is equal to or less than $39.503 billion, increase Acquisition Price by
the product of .0115 times the excess of Closing Assets Under
Management over $37.707 billion.
2. If Closing Assets Under Management is greater than $39.503 billion,
increase Acquisition Price by $20.649 million plus the product of .0231
times the excess of Closing Assets Under Management over $39.503
billion.
3. If Closing Assets Under Management is equal to or greater than $34.116
billion and equal to or less than $37.707 billion, no change in
Acquisition Price.
4. If Closing Assets Under Management is less than $34.116 billion but
greater than or equal to $32.321 billion, decrease Acquisition Price by
the product of .0115 times the excess of $34.116 billion over Closing
Assets Under Management.
5. If Closing Assets Under Management is less than $32.321 billion,
decrease Acquisition Price by $20.649 million plus the product of .0231
times the excess of $32.321 billion over Closing Assets Under
Management.
<PAGE> 88
Exhibit B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of ________, 1996, made by
McCarthy, Crisanti & Maffei, Inc., a New York corporation (the "Company"), in
favor of VK/AC Holding, Inc., a Delaware corporation ("VKAC Holding") and Morgan
Stanley Group Inc., a Delaware corporation ("Morgan Stanley").
WHEREAS, VKAC Holding has entered into an Agreement and Plan
of Merger with Morgan Stanley, Holdco and the Buyer, dated as of June 21, 1996
(as such agreement may be amended, the "Merger Agreement");
WHEREAS, prior to the closing of the transactions contemplated
by the Merger Agreement, VKAC Holding intends to distribute to its common
stockholders (the "MCM Spinoff") all of the outstanding common stock of a new
Delaware corporation ("MCM Holding") to be formed by VKAC Holding for the
purpose of holding all of the outstanding common stock of the Company, which is
currently a wholly-owned subsidiary of VKAC Holding (collectively, MCM Holding,
the Company and the subsidiaries of the Company, the "MCM Group");
WHEREAS, in connection with the MCM Spin-off, the Company and
VKAC Holding have entered into a Tax Sharing Agreement, dated as of _________,
1996, (the "Tax Sharing Agreement"); and
WHEREAS, pursuant to Section 4.2.3 of the Merger Agreement, it
is a condition to the obligations of Morgan Stanley and the Buyer that the
Company shall have entered into an Indemnification Agreement with respect to the
ownership of the stock of the Company and of MCM Holding prior to the MCM
Spin-off;
NOW THEREFORE, in consideration of the promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, VKAC Holding and Morgan Stanley
hereby agree as follows:
1. Indemnity. (a) The Company (hereinafter sometimes referred
to as the "Indemnitor") hereby agrees to indemnify and hold harmless VKAC
Holding, Morgan Stanley and their respective affiliates, successors and assigns
(collectively, the "Indemnitees"), from and against, and to
<PAGE> 89
pay or reimburse each Indemnitee for, any and all claims, actions, causes of
action, suits, judgments, losses, taxes, liabilities, damages, obligations,
costs and expenses including, but not limited to, reasonable attorneys' fees
(and the costs and expenses, including reasonable attorneys' fees and expenses,
of enforcing the Company's obligations hereunder) incurred by any of the
Indemnitees in connection with or arising from (each, an "Indemnifiable Loss")
incurred or suffered by any of the Indemnitees, whether arising before, on or
after the MCM Spin-off, (i) except as otherwise provided in the Tax Sharing
Agreement, of or relating to the MCM Group or arising from or in connection with
the conduct of the business of the MCM Group, including but not limited to taxes
of the MCM Group to the extent that such taxes are attributable to income,
assets or operations of the MCM Group and VKAC Holding has not previously
received a payment with respect thereto, (ii) the ownership of the stock of the
Company and MCM Holding prior to the MCM Spin-off (other than any taxes imposed
upon VKAC Holding or any of its subsidiaries as a consequence of the Spin-Off)
and (iii) the Guarantee, dated December 7, 1993, by Van Kampen American Capital,
Inc. of the Company's obligations under the Lease Agreement, dated December 7,
1993, between the Company, as lessee, and The Chase Manhattan Bank, N.A., as
lessor, with respect to certain premises occupied by the Company on the 37th
floor of the building located at One Chase Manhattan Plaza, New York, New York.
(b) Any indemnity payable hereunder shall be made on an
after-tax basis (taking into account both the deductibility of the Indemnifiable
Loss and the inclusion in income of the indemnity payment and using for this
purpose the maximum statutory rate applicable to the recipient of such indemnity
payment for the relevant taxable year).
2. Claims. In the case of any claim asserted by a third party
against an Indemnitee, notice shall be given by such Indemnitee to the
Indemnitor promptly after such Indemnitee shall have received (i) notice of the
commencement by a third party of any suit or other proceeding against or
otherwise involving such Indemnitee or (ii) information from a third party
alleging the existence of a claim against such Indemnitee, in either case, with
respect to which indemnification may be sought under this Agreement (a
"Third-Party Claim"); provided that the failure of such Indemnitee to give
notice as provided by this Section 2 shall not relieve the Indemnitor of its
obligations under this Agreement, except to the extent that the Indemnitor is
materially damaged as a result of such
2
<PAGE> 90
failure to give notice. Within 30 days after receipt of such notice, the
Indemnitor may (i) by giving written notice thereof to such Indemnitee,
acknowledge liability for such indemnification claim and at its option and at
its sole cost and expense assume the defense of any claim or any litigation
resulting therefrom, provided that counsel for the Indemnitor, who shall conduct
the defense of such claim or litigation, shall be reasonably satisfactory to
such Indemnitee, and such Indemnitee may participate in such defense at such
Indemnitee's expense, or (ii) object to the claim for indemnification set forth
in the notice delivered by such Indemnitee pursuant to this Section 2, provided
that if the Indemnitor does not within such 30-day period give such Indemnitee
written notice objecting to such indemnification claim and setting forth the
grounds therefor, the Indemnitor shall be deemed to have acknowledged its
liability for such indemnification claim. The Indemnitor, in the defense of any
such claim or litigation, shall not, except with the prior written consent of
the Indemnitee against whom the claim was made or the litigation was brought,
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other non-monetary relief affecting such Indemnitee or that does
not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim or litigation. In the event that an Indemnitee shall in good faith
determine that such Indemnitee has available to it one or more defenses or
counterclaims that conflict with one or more of those that may be available to
the Indemnitor in respect of such claim or any litigation relating thereto, such
Indemnitee shall have the right at all times to take over and assume control
over the defense, settlement, negotiations or litigation relating to any such
claim at the sole cost of the Indemnitor, provided that if such Indemnitee does
so take over and assume control, such Indemnitee shall not consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnitor. In the event that the Indemnitor does not exercise
its right to assume the defense of any matter as above provided, the Indemnitee
shall have the right (but not the obligation) to defend against any such claim
or demand.
3. Cooperation. The Indemnitees and their affiliates shall
make available to the Indemnitor and its attorneys and accountants, and the
Indemnitor and its affiliates shall make available to the Indemnitees and their
attorneys and accountants, at reasonable times and for
3
<PAGE> 91
reasonable periods, during normal business hours, all books and records in its
possession or under its control reasonably requested by the Indemnitor relating
to any matter with respect to which indemnification is being provided pursuant
to this Agreement, and the Indemnitees and the Indemnitor, and their respective
affiliates, shall render to the Indemnitor or the Indemnitees, as the case may
be, such assistance as may be reasonably required to ensure prompt and adequate
prosecution or the defense of any suit, claim or proceeding, including using its
reasonable efforts to make available for interviews and to give testimony those
officers or employees of the Indemnitees or the Indemnitor, or their respective
affiliates, as the Indemnitor or the Indemnitees, as the case may be, may
reasonably request; provided, however, that in each such case, any expense
reasonably incurred by the Indemnitees in connection therewith shall be promptly
paid by the Indemnitor upon submission to the Indemnitor of an itemized request
for such payment.
4. Subrogation. The Indemnitor shall be subrogated to any
claims or rights of the Indemnitees against any other person with respect to any
Indemnifiable Loss assumed or borne by the Indemnitor. The Indemnitees shall
cooperate with the Indemnitor to the extent reasonable under the circumstances
consistent with the provisions of Section 3, at the expense of the Indemnitor,
in connection with the assertion by the Indemnitor of any such claim against any
such other persons.
5. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and addressed to:
(i) if to the Indemnitor:
McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Attention: President
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
4
<PAGE> 92
(ii) if to the Indemnitees:
VK/AC Holding, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60187
Telecopy: (708) 684-6155
Telephone: (708) 684-6363
Attention: Ronald A. Nyberg, Esq.
with a copy to:
Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Telecopy: (212) 296-7778
Telephone: (212) 296-7125
Attention: James M. Allwin
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Telephone: (212) 450-4000
Attention: John R. Ettinger, Esq.
(iii) or, as to any party, at such other address as shall be designated by such
party in a written notice to other parties.
All such notices and other communications shall be made by
certified mail, postage prepaid, and shall be effective the third business day
after being deposited in the mails; provided that such notices and other
communications may be faxed, telegraphed, telexed or delivered by hand delivery,
but in any such case shall be effective only when receipt is confirmed in
writing by the party to which sent.
6. Waivers; Remedies. No failure on the part of Indemnitees to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided
5
<PAGE> 93
are cumulative and not exclusive of any remedies provided by law.
7. Amendments, Etc. No amendment, waiver, modification,
discharge or termination of any provisions of this Agreement, and no consent to
any departure by the Indemnitor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Indemnitee or Indemnitees
affected thereby, and then such amendment, waiver, modification, discharge,
termination or consent shall be effective only in the specific instance and for
the specific purpose for which given. Any such amendment, waiver, modification,
discharge, termination or consent shall be effective only if approved by the
directors of the applicable Indemnitees who are unaffiliated with the
Indemnitor.
8. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW).
9. Parties in Interest. This Agreement shall not be assignable
by any party hereto without the prior written consent of the other parties
hereto, and any attempt to assign this Agreement without such consent shall be
void and of no effect. This Agreement shall be binding on and enforceable
against the Indemnitor and its successors and permitted assigns, and shall inure
to the benefit of and be enforceable by the Indemnitees and their respective
successors and permitted assigns.
10. Headings. The descriptive headings of the several Sections
and paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
6
<PAGE> 94
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Indemnitor and the Indemnitees
has caused this Indemnification Agreement to be duly executed and delivered by
its officer duly authorized as of the date first written above.
MCCARTHY, CRISANTI &
MAFFEI, INC.
By ______________________
Name:
Title:
VK/AC HOLDING, INC.
By ______________________
Name:
Title:
MORGAN STANLEY GROUP INC.
By ______________________
Name:
Title:
7
<PAGE> 95
Exhibit C-1
[Form of Opinion of General Counsel
of VK/AC Holding, Inc.]
________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary
of VK/AC Holding, Inc., a Delaware corporation (the "Company"). As such, I and
other members of the Office of the General Counsel of the Company have counseled
the Company in connection with the execution and delivery of the Agreement and
Plan of Merger, dated as of June 21, 1996 (the "Merger Agreement"), among the
Company, Morgan Stanley Group Inc., a Delaware corporation (the "Parent"), MSAM
Holdings II, Inc., a Delaware corporation ("Holdco"), and MSAM Acquisition Inc.,
a Delaware corporation (the "Buyer"), and the transactions contemplated thereby.
Capitalized terms used herein and not otherwise defined herein have the
respective meanings ascribed them in the Merger Agreement.
In so acting, I have reviewed or caused to be reviewed under
my supervision the Merger Agreement.
I have examined and relied upon the representations and
warranties as to factual matters contained in or made pursuant to the Merger
Agreement and have examined and relied upon originals or copies, certified or
otherwise identified to my satisfaction, of such other agreements, instruments,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates, corporate or other records, authorizations, proceedings and other
instruments, and have made such additional examinations and conducted such other
investigations of fact and law, as I have deemed necessary or appropriate for
the purposes of
Exhibit C-1
<PAGE> 96
Morgan Stanley Group Inc. 2 June __, 1996
rendering the opinions expressed below. I have assumed the genuineness of all
signatures of, and the authority of, persons signing the Merger Agreement on
behalf of parties thereto other than the Company and the authenticity of all
documents submitted to me as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing, I am of the opinion that:
1. Corporate Status. Each Significant Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of organization, with the requisite corporate power and
authority to carry on its business as now conducted. Each Significant
Subsidiary is duly qualified to do business and is in good standing as a foreign
corporation in all jurisdictions in which the failure to be so qualified,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. As used herein, "Significant Subsidiary" means the
companies listed on Annex I hereto.
2. Capitalization. The authorized capital stock of the Company
consists of (i) 3,250,000 shares of Class A Common Stock, of which __________
shares are issued and outstanding, (ii) 3,250,000 shares of Class B Common
Stock, of which 117,817 shares are issued and outstanding and (iii) 32,500
shares of Preferred Stock of which 32,500 shares are issued and outstanding.
As of the date of the Merger Agreement, to the best of my
knowledge, there were _______ shares of Class A Common Stock reserved for
issuance upon exercise of the Employee Options outstanding on the date thereof,
57,750 shares of Class A Common Stock reserved for issuance upon exercise of the
Jones Option, 120,222 shares of Class B Common Stock reserved for issuance upon
exercise of the Travelers Option (the Employee Options, the Jones Option and the
Travelers Option, collectively, the "Options"), 3,350 shares of Class A Common
Stock reserved for issuance in connection with Deferred Stock Units outstanding
on the date thereof, 32,500 shares of Class A Common Stock reserved for issuance
upon exchange of the Preferred Stock for such shares and 3,132,183 shares of
Class B Common Stock reserved for issuance upon exchange of shares of Class A
Common Stock for such shares. There were Options relating to _________ shares of
Common Stock outstanding as of the date of the
Exhibit C-1
<PAGE> 97
Morgan Stanley Group Inc. 3 June __, 1996
Merger Agreement, and since the date thereof the Company has not agreed to, nor
does it have commitments to, issue options relating to any additional shares of
Common Stock.
To the best of my knowledge, there are no preemptive or
similar rights on the part of any Person with respect to the issuance of any
shares of capital stock of the Company or any other member of the VKAC Group,
except for such rights as may be set forth in the Registration and Participation
Agreement. Except (i) for this Agreement, (ii) in respect of the Options and the
Deferred Stock Agreements, (iii) in respect of certain repurchase rights with
respect to shares of Class A Common Stock held by current or former officers or
employees of the Company or any of its Subsidiaries and (iv) as set forth in
Schedule 2.1.2(c) or 2.1.2(d) of the Merger Agreement, there are no
subscriptions, options, warrants or other similar rights, agreements or
commitments of any kind obligating the Company or any other member of the VKAC
Group to issue or sell, or to cause to be issued or sold, or to repurchase or
otherwise acquire, any shares of its capital stock or any securities convertible
into or exchangeable for, or any options, warrants or other similar rights
relating to, any such shares.
3. No Conflict. Except as set forth in Schedule 2.1.1(b) to
the Merger Agreement, the execution and delivery by the Company of the Merger
Agreement, and the consummation of the transactions contemplated thereby, will
not result in any violation of, loss of rights or default under, constitute an
event creating rights of acceleration, termination, repayment or cancellation
under, entitle any party to any payment pursuant to or result in the creation of
any Lien (or any obligation to create any Lien) upon any of the properties or
assets of any member of the VKAC Group under (i) any provision of the
Organizational Documents of any member of the VKAC Group or (ii) to the best of
my knowledge, any Material Contract, except for, in the case of clause (ii), any
such violations, losses, defaults, accelerations, terminations, repayments,
cancellations or Liens that, individually and in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. As used herein,
"Material Contract" shall mean any Contract that would be a "material contract"
of any member of the VKAC Group within the meaning of Item 601(b)(10) of
Securities and Exchange Commission Regulation S-K, without giving effect (except
as to management contracts) to clause (iii)(A) of such Item 601(b)(10).
Exhibit C-1
<PAGE> 98
Morgan Stanley Group Inc. 4 June __, 1996
4. Litigation. To the best of my knowledge, except as set
forth in Schedule 2.1.11 of the Merger Agreement, there is no judicial or
administrative action, suit, investigation, inquiry or proceeding pending or
threatened that (a) individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or result in any liability on the
part of the VKAC Group in an amount in excess of $2,000,000 individually or
$5,000,000 in the aggregate or (b) questions the validity of the Merger
Agreement or of any action taken or to be taken by any member of the VKAC Group
in connection therewith.
5. Regulatory Matters. Each of the Registered Investment
Advisers is duly registered as an investment adviser under the Advisers Act.
Each such registration is in full force and effect. Each of the Registered
Investment Advisers is not registered and is not required to be registered as a
broker-dealer under federal law, and is not a member and is not required to be a
member of any self-regulatory organization. Each of the Registered
Broker-Dealers is a broker-dealer duly registered under the Exchange Act and a
member firm in good standing of the NASD, and, to the extent required, the
Municipal Securities Rulemaking Board. Each such registration is in full force
and effect. No VKAC Company other than the Registered Broker-Dealers is required
to be registered, licensed or qualified as a broker-dealer under the Exchange
Act, or subject to any material liability or disability by reason of any failure
to be so registered, licensed or qualified. Except with respect to the Funds and
the Sub-Advisory Funds, no VKAC Company acts as investment adviser or subadviser
to any Investment Company. The Transfer Agent is duly registered as a transfer
agent under the Exchange Act. Such registration is in full force and effect. No
VKAC Company other than the Transfer Agent is a "transfer agent" within the
meaning of the Exchange Act, or required to be registered, licensed or qualified
as a transfer agent under the Exchange Act, or subject to any material liability
or disability by reason of any failure to be so registered, licensed or
qualified. None of the VKAC Companies is an Investment Company. Van Kampen
American Capital Trust Company is duly registered, licensed or qualified as a
trust company in the State of Texas and such registration, license or
qualification is in full force and effect.
6. Certain Approvals and Contracts. The approval of each
investment advisory agreement with a Client of the Registered Investment Adviser
which is an Investment Company required in connection with the performance by
the parties
Exhibit C-1
<PAGE> 99
Morgan Stanley Group Inc. 5 June __, 1996
of the Merger Agreement has been effected in accordance with the provisions of
Section 15 of the Investment Company Act. Each Investment Advisory Contract with
respect to any Fund, and each Underwriting Agreement, has been duly adopted and
maintained in compliance in all material respects with Section 15 of the
Investment Company Act. With respect to each client of the VKAC Group listed on
Schedule 2.1.8(c)(A)(9) of the Merger Agreement the assets of which have been
included by the Company in determining Closing Assets Under Management and
Market Assets Under Management under the Merger Agreement, a Consent has been
obtained in accordance with the provisions of Section 3.1.6(d) of the Merger
Agreement which, to my knowledge, is consistent with the requirements of the
Advisers Act as interpreted by the staff of the Commission in Jennison
Associates Capital Corp. (avail. Dec. 2, 1985).
I am a member of the Bar of the State of Illinois and express
no opinion as to matters governed by any laws other than the laws of the State
of Illinois, the Federal laws of the United States of America, the General
Corporation Law of the State of Delaware and, with respect to the opinion
expressed in the last sentence of paragraph (5) above, the State of Texas. In
rendering the opinions set forth above, I have, with your permission, relied on
certain members of my staff with respect to certain matters covered in this
opinion.
I am delivering this opinion to you pursuant to Section 4.2.6
of the Merger Agreement and no person other than you is entitled to rely on this
opinion.
Very truly yours,
Exhibit C-1
<PAGE> 100
Annex I
Significant Subsidiaries
Van Kampen American Capital, Inc.
Van Kampen American Capital Investment Advisory Corp.
Van Kampen American Capital Asset Management, Inc.
Van Kampen American Capital Management, Inc.
Van Kampen American Capital Distributors, Inc.
ACCESS Investor Services, Inc.
Van Kampen American Capital Trust Company
American Capital Contractual Services, Inc.
Van Kampen American Capital Advisors, Inc.
Van Kampen American Capital Exchange Corp.
Exhibit C-1
<PAGE> 101
Exhibit C-2
[Form of Opinion of Debevoise & Plimpton]
_________ __, 1996
Morgan Stanley Group Inc.
MSAM Holdings II, Inc.
MSAM Acquisition Inc.
c/o Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel to VK/AC Holding, Inc., a
Delaware corporation (the "Company"), in connection with the execution and
delivery of the Agreement and Plan of Merger, dated as of June 21, 1996 (the
"Merger Agreement"), among the Company, Morgan Stanley Group Inc., a Delaware
corporation (the "Parent"), MSAM Holdings II, Inc., a Delaware corporation
("Holdco"), and MSAM Acquisition Inc., a Delaware corporation (the "Buyer"), and
the transactions contemplated thereby. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
In so acting, we have participated in the preparation of the
Merger Agreement.
We have examined and relied upon the representations and
warranties as to factual matters contained in or
Exhibit C-2
<PAGE> 102
Morgan Stanley Group Inc. 2 _________ __, 1996
made pursuant to the Merger Agreement and have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
such other agreements, instruments, certificates of public officials,
certificates of officers or other representatives of the Company and others, and
such other documents, certificates, corporate or other records, authorizations,
proceedings and other instruments, and have made such additional examinations
and conducted such other investigations of fact and law, as we have deemed
necessary or appropriate for the purposes of rendering the opinions expressed
below. We have assumed the genuineness of all signatures of, and the authority
of, persons signing the Merger Agreement on behalf of parties thereto other than
the Company and the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
copies.
Based upon the foregoing, we are of the opinion that:
1. Corporate Status; Merger Agreement; Etc. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite corporate power and
authority to execute and deliver the Merger Agreement, to perform its respective
obligations thereunder and to consummate the transactions contemplated thereby.
The execution and delivery of the Merger Agreement, and the consummation of the
transactions contemplated thereby, have been duly authorized by all requisite
corporate action of the Company. The Merger Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization or other laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2. No Conflict. The execution and delivery by the Company of
the Merger Agreement, and the consummation of the transactions contemplated
thereby, will not result in any violation of any New York State or federal law,
rule or
Exhibit C-2
<PAGE> 103
Morgan Stanley Group Inc. 3 ________ __, 1996
regulation or the Delaware General Corporation Law (it being understood
that the rules and regulations of a self regulatory body or organization such as
the National Association of Securities Dealers, Inc. shall not be deemed to be
federal laws, rules or regulations).
3. Governmental Approvals. Except for filings in connection
with the Merger which will become effective after the Closing and other
Governmental Approvals to be made or obtained after the Closing (none of which
are required to be made prior to the Closing), no Governmental Approval (other
than pursuant to the HSR Act, which Governmental Approval has been obtained)
required by the laws of the State of New York, the federal laws of the United
States or the Delaware General Corporation Law is required to be obtained or
made by the Company in connection with the execution and delivery of the Merger
Agreement or the consummation of the transactions contemplated thereby other
than those which have been obtained or made.
We are members of the Bar of the State of New York and express
no opinion as to matters governed by any laws other than the laws of the State
of New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware.
We are delivering this opinion to you pursuant to Section
4.2.6 of the Merger Agreement and no person other than you is entitled to rely
on this opinion.
Very truly yours,
Debevoise & Plimpton
Exhibit C-2
<PAGE> 104
Exhibit D
[Form of Opinion of Davis Polk & Wardwell]
______________ _____, 1996
VK/AC Holding, Inc.
One Park View Plaza
Oakbrook Terrace, Illinois 60181
Each of the Designated Managers
Party to the Contribution Agreement
Referred to herein
Ladies and Gentlemen:
We have acted as special counsel to MSAM Acquisition Inc., a
Delaware corporation (the "Buyer"), MSAM Holdings II, Inc., a Delaware
corporation ("Holdco"), and Morgan Stanley Group Inc., a Delaware corporation
(the "Parent"), in connection with (i) the execution and delivery of the
Agreement and Plan of Merger, dated as of June 21, 1996, (the "Merger
Agreement"), among VK/AC Holding, Inc., a Delaware corporation (the Company"),
the Parent, Holdco and the Buyer, and (ii) the execution and delivery of the
Contribution Agreement, dated as of June 21, 1996 (the "Contribution
Agreement"), among the Parent, Holdco and the Designated Managers, and the
transactions contemplated thereby. Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed them in the
Merger Agreement.
Exhibit D
<PAGE> 105
VK/AC Holding, Inc. 2 _______ __, 1996
In so acting, we have participated in the preparation of the
Merger Agreement and the Contribution Agreement.
We have examined and relied upon the representations and
warranties as to factual matters contained in or made pursuant to the Merger
Agreement and the Contribution Agreement and have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
such other agreements, instruments, certificates of public officials,
certificates of officers or other representatives of the Buyer and others, and
such other documents, certificates, corporate or other records, authorizations,
proceedings and other instruments, and have made such additional examinations
and conducted such other investigations of fact and law, as we have deemed
necessary or appropriate for the purposes of rendering the opinions expressed
below. We have assumed the genuineness of all signatures of, and the authority
of, persons signing the Merger Agreement and the Contribution Agreement on
behalf of parties thereto other than the Buyer, Holdco and the Parent and the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that:
1. Corporate Status; Authority for Agreements(1); Etc.
Each of the Parent, Holdco and the Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
All of the outstanding shares of capital stock of the Buyer are owned by Holdco,
and all the outstanding shares of capital stock of Holdco are owned by Parent,
except for the Preferred Stock referred to below being issued to the Designated
Managers pursuant to the Contribution Agreement. Each of the Parent, Holdco and
the Buyer, as the case may be, has the requisite corporate power and authority
to execute and deliver the Merger Agreement, and the Contribution Agreement, to
perform its respective obligations thereunder and to consummate the transactions
contemplated thereby. The execution and delivery of the
- --------
1 This opinion to cover such other agreements in addition to the
Contribution Agreement as Parent or Holdco may enter into pursuant
to Section 6.1(c) of the Contribution Agreement.
Exhibit D
<PAGE> 106
VK/AC Holding, Inc. 3 _______ __, 1996
Merger Agreement and the Contribution Agreement, and the consummation of the
transactions contemplated thereby, have been duly authorized by all requisite
corporate action of the Parent, Holdco and the Buyer, as the case may be. Each
of the Merger Agreement and the Contribution Agreement has been duly executed
and delivered by each of the Parent, Holdco and the Buyer, as the case may be,
and constitutes the legal, valid and binding obligation of each of them,
enforceable against each of them, as the case may be, in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization or other laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2. Validity of Shares. The shares of 4% Exchangeable
Redeemable Preferred Stock, par value $100 per share (the "Preferred Stock"), of
Holdco to be issued to the Designated Managers pursuant to the Contribution
Agreement have been duly authorized and, when issued and delivered in accordance
with the terms of such Contribution Agreement, will be validly issued, fully
paid and non-assessable. The Certificate of Designation of the Preferred Stock
has been duly authorized by Holdco, and has been duly filed with the Secretary
of State of the State of Delaware. The shares of common stock, par value $1.00
per share, of the Parent issuable in exchange for the Preferred Stock have been
duly authorized and, when issued and delivered in exchange for shares of the
Preferred Stock in accordance with the terms thereof, will be validly issued,
fully paid and nonassessable.(2)
3. No Conflict.(3) The execution and delivery by each of the
Parent, Holdco and the Buyer, as the case may be, of the Merger Agreement and
the Contribution Agreement, and the consummation of the transactions
contemplated thereby, will not result in any violation of (i) any provision of
the certificate of incorporation, by-laws of other organizational documents of
such party or (ii) any New York State or federal law, rule or regulation or the
Delaware General Corporation Law (it being understood that the rules and
regulations of a self regulatory body or
__________________________
2 To be included in the opinion if the Preferred Stock is issued.
3 See Note 1.
Exhibit D
<PAGE> 107
VK/AC Holding, Inc. 4 _________ __, 1996
organization such as the National Association of Securities Dealers, Inc. shall
not be deemed to be federal laws, rules or regulations).
4. Governmental Approvals.(4) Except for filings in connection
with the Merger which will become effective after the Closing and other
Governmental Approvals to be made or obtained after the Closing (none of which
are required to be made prior to the Closing), no Governmental Approval required
by the laws of the State of New York, the federal laws of the United States or
the Delaware General Corporation Law is required to be obtained or made by the
Parent, Holdco or the Buyer, as the case may be, in connection with the
execution and delivery of the Merger Agreement and the Contribution Agreement or
the consummation of the transactions contemplated thereby other than those which
have been obtained or made.
We are members of the Bar of the State of New York and express
no opinion as to matters governed by any laws other than the laws of the State
of New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware (but including only those federal and
New York State and Delaware laws which, in our experience, are normally
applicable to transactions of this type).
We are delivering this opinion to you pursuant to Section
4.3.5 of the Merger Agreement and Section 6.3 of the Contribution Agreement and
no person other than you is entitled to rely on this opinion.
Very truly yours,
Davis Polk & Wardwell
__________________________
4 See note 1.
Exhibit D
<PAGE> 108
EXHIBIT E
SCHEDULE OF CUMULATIVE PRE-TAX
INCOME TARGET AMOUNTS AND CUMULATIVE
DEBT PREPAYMENT TARGET AMOUNTS
<TABLE>
<CAPTION>
CUMULATIVE PRE-TAX CUMULATIVE DEBT
MONTH INCOME TARGET PREPAYMENT TARGET(1)
- ----- ------------------ --------------------
($ in millions)
<S> <C> <C>
July $ 7.3 $15
August 14.9 20
September 22.3 35
October 30.4 45
November 38.3 55
December 47.0 65
January 56.0 75
</TABLE>
- --------
(1) Based on the assumption that debt outstanding under the Credit
Agreement on the date hereof is $275,000,000.
2
<PAGE> 1
EXHIBIT 4
RESTATED CERTIFICATE OF INCORPORATION
OF
MORGAN STANLEY GROUP INC.
Pursuant to Section 245 of the
General Corporation Law of the State of Delaware
Morgan Stanley Group Inc., a corporation duly organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation") and originally incorporated in the State of Delaware on
July 10, 1975 under the name Morgan Stanley Holdings Incorporated, does
hereby certify as follows:
FIRST: That the Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of the State of
Delaware, and a certified copy thereof was recorded in the office of the
Recorder of Kent County, Delaware, on the 10th day of July, 1975.
SECOND: That the Restated Certificate of Incorporation was
filed in the office of the Secretary of State of the State of Delaware, and a
certified copy thereof was recorded in the office of the Recorder of Kent
County, Delaware, on the 30th day of October, 1989.
THIRD: That Certificates of Amendment to the Restated
Certificate of Incorporation were filed in the office of the Secretary of State
of the State of Delaware, and certified copies thereof were recorded in the
office of the Recorder of Kent County, Delaware, on the 8th day of May, 1991,
and the 21st day of May, 1992.
FOURTH: That Certificates of Stock Designation were filed in
the office of the Secretary of State of the State of Delaware, and certified
copies thereof were recorded in the office of the Recorder of Kent County,
Delaware, on the 19th day of September, 1990, the 24th day of May, 1991, the
29th day of August, 1991, the 15th day of November, 1991, the 20th day of
March, 1992, and the 6th day of May, 1992.
FIFTH: That a Certificate of Retirement of Stock was filed in
the office of the Secretary of State of the State of Delaware and a certified
copy thereof was recorded in the office of the Recorder of Kent County,
Delaware, on the 20th day of June, 1992.
<PAGE> 2
2
SIXTH: That this Restated Certificate of Incorporation
restates and integrates and does not further amend the provisions of the
Corporation's Restated Certificate of Incorporation as heretofore amended or
supplemented, and that there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation, and that the Restated
Certificate of Incorporation is hereby restated to read in its entirety as
follows:
ARTICLE I
NAME
The name of the Corporation is:
MORGAN STANLEY GROUP INC.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of
Delaware is located at 32 Loockerman Sq., Ste. L-100, City of Dover, County of
Kent. The name of the registered agent of the Corporation at such address is
United States Corporation Company.
ARTICLE III
CORPORATE PURPOSE
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may now or hereafter be organized under the
General Corporation Law of Delaware.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Shares and Classes Authorized. The total number
of shares of all classes of capital stock which the Corporation shall have
authority to issue is 330,000,000 shares, which shall include:
(a) 30,000,000 shares of preferred stock of no par value
each (hereinafter referred to as "Preferred Stock"); and
<PAGE> 3
3
(b) 300,000,000 shares of common stock of the par value
of $1.00 each (hereinafter referred to as "Common Stock");
such classes of Preferred Stock and Common Stock being sometimes hereinafter
collectively referred to as "capital stock".
SECTION 2. Preferences, Rights, Limitations and Restrictions
of Capital Stock. The designations and the powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, in respect of the
classes of the capital stock, and the authority with respect thereto expressly
vested in the Board of Directors of the Corporation, are as follows:
PART I -- PREFERRED STOCK (a) The Preferred Stock may be
issued either as a class without series or, if so determined by the Board of
Directors of the Corporation, from time to time in one or more series and with
such designation for such class or each such series as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
class or each such series adopted by the Board of Directors. The Board of
Directors in any such resolution or resolutions is expressly authorized to
state and express for such class or each such series:
(i) Voting rights, if any, including, without limitation, the
authority to confer multiple votes per share, voting rights as to
specified matters or issues or, subject to the provisions of this
Restated Certificate of Incorporation, voting rights to be exercised
either together with holders of Common Stock as a single class, or
independently as a separate class;
(ii) The rate per annum and the times at and conditions upon
which the holders of shares of such class or series shall be entitled
to receive dividends, the conditions and dates upon which such
dividends shall be payable and whether such dividends shall be
cumulative or noncumulative, and, if cumulative, the terms upon which
such dividends shall be cumulative;
(iii) Redemption, repurchase, retirement and sinking fund
rights, preferences and limitations, if any, the amount payable on
shares of such class or series in the event of such redemption,
repurchase or retirement, the terms and conditions of any sinking
fund, the manner of creating such fund or funds and whether any of the
foregoing shall be cumulative or noncumulative;
<PAGE> 4
4
(iv) The rights to which the holders of the shares of such
class or series shall be entitled upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(v) The terms, if any, upon which the shares of such class or
series shall be convertible into, or exchangeable for, shares of stock
of any other class or classes or of any other series of the same or
any other class or classes, including the price or prices or the rate
or rates of conversion or exchange and the terms of adjustment, if
any; and
(vi) Any other designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof so far as they are not
inconsistent with the provisions of this Restated Certificate of
Incorporation and to the full extent now or hereafter permitted by the
laws of the State of Delaware.
(b) All shares of the Preferred Stock, if issued as a
class without series, or all shares of the Preferred Stock of any one series,
if issued in series, shall be identical to each other in all respects and shall
entitle the holders thereof to the same rights and privileges, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereon, if cumulative, shall be cumulative.
<PAGE> 5
5
Subpart A: ESOP Convertible Preferred Stock*
1. Designation and Issuance.
(A) The shares of such series shall be designated ESOP
CONVERTIBLE PREFERRED STOCK (hereinafter referred to as the "ESOP Preferred
Stock") and such series shall consist of 3,902,438 shares. Such number of
shares may be increased or decreased from time to time by resolution of the
Pricing Committee of this Board of Directors (the "Pricing Committee"), but no
such increase shall result in such series consisting of more than 4,000,000
shares, and no decrease shall reduce the number of shares of ESOP Preferred
Stock to a number less than that of shares of ESOP Preferred Stock then
outstanding plus the number of shares issuable upon exercise of any rights,
options or warrants or upon conversion of outstanding securities issued by the
Corporation relating to such shares. Any shares of ESOP Preferred Stock
redeemed or purchased by the Corporation shall remain issued and outstanding
for all purposes (except that as long as such shares are held by the
Corporation or its nominee, no dividends shall be paid on such shares and they
shall neither be entitled to vote nor counted for quorum purposes) and may
thereafter be transferred by the Corporation from time to time to a trustee or
trustees referred to in paragraph (B) of this Section 1 (whereupon the voting
and dividend rights of such shares shall be restored); provided that the
Corporation may provide at the time of or at any time after such redemption or
purchase that any such shares then held by the Corporation or its nominee shall
be retired, and such shares shall then be restored to the status of authorized
but unissued shares of preferred stock of the Corporation.
(B) Shares of ESOP Preferred Stock shall be issued only to a
trustee or trustees acting on behalf of an employee stock ownership trust or
plan or other employee benefit plan (a "Plan") of the Corporation. In the
event of any sale, transfer or other disposition (hereinafter a "transfer") of
shares of ESOP Preferred Stock to any person (including, without limitation,
any participant in the Plan) other than (x) any trustee or trustees of the Plan
or (y) any pledgee of such shares acquiring such shares as security for any
loan or
- --------------------
* Terms defined in this Subpart A are so defined for purposes of this
Subpart alone.
<PAGE> 6
6
loans made to the Plan or to any trustee or trustees acting on behalf of the
Plan, the shares of ESOP Preferred Stock so transferred, upon such transfer and
without any further action by the Corporation or the holder, shall be
automatically converted into shares of Common Stock at the Conversion Price (as
hereinafter defined) and on the terms otherwise provided for the conversion of
shares of ESOP Preferred Stock into shares of Common Stock pursuant to Section
5 hereof and no such transferee shall have any of the voting powers,
preferences and relative, participating, optional or special rights ascribed to
shares of ESOP Preferred Stock hereunder, but, rather, only the powers and
rights pertaining to the Common Stock into which such shares of ESOP Preferred
Stock shall be so converted; provided, however, that in the event of a
foreclosure or other realization upon shares of ESOP Preferred Stock pledged as
security for any loan or loans made to the Plan or to the trustee or the
trustees acting on behalf of the Plan, the pledged shares so foreclosed or
otherwise realized upon shall be converted automatically into shares of Common
Stock at the Conversion Price and on the terms otherwise provided for
conversions of shares of ESOP Preferred Stock into shares of Common Stock
pursuant to Section 5 hereof. In the event of such a conversion, such
transferee shall be treated for all purposes as the record holder of the shares
of Common Stock into which the ESOP Preferred Stock shall have been converted
as of the date of such conversion. Certificates representing shares of ESOP
Preferred Stock shall be legended to reflect such restrictions on transfer.
Notwithstanding the foregoing provisions of this Section 1, shares of ESOP
Preferred Stock (i) may be converted into shares of Common Stock as provided by
Section 5 hereof and the shares of Common Stock issued upon such conversion may
be transferred by the holder thereof as permitted by law and (ii) shall be
redeemable by the Corporation upon the terms and conditions provided by
Sections 6, 7 and 8 hereof.
2. Dividends and Distributions.
(A) (1) Subject to the provisions for adjustment
hereinafter set forth, the holders of shares of ESOP Preferred Stock (other
than the Corporation or its nominee) shall be entitled to receive, when and as
declared by the Board of Directors out of funds legally available therefor,
cash dividends ("Preferred Dividends") payable in accordance with either of the
following elections, as the Board of Directors shall elect from time to time in
its absolute discretion:
<PAGE> 7
7
(i) in an amount per share initially equal to $2.78 per
share per annum, and no more (such amount, as adjusted from time to
time pursuant to the terms hereof, including during any period in
which a Semiannual Payment Election (as defined below) shall be in
effect, the "Annual Dividend Rate"), payable annually in arrears on
December 31 (or such later date not more than four business days
thereafter as the Board of Directors may from time to time elect in
its absolute discretion; such date, the "Annual Payment Date") of each
year (such election, the "Annual Payment Election") beginning on the
Annual Payment Date occurring immediately after the effective date of
such Annual Payment Election; or
(ii) in an amount per share initially equal to $2.78 per share
per annum, and no more (such amount, as adjusted from time to time
pursuant to the terms hereof, including during any period in which an
Annual Payment Election is in effect, the "Semiannual Dividend Rate";
and the Semiannual Dividend Rate and the Annual Dividend Rate, as in
effect at any time, are each hereinafter referred to as the "Preferred
Dividend Rate"), semiannually in arrears, one-half on each June 30 and
December 31 (or, in either case, such later date not more than four
business days after either of such dates as the Board of Directors may
from time to time elect in its absolute discretion; such dates, the
"Semiannual Payment Dates") of each year (such election, the
"Semiannual Payment Election"), beginning on the Semiannual Payment
Date occurring immediately after the effective date of such Semiannual
Payment Election;
provided that any Semiannual Payment Election shall be made effective only
during the period beginning on January 5 and ending on June 29 in each year.
The Board of Directors shall give prompt notice to the holders of the ESOP
Preferred Stock of any Semiannual Payment Election or Annual Payment Election
and any election to alter any Dividend Payment Date pursuant to this Section
2(A)(1). Each Annual Payment Date or Semiannual Payment Date, as applicable,
is hereinafter referred to as a "Dividend Payment Date", and each payment of a
Preferred Dividend shall be made to holders of record at the opening of
business on such Dividend Payment Date.
(2) Preferred Dividends shall begin to accrue on
outstanding shares of ESOP Preferred Stock from the date of issuance of such
shares, except that with respect to any shares of ESOP Preferred Stock redeemed
or purchased by the Corporation and then reissued, Preferred Dividends shall
<PAGE> 8
8
accrue on such shares from their date of reissuance. Preferred Dividends shall
accrue on a daily basis, whether or not the Corporation shall then have
earnings or surplus (computed on the basis of a 360-day year of twelve 30-day
months in case of any period less than one year) based on the Preferred
Dividend Rate in effect on such date; provided that if a Semiannual Payment
Election or an Annual Payment Election becomes effective on or after such date
and before the immediately succeeding Dividend Payment Date, payments in
respect of dividends on the ESOP Preferred Stock made on or after the effective
date of such Semiannual Payment Election or Annual Payment Election and on or
before such Dividend Payment Date shall be computed using the Preferred
Dividend Rate in effect on the date of such payment. Accrued but unpaid
Preferred Dividends shall cumulate as of the Dividend Payment Date on which
they first become payable, but no interest shall accrue on accumulated but
unpaid Preferred Dividends.
(B) So long as any shares of ESOP Preferred Stock shall be
outstanding, no dividend shall be declared or paid or set apart for payment on
any other series of stock ranking on a parity with the ESOP Preferred Stock as
to dividends, unless there shall also be or have been declared and paid or set
apart for payment on the ESOP Preferred Stock, like dividends for all dividend
payment periods of the ESOP Preferred Stock ending on or before the dividend
payment date of such parity stock, ratably in proportion to the respective
amounts of dividends (1) accumulated and unpaid or payable on such parity
stock, on the one hand, and (2) accumulated and unpaid through the dividend
payment period or periods of the ESOP Preferred Stock next preceding such
dividend payment date, on the other hand. If full cumulative dividends on the
ESOP Preferred Stock have not been declared and paid or set apart for payment
when due, the Corporation shall not declare or pay or set apart for payment any
dividends or make any other distributions on, or make any payment on account of
the purchase, redemption or other retirement of, any other class of stock or
series thereof of the Corporation ranking, as to dividends or upon dissolution,
junior to the ESOP Preferred Stock until full cumulative dividends on the ESOP
Preferred Stock shall have been paid or declared and set apart; provided,
however, that the foregoing shall not apply to (i) any dividend or distribution
payable solely in any shares of, or options, warrants or rights to subscribe
for or purchase shares of, any stock ranking, as to dividends and upon
dissolution, junior to the ESOP Preferred Stock or (ii) the acquisition of
shares of any stock ranking, as to dividends and upon dissolution, junior to
the ESOP Preferred Stock in
<PAGE> 9
9
exchange solely for or by conversion solely into shares of any other stock
ranking junior to the ESOP Preferred Stock as to dividends and upon
dissolution.
(C) Any dividend payment made on shares of ESOP Preferred
Stock shall first be credited against the earliest accumulated but unpaid
dividend due with respect to such shares.
3. Liquidation Preference.
(A) In the event of any dissolution or liquidation of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of any series or class or classes
of stock of the Corporation ranking junior to ESOP Preferred Stock upon
dissolution or liquidation, the holders of ESOP Preferred Stock (other than the
Corporation or its nominee) shall be entitled to receive the Liquidation Price
(as hereinafter defined) per share in effect at the time of dissolution or
liquidation plus an amount equal to all dividends accrued (whether or not
accumulated) and unpaid on the ESOP Preferred Stock to the date of final
distribution to such holders; but such holders shall not be entitled to and
shall not otherwise receive any further payments. The Liquidation Price per
share that holders of ESOP Preferred Stock shall receive upon dissolution or
liquidation shall be $35.875, subject to adjustment as hereinafter provided.
If, upon any dissolution or liquidation of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of ESOP
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares ranking, as to
dissolution or liquidation, on a parity with ESOP Preferred Stock, then such
assets, or the proceeds thereof, shall be distributed among the holders of ESOP
Preferred Stock and any such other shares ratably in accordance with the
respective amounts that would be payable on such shares of ESOP Preferred Stock
and any such other shares if all amounts payable thereon were paid in full.
For the purposes of this Section 3, neither a consolidation or merger of the
Corporation with or into one or more corporations, nor the sale, transfer,
lease or exchange (for cash, shares of equity stock, securities or other
consideration) of all or substantially all of the assets of the Corporation,
nor the distribution to the stockholders of the Corporation of all or
substantially all of the consideration for such sale, unless such consideration
(apart from assumption of liabilities) or the net proceeds
<PAGE> 10
10
thereof consists substantially entirely of cash, shall be deemed to be a
dissolution or liquidation, voluntary or involuntary.
(B) Subject to the rights of the holders of shares of any
series or class or classes of stock ranking on a parity with or senior to ESOP
Preferred Stock upon dissolution or liquidation, upon any dissolution or
liquidation of the Corporation, after payment shall have been made in full to
the holders of ESOP Preferred Stock as provided in this Section 3, but not
prior thereto, any other series or class or classes of stock ranking junior to
ESOP Preferred Stock upon dissolution or liquidation shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets of the Corporation remaining to be paid or
distributed, and the holders of ESOP Preferred Stock shall not be entitled to
share therein.
4. Ranking and Voting of Shares.
(A) The Corporation's 9.36% Cumulative Preferred Stock, with
a liquidation value of $25.00 per share, the Corporation's 8.88% Cumulative
Preferred Stock, with a liquidation value of $200.00 per share, and the
Corporation's 8-3/4% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share, shall rank on a parity with ESOP Preferred Stock as to
dividends and as to distribution of assets upon dissolution or liquidation.
Unless otherwise provided in the Restated Certificate of
Incorporation of the Corporation, as the same may be amended, or in a
Certificate of Designation of Rights and Preferences relating to any subsequent
series of preferred stock, the ESOP Preferred Stock shall rank on a parity with
all series of the Corporation's preferred stock as to dividends and as to the
distribution of assets upon dissolution or liquidation.
(B) The holders of shares of ESOP Preferred Stock (other
than the Corporation or its nominee) shall have the following voting rights:
(1) The holders of ESOP Preferred Stock shall be entitled
to vote on all matters submitted to a vote of the stockholders of the
Corporation, voting together with the holders of Common Stock as one class.
The holder of each share of ESOP Preferred Stock shall be entitled to a number
of votes equal to 1.35 times the number of shares of Common
<PAGE> 11
11
Stock into which such share of ESOP Preferred Stock could be converted on the
record date for determining the stockholders entitled to vote; it being
understood that whenever the "Conversion Price" (as defined in Section 5
hereof) is adjusted as provided in Section 9 hereof, the number of votes of the
ESOP Preferred Stock shall also be correspondingly adjusted. Notwithstanding
the immediately preceding sentence, if the governing body of the New York Stock
Exchange or any other securities listing service or exchange (each, an
"Exchange") or any relevant governmental or regulatory entity (each such
entity, and each governing body of an Exchange, a "Regulating Entity") shall
have disapproved of such voting power or taken or threatened any action against
the Corporation or in respect of any of its securities in accordance with Rule
19c-4 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), or any other rule or listing standard of any Regulating Entity regarding
the voting power of securities, or if the Board of Directors determines in its
sole judgment that any Regulating Entity may so disapprove or take or threaten
any such action, the holder of each share of ESOP Preferred Stock shall be
entitled to a maximum number of votes permissible (consistent with continued
listing of the Corporation's securities on any such Exchange) in accordance
with the interpretations of any such rule or listing standard by such
Regulating Entity, as determined by the Board of Directors.
(2) Except as otherwise required by law or set forth herein,
holders of ESOP Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for the taking of any
corporate action, including the issuance of any preferred stock now or
hereafter authorized; provided, however, that the vote of at least 66-2/3% of
the outstanding shares of ESOP Preferred Stock, voting separately as a series,
shall be necessary to approve any alteration, amendment or repeal of any
provision of the Restated Certificate of Incorporation or any alteration,
amendment or repeal of any provision of the resolutions relating to the
designation, preferences and rights of ESOP Preferred Stock (including any such
alteration, amendment or repeal effected by any merger or consolidation in
which the Corporation is the surviving or resulting corporation, but not
including any alteration or amendment of rights expressly provided for in
Section (B)(1) above or in Section 2(A)(1)), if such amendment, alteration or
repeal would alter or change the powers, preferences, or special rights of the
ESOP Preferred Stock so as to affect them adversely.
<PAGE> 12
12
5. Conversion into Common Stock.
(A) A holder of shares of ESOP Preferred Stock shall be
entitled, at any time prior to the close of business on the date fixed for
redemption of such shares pursuant to Section 6, 7 or 8 hereof, to cause any or
all of such shares to be converted into shares of Common Stock. The number of
shares of Common Stock into which each share of the ESOP Preferred Stock may be
converted shall be determined by dividing the Liquidation Price in effect at
the time of conversion by the Conversion Price (as hereinafter defined) in
effect at the time of conversion. The initial Conversion Price per share at
which shares of Common Stock shall be issuable upon conversion of any shares of
ESOP Preferred Stock shall be $35.875, subject to adjustment as hereinafter
provided; that is, a conversion rate initially equivalent to one share of
Common Stock for each share of ESOP Preferred Stock, which is subject to
adjustment as hereinafter provided.
(B) Any holder of shares of ESOP Preferred Stock desiring to
convert such shares into shares of Common Stock shall surrender, if
certificated, the certificate or certificates representing the shares of ESOP
Preferred Stock being converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto), or
if uncertificated, a duly executed stock power relating thereto, at the
principal executive office of the Corporation or the offices of the transfer
agent for the ESOP Preferred Stock or such office or offices in the continental
United States of an agent for conversion as may from time to time be designated
by notice to the holders of the ESOP Preferred Stock by the Corporation or the
transfer agent for the ESOP Preferred Stock, accompanied by written notice of
conversion. Such notice of conversion shall specify (i) the number of shares
of ESOP Preferred Stock to be converted and the name or names in which such
holder wishes the Common Stock and any shares of ESOP Preferred Stock not to be
so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of a confirmation of such conversion, if uncertificated, or
any new certificates which may be issued upon such conversion, if certificated.
(C) Upon surrender, if certificated, of a certificate
representing a share or shares of ESOP Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the
Corporation shall issue and send by hand delivery (with receipt to be
acknowledged) or by first class mail, postage prepaid, to the
<PAGE> 13
13
holder thereof or to such holder's designee, at the address designated by such
holder, if certificated, a certificate or certificates for, or if
uncertificated, confirmation of, the number of shares of Common Stock to which
such holder shall be entitled upon conversion. If there shall have been
surrendered shares of ESOP Preferred Stock only part of which are to be
converted, the Corporation shall issue and deliver to such holder or such
holder's designee, if certificated, a new certificate or certificates
representing the number of shares of ESOP Preferred Stock that shall not have
been converted, or if uncertificated, confirmation of the number of shares of
ESOP Preferred Stock that shall not have been converted.
(D) The issuance by the Corporation of shares of Common
Stock upon a conversion of shares of ESOP Preferred Stock into shares of Common
Stock made at the option of the holder thereof shall be effective as of the
earlier of (i) the delivery to such holder or such holder's designee of the
certificates representing the shares of Common Stock issued upon conversion
thereof, if certificated, or confirmation, if uncertificated, and (ii) the
commencement of business on the second business day after the surrender of the
certificate or certificates, if certificated, or a duly executed stock power,
if uncertificated, for the shares of ESOP Preferred Stock to be converted. On
and after the effective date of conversion, the person or persons entitled to
receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, and no
allowance or adjustment shall be made in respect of dividends payable to
holders of Common Stock of record on any date prior to such effective date.
The Corporation shall not be obligated to pay any dividend that may have
accrued or have been declared but that is not payable to holders of shares of
ESOP Preferred Stock if the Dividend Payment Date for such dividend is on or
subsequent to the effective date of conversion of such shares.
(E) The Corporation shall not be obligated to deliver to
holders of ESOP Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of ESOP Preferred Stock, but in
lieu thereof may make a cash payment in respect thereof in any manner permitted
by law.
(F) The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock or treasury Common
Stock, solely for issuance upon the conversion of shares of ESOP Preferred
Stock as herein
<PAGE> 14
14
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of ESOP Preferred Stock then
outstanding.
6. Redemption at the Option of the Corporation.
(A) The ESOP Preferred Stock shall be redeemable, in whole or in
part, at the option of the Corporation at any time after September 19, 2000,
out of funds legally available therefor, at a redemption price per share equal
to 100% of the Liquidation Price plus an amount equal to all accrued (whether
or not accumulated) and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Corporation
in cash or shares of Common Stock, or a combination thereof, as permitted by
paragraph (E) of this Section 6. From and after the date fixed for redemption,
dividends on shares of ESOP Preferred Stock called for redemption will cease to
accrue and all rights of the holder in respect of such shares shall cease,
except the right to receive the redemption price. Upon payment of the
redemption price, such shares shall be deemed to have been transferred to the
Corporation, to be held as treasury shares or to be retired, in either case as
provided in Section 1(A). If less than all of the outstanding shares of ESOP
Preferred Stock are to be redeemed, the Corporation shall either redeem a
portion of the shares of each holder determined pro rata based on the number of
shares held by each holder or shall select the shares to be redeemed by lot, as
may be determined by the Board of Directors of the Corporation.
(B) Notice of redemption will be sent to the holders of ESOP
Preferred Stock at the address shown on the books of the Corporation or any
transfer agent for ESOP Preferred Stock by first class mail, postage prepaid,
mailed not less than twenty (20) days nor more than sixty (60) days prior to the
redemption date or in any other manner provided by law. Each notice shall
state: (i) the redemption date; (ii) the total number of shares of ESOP
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates, if certificated, for such shares are to be surrendered for
payment of the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date; (vi) whether such
redemption price should be paid in cash or in shares of Common Stock; and (vii)
the conversion rights of the shares to be redeemed, the period within which
conversion
<PAGE> 15
15
rights may be exercised and the Conversion Price and number of shares of Common
Stock issuable upon conversion of a share of ESOP Preferred Stock at the time.
Upon surrender of the certificates, if certificated, for any shares so called
for redemption, or upon the date fixed for redemption, if uncertificated, such
shares, if not previously converted, shall be redeemed by the Corporation as of
the close of business on the date fixed for redemption and at the redemption
price set forth in this Section 6.
(C) The Corporation may, in its sole discretion and
notwithstanding anything to the contrary in paragraph (A) of this Section 6, at
any time within one year after either of the following events:
(i) there shall be a change in the federal tax law or
regulations of the United States of America or of an interpretation or
application of such law or regulations or of a determination by a
court of competent jurisdiction that in any case has the effect of
precluding the Corporation from claiming (other than for purposes of
calculating any alternative minimum tax) any of the tax deductions for
dividends paid on the ESOP Preferred Stock when such dividends are
used as provided under Section 404(k)(2) of the Internal Revenue Code
of 1986, as amended (the "Code"), as in effect on the date shares of
ESOP Preferred Stock are initially issued, or
(ii) the Corporation shall certify to the holders of the ESOP
Preferred Stock that the Corporation has determined in good faith that
the Plan either is not qualified as a "stock bonus plan" within the
meaning of Section 401(a) of the Code or is not an "employee stock
ownership plan" within the meaning of Section 4975(e)(7) of the Code,
elect either to (a) redeem, out of funds legally available therefor, any or all
of such ESOP Preferred Stock for cash or, if the Corporation so elects, in
shares of Common Stock, or a combination of such shares of Common Stock and
cash, as permitted by paragraph (E) of this Section 6, at a redemption price
equal to (x) if the relevant event is as provided in clause (i) above, the
Liquidation Price per share on the date fixed for redemption, plus an amount
equal to accrued (whether or not accumulated) and unpaid dividends thereon to
the date fixed for redemption or (y) if the relevant event is as provided in
clause (ii) above, an amount calculated on the basis of the redemption prices
provided in paragraph (D) of this Section 6 on the date fixed for redemption or
(b)
<PAGE> 16
16
exchange any or all of such shares of ESOP Preferred Stock for securities of at
least equal value (as determined by an independent appraiser) that constitute
"qualifying employer securities" with respect to a holder of ESOP Preferred
Stock within the meaning of Section 409(1) of the Code and Section 407(d)(5) of
the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), or
any successor provisions of law. If the Corporation elects to redeem any or
all of the ESOP Preferred Stock pursuant to clause (a) of the preceding
sentence, notice of such redemption shall be given as required in paragraph (B)
of this Section 6, and if the Corporation elects to exchange any or all of the
ESOP Preferred Stock for securities of at least equal value pursuant to clause
(b) of the preceding sentence, it will cause notice of such election to be sent
to the holders of ESOP Preferred Stock at the address shown on the books of the
Corporation or any transfer agent for ESOP Preferred Stock by first class mail,
postage prepaid, mailed not less than twenty (20) days nor more than sixty (60)
days prior to the date of exchange or in any other manner required by law.
Each notice shall state: (i) the exchange date; (ii) the total number of
shares of ESOP Preferred Stock to be exchanged and, if fewer than all the
shares held by such holder are to be exchanged, the number of shares held by
such holder to be exchanged; (iii) the exchange rate; (iv) the place or places
where certificates, if certificated, for such shares are to be surrendered for
exchange; and (v) that dividends on the shares to be exchanged will cease to
accrue on such exchange date.
(D) Notwithstanding anything to the contrary in paragraph (A)
of this Section 6, in the event that the Plan is, or contributions thereto are,
terminated, the Corporation may, in its sole discretion, call for redemption
any or all of the then outstanding ESOP Preferred Stock, upon notice as
required in paragraph (B) of this Section 6, out of funds legally available
therefor, at a redemption price per share equal to the following percentages of
the Liquidation Price in effect on the date fixed for redemption:
<PAGE> 17
17
<TABLE>
<CAPTION>
During the Twelve-
Month Period Percentage of
Beginning September 19, Liquidation Price
----------------------- -----------------
<S> <C>
1991 106.98
1992 106.20
1993 105.43
1994 104.65
1995 103.88
1996 103.10
1997 102.33
1998 101.55
1999 100.78
2000 100.00
</TABLE>
and thereafter at 100%, plus, in each case, an amount equal to all accrued
(whether or not accumulated) and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Corporation
in cash or shares of Common Stock, or a combination thereof, as permitted by
paragraph (E) of this Section 6. From and after the date fixed for redemption,
dividends on shares of ESOP Preferred Stock called for redemption will cease to
accrue and all rights of the holder in respect of such shares shall cease,
except the right to receive the redemption price. Upon payment of the
redemption price, such shares shall be deemed to have been transferred to the
Corporation, to be held as treasury shares or to be retired, in either case as
provided in Section 1(A).
(E) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of ESOP Preferred Stock
in cash or in shares of Common Stock, or in a combination of such shares and
cash, any such shares of Common Stock to be valued for such purpose at their
Fair Market Value (as defined in paragraph 9(H)(2)); provided, however, that in
calculating their Fair Market Value the Adjustment Period (as defined in
paragraph 9(H)(2)) shall be deemed to be the five (5) consecutive trading days
preceding the date of redemption.
7. Redemption at the Option of the Holder.
(A) Unless otherwise provided by law, shares of ESOP
Preferred Stock shall be redeemed by the Corporation at the option of the
holder, at any time and from time to time upon notice to the Corporation given
not less than five business days prior to the date fixed by the holder in such
notice, when and to the extent necessary for such holder to
<PAGE> 18
18
provide for distributions required to be made under, or to satisfy an
investment election provided to participants in accordance with, the Plan or
any successor plan or when the holder elects to redeem shares of ESOP Preferred
Stock in connection with any Preferred Dividend (a "Dividend Redemption"), in
shares of Common Stock legally available therefor, at a redemption price equal
to the higher of (x) the Liquidation Price per share on the date fixed for
redemption and (y) the Fair Market Value (as defined in paragraph 9(H)(2)) of
the number of shares of Common Stock into which each share of ESOP Preferred
Stock is convertible at the time the notice of such redemption is given, plus
in either case an amount equal to accrued (whether or not accumulated) and
unpaid dividends thereon to the date fixed for redemption (such higher price on
any date, together with such accrued and unpaid dividends, the "Special
Redemption Price"). At the election of the Corporation, such redemption may
instead be made out of funds legally available therefor in cash or a
combination of Common Stock and cash. Any shares of Common Stock shall be
valued for the purposes of redemption pursuant to this paragraph (A) as
provided by paragraph (E) of Section 6. In the case of any Dividend
Redemption, such holder shall give the notice specified above on the fifth
business day after the related Dividend Payment Date and such redemption shall
be effective as to such number of shares of ESOP Preferred Stock as shall equal
(x) the aggregate amount of such Preferred Dividends paid with respect to
shares of ESOP Preferred Stock allocated or credited to the accounts of
participants in the Plan or any successor plan that are used to repay any loan
associated with such allocated or credited shares divided by (y) the Special
Redemption Price specified above in this paragraph (A).
(B) Unless otherwise provided by law, shares of ESOP
Preferred Stock shall be redeemed by the Corporation at the option of the
holder, at any time and from time to time upon notice to the Corporation given
not less than five business days prior to the date fixed by the holder in such
notice, upon certification by such holder to the Corporation of the following
events: (i) when and to the extent necessary for such holder to make any
payments of principal, interest or premium due and payable (whether voluntary,
scheduled, upon acceleration or otherwise) upon any obligations of the trust
established under the Plan in connection with the acquisition of ESOP Preferred
Stock or any indebtedness, expenses or costs incurred by the holder for the
benefit of the Plan; or (ii) when and if it shall be established to the
satisfaction of the holder that the Plan
<PAGE> 19
19
has not initially been determined by the Internal Revenue Service to be
qualified as a "stock bonus plan" and an "employee stock ownership plan" within
the meaning of Section 401(a) or 4975(e)(7) of the Code, respectively, in
shares of Common Stock legally available therefor, at a redemption price equal
to the Liquidation Price plus an amount equal to accrued and unpaid dividends
thereon to the date fixed for redemption. At the election of the Corporation,
such redemption may instead be made out of funds legally available therefor in
cash or a combination of Common Stock and cash. Any shares of Common Stock
shall be valued for the purposes of redemption pursuant to this paragraph (B)
as provided by paragraph (E) of Section 6.
8. Consolidation, Merger, etc.
(A) If the Corporation shall consummate any consolidation or merger
or similar transaction, however named, pursuant to which the outstanding shares
of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into securities of any successor or resulting
company (including the Corporation) that constitute "qualifying employer
securities" with respect to a holder of ESOP Preferred Stock within the
meanings of Section 409(l) of the Code and Section 407(d)(5) of ERISA, or any
successor provision of law, and, if applicable, for a cash payment in lieu of
fractional shares, if any, then, in such event, the terms of such consolidation
or merger or similar transaction shall provide that the shares of ESOP
Preferred Stock of such holder shall be converted into or exchanged for and
shall become preferred securities of such successor or resulting company,
having in respect of such company insofar as possible (taking into account,
without limitation, any requirements relating to the listing of such preferred
securities on any national securities exchange or the qualification of such
preferred securities for trading in any over-the-counter market) the same
powers, preferences and relative, participating, optional or other special
rights (including the redemption rights provided by Sections 6, 7 and 8
hereof), and the qualifications, limitations or restrictions thereon, that the
ESOP Preferred Stock had immediately prior to such transaction; provided,
however, that after such transaction each security into which the ESOP
Preferred Stock is so converted or for which it is exchanged shall be
convertible, pursuant to the terms and conditions provided by Section 5 hereof,
into the number and kind of qualifying employer securities receivable by a
holder equivalent to the number of shares of Common Stock into which such
shares of ESOP
<PAGE> 20
20
Preferred Stock could have been converted pursuant to Section 5 hereof
immediately prior to such transaction and provided further that if by virtue of
the structure of such transaction, a holder of Common Stock is required to make
an election with respect to the nature and kind of consideration to be received
in such transaction, which election cannot practicably be made by the holders
of the ESOP Preferred Stock, then such election shall be deemed to be solely
for "qualifying employer securities" (together, if applicable, with a cash
payment in lieu of fractional shares) with the effect provided above on the
basis of the number and kind of qualifying employer securities receivable by a
holder of the number of shares of Common Stock into which the shares of ESOP
Preferred Stock could have been converted pursuant to Section 5 hereof
immediately prior to such transaction (it being understood that if the kind or
amount of qualifying employer securities receivable in respect of each share of
Common Stock upon such transaction is not the same for each such share, then
the kind and amount of qualifying employer securities deemed to be receivable
in respect of each share of Common Stock for purposes of this proviso shall be
the kind and amount so receivable per share of Common Stock by a plurality of
such shares). The rights of the ESOP Preferred Stock as preferred equity of
such successor or resulting company shall successively be subject to
adjustments pursuant to Section 9 hereof after any such transaction as nearly
equivalent as practicable to the adjustments provided for by such Section prior
to such transaction. The Corporation shall not consummate any such merger,
consolidation or similar transaction unless all the terms of this paragraph (A)
are complied with.
(B) If the Corporation shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other shares or securities or cash or any other
property, or any combination thereof, other than any such consideration which
is constituted solely of qualifying employer securities that are common stock
or common equity (as referred to in paragraph (A) of this Section 8) and cash
payments, if applicable, in lieu of fractional shares or other interests,
outstanding shares of ESOP Preferred Stock shall, without any action on the
part of the Corporation or any holder thereof (but subject to paragraph (C) of
this Section 8), be automatically converted immediately prior to the
consummation of such merger, consolidation or similar transaction into shares
of Common Stock at the Conversion Price then in effect.
<PAGE> 21
21
(C) If the Corporation shall enter into any agreement providing
for any consolidation or merger or similar transaction described in paragraph
(B) of this Section 8, then the Corporation shall as soon as practicable
thereafter (and in any event at least ten (10) business days before
consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of ESOP Preferred Stock and each such
holder shall have the right to elect, by written notice to the Corporation, to
receive, upon consummation of such transaction (if and when such transaction
is consummated), out of funds legally available therefor, from the Corporation
or the successor of the Corporation, in redemption of such ESOP Preferred
Stock, in lieu of any cash or other securities which such holder would
otherwise be entitled to receive under paragraph (B) of this Section 8, a cash
payment equal to the Liquidation Price per share on the date fixed for such
transaction, plus an amount equal to accrued (whether or not accumulated) and
unpaid dividends thereon to the date fixed for such transaction. No such
notice of redemption shall be effective unless given to the Corporation prior
to the close of business of the fifth business day prior to consummation of
such transaction, unless the Corporation or the successor of the Corporation
shall waive such prior notice, but any notice or redemption so given prior to
such time may be withdrawn by notice of withdrawal given to the Corporation
prior to the close of business on the fifth business day prior to consummation
of such transaction.
9. Anti-dilution Adjustments.
(A) (1) Subject to the provisions of paragraphs (E) and (F)
of this Section 9, in the event the Corporation shall, at any time or from time
to time while any of the shares of the ESOP Preferred Stock are outstanding,
(i) pay a dividend or make a distribution in respect of the Common Stock in
shares of Common Stock or (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares, in each case whether by reclassification of
shares, recapitalization of the Corporation (excluding a recapitalization or
reclassification effected by a merger or consolidation to which Section 8
applies) or otherwise, then, in such event, the Board of Directors shall, to
the extent legally permissible, declare a dividend in respect of the ESOP
Preferred Stock in shares of ESOP Preferred Stock (a "Special Dividend") in
such a manner that a holder of ESOP Preferred Stock will become a holder of
that number of shares of ESOP Preferred Stock equal to the product of the
number of such shares held prior to such event times a fraction (the
<PAGE> 22
22
"Section 9(A) Fraction"), the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock outstanding immediately before
such event. A Special Dividend declared pursuant to this Section 9(A)(1) shall
be effective, upon payment of such dividend or distribution in respect of the
Common Stock, as of the record date for the determination of stockholders
entitled to receive such dividend or distribution (on a retroactive basis), and
in the case of a subdivision shall become effective immediately as of the
effective date thereof. Concurrently with the declaration of the Special
Dividend pursuant to this paragraph 9(A)(1), the Conversion Price, the
Liquidation Price and the Preferred Dividend Rate of all shares of ESOP
Preferred Stock shall be adjusted by dividing the Conversion Price, the
Liquidation Price and the Preferred Dividend Rate, respectively, in effect
immediately before such event by the Section 9(A) Fraction.
(2) Subject to the provisions of paragraphs (E) and (F) of this
Section 9, in the event the Corporation shall, at any time or from time to time
while any of the shares of the ESOP Preferred Stock are outstanding, combine
the outstanding shares of Common Stock into a lesser number of shares, whether
by reclassification of shares, recapitalization of the Corporation (excluding a
recapitalization or reclassification effected by a merger, consolidation or
other transaction to which Section 8 applies) or otherwise, then, in such
event, the Conversion Price shall automatically be adjusted by dividing the
Conversion Price in effect immediately before such event by the Section 9(A)
Fraction and the Liquidation Price and the Preferred Dividend Rate will not be
adjusted. An adjustment to the Conversion Price made pursuant to this
paragraph 9(A)(2) shall be given effect immediately as of the effective date of
such combination.
(B) Subject to the provisions of paragraphs (E) and (F) of this
Section 9, in the event the Corporation shall, at any time or from time to time
while any of the shares of ESOP Preferred Stock are outstanding, issue to
holders of shares of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of the Corporation,
any right or warrant to purchase shares of Common Stock (but not including as a
right or warrant for this purpose any security convertible into or exchangeable
for shares of Common Stock) for a consideration having a Fair Market Value (as
hereinafter defined) per share less than the Fair Market Value of a share of
Common Stock on the date of issuance of such right or warrant (other than
pursuant to any
<PAGE> 23
23
employee or director incentive, compensation or benefit plan or arrangement of
the Corporation or any subsidiary of the Corporation heretofore or hereafter
adopted), then, in such event, the Board of Directors shall, to the extent
legally permissible, declare a Special Dividend in such a manner that a holder
of ESOP Preferred Stock will become a holder of that number of shares of ESOP
Preferred Stock equal to the product of the number of such shares held prior to
such event times a fraction (the "Section 9(B) Fraction"), the numerator of
which is the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Common
Stock that could be acquired upon exercise in full of all such rights and
warrants and the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance of warrants or rights plus the
number of shares of Common Stock that could be purchased at the Fair Market
Value of a share of Common Stock at the time of such issuance for the maximum
aggregate consideration payable upon exercise in full of all such rights and
warrants. A Special Dividend declared pursuant to this Section 9(B) shall be
effective upon such issuance of rights or warrants. Concurrently with the
declaration of the Special Dividend pursuant to this Section 9(B), the
Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all
shares of ESOP Preferred Stock shall be adjusted by dividing the Conversion
Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in
effect immediately before such event by the Section 9(B) Fraction.
(C) (1) Subject to the provisions of paragraphs (E) and (F) of
this Section 9, in the event the Corporation shall, at any time or from time to
time while any of the shares of ESOP Preferred Stock are outstanding, issue,
sell or exchange shares of Common Stock (other than pursuant to (x) any right or
warrant to purchase or acquire shares of Common Stock (including as such a
right or warrant any security convertible into or exchangeable for shares of
Common Stock) or (y) any employee or director incentive, compensation or
benefit plan or arrangement of the Corporation or any subsidiary of the
Corporation heretofore or hereafter adopted) at a purchase price per share less
than the Fair Market Value of a share of Common Stock on the date of such
issuance, sale or exchange, then, in such event, the Board of Directors shall,
to the extent legally permissible, declare a Special Dividend in such a manner
that a holder of ESOP Preferred Stock will become the holder of that number of
shares of ESOP Preferred Stock equal to the product of the number of such
shares held prior to such event times a
<PAGE> 24
24
fraction (the "Section 9(C)(1) Fraction"), the numerator of which is the number
of shares of Common Stock outstanding immediately before such issuance, sale or
exchange plus the number of shares of Common Stock so issued, sold or exchanged
and the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance, sale or exchange plus the number
of shares of Common Stock that could be purchased at the Fair Market Value of a
share of Common Stock at the time of such issuance, sale or exchange for the
maximum aggregate consideration paid therefor.
(2) Subject to the provisions of paragraphs (E) and (F) of this
Section 9, in the event that the Corporation shall, at any time or from time to
time while any ESOP Preferred Stock is outstanding, issue, sell or exchange any
right or warrant to purchase or acquire shares of Common Stock (including as
such a right or warrant any security convertible into or exchangeable for
shares of Common Stock other than pursuant to (x) any employee or director
incentive, compensation or benefit plan or arrangement of the Corporation or
any subsidiary of the Corporation heretofore or hereafter adopted and (y) any
dividend or distribution on shares of Common Stock contemplated in Section
9(A)(1)) for a consideration having a Fair Market Value, on the date of such
issuance, sale or exchange, less than the Non-Dilutive Amount (as hereinafter
defined), then, in such event, the Board of Directors shall, to the extent
legally permissible, declare a Special Dividend in such a manner that a holder
of ESOP Preferred Stock will become the holder of that number of shares of ESOP
Preferred Stock equal to the product of the number of such shares held prior to
such event times a fraction (the "Section 9(C)(2) Fraction"), the numerator of
which is the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares of Common
Stock that could be acquired upon exercise in full of all such rights and
warrants and the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants plus the
number of shares of Common Stock that could be purchased at the Fair Market
Value of a share of Common Stock at the time of such issuance for the total of
(x) the maximum aggregate consideration payable at the time of the issuance,
sale or exchange of such right or warrant and (y) the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(3) A Special Dividend declared pursuant to this Section 9(C)
shall be effective upon the effective date of
<PAGE> 25
25
such issuance, sale or exchange. Concurrently with the declaration of the
Special Dividend pursuant to this Section 9(C), the Conversion Price, the
Liquidation Price and the Preferred Dividend Rate of all shares of ESOP
Preferred Stock shall be adjusted by dividing the Conversion Price, the
Liquidation Price and the Preferred Dividend Rate, respectively, in effect
immediately before such event by the Section 9(C)(1) Fraction or Section
9(C)(2) Fraction, as the case may be.
(D) Subject to the provisions of paragraphs (E) and (F) of this
Section 9, in the event the Corporation shall, at any time or from time to time
while any of the shares of ESOP Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Corporation (including capitalization or
reclassification effected by a merger or consolidation to which Section 8 does
not apply) or effect a Pro Rata Repurchase (as hereinafter defined) of Common
Stock, then, in such event, the Board of Directors shall, to the extent legally
permissible, declare a Special Dividend in such a manner that a holder of ESOP
Preferred Stock will become a holder of that number of shares of ESOP Preferred
Stock equal to the product of the number of such shares held prior to such
event times a fraction (the "Section 9(D) Fraction"), the numerator of which is
the product of (a) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution or Pro Rata Repurchase minus, in the
case of Pro Rata Repurchase, the number of shares of Common Stock repurchased
by the Corporation multiplied by (b) the Fair Market Value of a share of Common
Stock on the day before the ex-dividend date with respect to an Extraordinary
Distribution that is paid in cash and on the distribution date with respect to
an Extraordinary Distribution that is paid other than in cash, or on the
applicable expiration date (including all extensions thereof) of any tender
offer that is a Pro Rata Repurchase or on the date of purchase with respect to
any Pro Rata Repurchase that is not a tender offer, as the case may be, and the
denominator of which is (i) the product of (x) the number of shares of Common
Stock outstanding immediately before such Extraordinary Distribution or Pro
Rata Repurchase multiplied by (y) the Fair Market Value of a share of Common
Stock on the day before the ex-dividend date with respect to an Extraordinary
Distribution that is paid in cash and on the distribution date with respect to
an Extraordinary Distribution that is paid other than in cash, or on the
applicable expiration date
<PAGE> 26
26
(including all extensions thereof) of any tender offer that is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase
that is not a tender offer, as the case may be, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of the
Pro Rata Repurchase, as the case may be. The Corporation shall send each
holder of ESOP Preferred Stock (i) notice of its intent to make any
Extraordinary Distribution and (ii) notice of any offer by the Corporation to
make a Pro Rata Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated to holders of Common Stock
or, in the case of an Extraordinary Distribution, the announcement of a record
date in accordance with the rules of any stock exchange on which the Common
Stock is listed or admitted to trading. Such notice shall indicate the
intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Corporation pursuant to such
offer, as well as the Conversion Price and the number of shares of Common Stock
into which a share of ESOP Preferred Stock may be converted at such time.
Concurrently with the Special Dividend paid pursuant to this Section 9(D), the
Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all
shares of ESOP Preferred Stock shall be adjusted by dividing the Conversion
Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in
effect immediately before such Extraordinary Distribution or Pro Rata
Repurchase by the Section 9(D) Fraction.
(E) Notwithstanding any other provision of this Section 9, the
Corporation shall not be required to make (i) any Special Dividend or any
adjustment of the Conversion Price, the Liquidation Price or the Preferred
Dividend Rate unless such Special Dividend or adjustment would require an
increase or decrease of at least one percent (1%) in the number of shares of
ESOP Preferred Stock outstanding, or, (ii) if no additional shares of ESOP
Preferred Stock are issued, any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%)
in the Conversion Price. Any lesser Special Dividend or adjustment shall be
carried forward and shall be made no later than the time of, and together with,
the next subsequent Special Dividend or adjustment which, together with any
Special Dividend or Dividends, adjustment or adjustments so carried forward,
shall amount to an increase or decrease of at least one percent (1%) of the
number of shares of ESOP Preferred Stock outstanding or, if no additional
shares of ESOP Preferred Stock are being issued,
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27
an increase or decrease of at least one percent (1%) of the Conversion Price,
whichever the case may be.
(F) The Corporation and the Board of Directors shall each use its
best efforts to take all necessary steps or to take all actions as are
reasonably necessary or appropriate for declaration of any Special Dividend
provided in any of paragraphs (A), (B), (C) and (D) of this Section 9, but
shall not be required to call a special meeting of stockholders in order to
implement the provisions thereof. If for any reason the Board of Directors is
precluded from giving full effect to the Special Dividend provided in any of
such paragraphs, then no such Special Dividend shall be declared, but instead
the Conversion Price shall automatically be adjusted by dividing the Conversion
Price in effect immediately before the relevant event by the Section 9(A),
Section 9(B), Section 9(C) or Section 9(D) Fraction, as applicable, and the
Liquidation Price and the Preferred Dividend Rate will not be adjusted. An
adjustment to the Conversion Price made pursuant to this paragraph (F) shall be
given effect, (i) in the case of a payment of a dividend or distribution under
Section 9(A), upon payment thereof as of the record date for the determination
of holders entitled to receive such dividend or distribution (on a retroactive
basis), and, in the case of a subdivision under Section 9(A), immediately as of
the effective date thereof, (ii) in the case of Section 9(B), upon such
issuance of rights or warrants, (iii) in the case of Section 9(C), upon the
effective date of such issuance, sale or exchange and (iv) in the case of an
Extraordinary Dividend under Section 9(D), as of the record date for the
determination of holders entitled to receive such Extraordinary Dividend (on a
retroactive basis), and, in the case of a Pro Rata Repurchase under Section
9(D), upon the expiration date thereof (if such Pro Rata Repurchase is a tender
offer) or the effective date thereof (if such Pro Rata Repurchase is not a
tender offer). If subsequently the Board of Directors is able to give full
effect to the Special Dividend as provided in paragraph (A), (B), (C) or (D) of
this Section 9, then such Special Dividend will be declared and other
adjustments will be made in accordance with the provisions of such paragraph
and the adjustment in the Conversion Price as provided in this paragraph (F)
will automatically be reversed and nullified prospectively.
(G) If the Corporation shall make any dividend or distribution
on the Common Stock or issue any Common Stock, other capital stock or other
security of the Corporation or any rights or warrants to purchase or acquire
any such
<PAGE> 28
28
security, which transaction does not result in an adjustment to the number of
shares of ESOP Preferred Stock outstanding or the Conversion Price pursuant to
the foregoing provisions of this Section 9, the Board of Directors of the
Corporation may, in its sole discretion, consider whether such action is of
such a nature that some type of equitable adjustment should be made in respect
of such transaction. If in such case the Board of Directors of the Corporation
determines that some type of adjustment should be made, an adjustment shall be
made effective as of such date as determined by the Board of Directors of the
Corporation. The determination of the Board of Directors of the Corporation as
to whether some type of adjustment should be made pursuant to the foregoing
provisions of this Section 9(G), and, if so, as to what adjustment should be
made and when, shall be final and binding on the Corporation and all
stockholders of the Corporation. The Corporation shall be entitled, but not
required, to make such additional adjustments, in addition to those required by
the foregoing provisions of this Section 9, as shall be necessary in order that
any dividend or distribution in shares of capital stock of the Corporation,
subdivision, reclassification or combination of shares of the Corporation or
any reclassification of the Corporation shall not be taxable to holders of the
Common Stock.
(H) For purposes hereof, the following definitions shall apply:
(1) "Extraordinary Distribution" shall mean any dividend or other
distribution to holders of Common Stock (effected while any of the shares of
ESOP Preferred Stock are outstanding) of (i) cash or (ii) any shares of capital
stock of the Corporation (other than shares of Common Stock), other securities
of the Corporation (other than securities of the type referred to in paragraph
(B) of this Section 9), evidences of indebtedness of the Corporation or any
other person or any other property (including shares of any subsidiary of the
Corporation), or any combination of the foregoing, where the aggregate amount
of such cash dividend or other distribution together with the amount of all
cash dividends and other distributions made during the preceding period of
twelve months, when combined with the aggregate amount of all Pro Rata
Repurchases (for this purpose, including only that portion of the aggregate
purchase price of such Pro Rata Repurchase that is in excess of the Fair Market
Value of the Common Stock repurchased as determined on the applicable
expiration date (including all extensions thereof) of any tender offer or
exchange offer that is a Pro Rata Repurchase, or the date of purchase with
respect to any
<PAGE> 29
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other Pro Rata Repurchase that is not a tender offer or exchange offer) made
during such period, exceeds twelve and one-half percent (12-1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the
day before the ex-dividend date with respect to such Extraordinary Distribution
that is paid in cash and on the distribution date with respect to an
Extraordinary Distribution that is paid other than in cash. The Fair Market
Value of an Extraordinary Distribution for purposes of paragraph (D) of this
Section 9 shall be the sum of the Fair Market Value of such Extraordinary
Distribution plus the aggregate amount of any cash dividends or other
distributions that are not Extraordinary Distributions made during such
twelve-month period and not previously included in the calculation of an
adjustment pursuant to paragraph (D) of this Section 9, but shall exclude the
aggregate amount of regular quarterly dividends declared by the Board of
Directors and paid by the Corporation in such twelve-month period.
(2) "Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation or any
other issuer that are publicly traded, the average of the Current Market Prices
(as hereinafter defined) of such shares or securities for each day of the
Adjustment Period (as hereinafter defined). "Current Market Price" of publicly
traded shares of Common Stock or any other class of capital stock or other
security of the Corporation or any other issuer for a day shall mean the last
reported sales price, regular way, or, in case no sale takes place on such day,
the average of the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange Composite Tape or, if
such security is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which such security
is listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market System or, if
such security is not quoted on such National Market System, the average of the
closing bid and asked prices on such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in such security selected for such purpose by the
Board of Directors of the Corporation. "Adjustment Period" shall mean the
period of five consecutive trading days, selected by the Board of Directors of
the
<PAGE> 30
30
Corporation, during the twenty (20) trading days preceding, and including, the
date as of which the Fair Market Value of a security is to be determined. The
"Fair Market Value" of any security that is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of the
Corporation, or, if no such investment banking or appraisal firm is in the good
faith judgment of the Board of Directors available to make such determination,
as determined in good faith by the Board of Directors of the Corporation.
(3) "Non-Dilutive Amount" in respect of an issuance, sale or
exchange by the Corporation of any right or warrant to purchase or acquire
shares of Common Stock (including any security convertible into or exchangeable
for shares of Common Stock) shall mean the difference between (i) the product of
the Fair Market Value of a share of Common Stock on the day preceding the first
public announcement of such issuance, sale or exchange multiplied by the
maximum number of shares of Common Stock that could be acquired on such date
upon the exercise in full of such rights or warrants (including upon the
conversion or exchange of all such convertible or exchangeable securities),
whether or not exercisable (or convertible or exchangeable) at such date, and
(ii) the aggregate amount payable pursuant to such right or warrant to purchase
or acquire such maximum number of shares of Common Stock; provided, however,
that in no event shall the Non-Dilutive Amount be less than zero. For purposes
of the foregoing sentence, in the case of a security convertible into or
exchangeable for shares of Common Stock, the amount payable pursuant to a right
or warrant to purchase or acquire shares of Common Stock shall be the Fair
Market Value of such security on the date of the issuance, sale or exchange of
such security by the Corporation.
(4) "Pro Rata Repurchase" shall mean any purchase of shares or
Common Stock by the Corporation or any subsidiary thereof, whether for cash,
shares of capital stock of the Corporation, other securities of the Corporation,
evidences of indebtedness of the Corporation or any other person or any other
property (including shares of a subsidiary of the Corporation), or any
combination thereof, effected while any of the shares of ESOP Preferred Stock
are outstanding, pursuant to any tender offer or exchange offer subject to
Section 13(e) of the Exchange Act, or any successor provision of law, or
pursuant to any other offer available to substantially all holders of Common
Stock;
<PAGE> 31
31
provided, however, that no purchase of shares by the Corporation or any
subsidiary thereof made in open market transactions shall be deemed a Pro Rata
Repurchase. For purposes of this Section 9(H), shares shall be deemed to have
been purchased by the Corporation or any subsidiary thereof "in open market
transactions" if they have been purchased substantially in accordance with the
requirements of Rule 10b-18 as in effect under the Exchange Act on the date
shares of ESOP Preferred Stock are initially issued by the Corporation or on
such other terms and conditions as the Board of Directors of the Corporation
shall have determined are reasonably designed to prevent such purchases from
having a material effect on the trading market for the Common Stock.
(I) Whenever an adjustment increasing the number of shares of
ESOP Preferred Stock outstanding is required pursuant hereto, the Board of
Directors shall take action as is necessary so that a sufficient number of
shares of ESOP Preferred Stock are designated with respect to such increase
resulting from such adjustment. Whenever an adjustment to the Conversion
Price, the Liquidation Price or the Preferred Dividend Rate of the ESOP
Preferred Stock is required pursuant hereto, the Corporation shall forthwith
place on file with the transfer agent for the Common Stock and the ESOP
Preferred Stock, if there be one, and with the Treasurer of the Corporation, a
statement signed by the Treasurer or any Assistant Treasurer of the Corporation
stating the adjusted Conversion Price, Liquidation Price and Preferred Dividend
Rate determined as provided herein. Such statement shall set forth in
reasonable detail such facts as shall be necessary to show the reason and the
manner of computing such adjustments, including any determination of Fair
Market Value involved in such computation. Promptly after each adjustment to
the number of shares of ESOP Preferred Stock outstanding, the Conversion Price,
the Liquidation Price or the Preferred Dividend Rate, the Corporation shall
mail a notice thereof and of the then prevailing number of shares of ESOP
Preferred Stock outstanding, the Conversion Price, the Liquidation Price and
the Preferred Dividend Rate to each holder of shares of ESOP Preferred Stock.
10. Miscellaneous.
(A) All notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon the earlier of
receipt thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms hereof) with postage prepaid,
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addressed: (i) if to the Corporation, to its office at 1251 Avenue of the
Americas, New York, New York 10020 (Attention: Secretary) or to the transfer
agent for the ESOP Preferred Stock, or other agent of the Corporation
designated as permitted hereof or (ii) if to any holder of the ESOP Preferred
Stock or Common Stock, as the case may be, to such holder at the address of
such holder as listed in the stock record books of the Corporation (which may
include the records of any transfer agent for Common Stock) or (iii) to such
other address as the Corporation or any such holder, as the case may be, shall
have designated by notice similarly given.
(B) The term "Common Stock" as used herein means the Corporation's
Common Stock, par value $1.00 per share, as the same exists at the date of
filing of this Certificate of Designation pursuant to Section 151 of the
General Corporation Law of the State of Delaware, or any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to without par
value, or from without par value to par value. In the event that, at any time
as a result of an adjustment made pursuant to Section 9 hereof, the holder of
any shares of the ESOP Preferred Stock upon thereafter surrendering such shares
for conversion shall become entitled to receive any shares or other securities
of the Corporation other than shares of Common Stock, the anti-dilution
provisions contained in Section 9 hereof shall apply in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to Common
Stock, and the provisions of Sections 1 through 8 and 10 hereof with respect to
the Common Stock shall apply on like or similar terms to any such other shares
or securities.
(C) The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of ESOP Preferred Stock or shares of Common Stock or other
securities issued on account of ESOP Preferred Stock pursuant thereto or
certificates representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax which may be payable in respect
of any transfer involved in the issuance or delivery of shares of ESOP
Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of ESOP Preferred Stock with respect to which such shares
or other securities are issued or delivered were registered, or in respect of
any payment to any person with respect to any shares or securities other than a
payment
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33
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid or is not payable.
(D) In the event that a holder of shares of ESOP Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion or exchange of such shares should be registered or
to whom payment upon redemption of shares of ESOP Preferred Stock should be
made or the address to which the certificate or certificates representing such
shares, or such payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the holder of such
ESOP Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates or other documentation representing such shares, or
such payment, to the address of such holder shown on the records of the
Corporation.
(E) The Corporation may appoint, and from time to time discharge
and change, a transfer agent for the ESOP Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of ESOP
Preferred Stock.
<PAGE> 34
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Subpart B: 9.36% Cumulative Preferred Stock*
1. Designation and Amount; Fractional Shares. The designation
for such series of the Preferred Stock authorized by this resolution shall be
the 9.36% Cumulative Preferred Stock, without par value but with a stated value
of $25.00 per share (the "Cumulative Preferred Stock"). The maximum number of
shares of Cumulative Preferred Stock shall be 5,500,000. The Cumulative
Preferred Stock is issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative Preferred Stock
will be entitled to receive, when and as declared by the Board out of assets of
the Corporation legally available for payment, cash dividends payable quarterly
at the rate of 9.36% per annum. Dividends on the Cumulative Preferred Stock,
calculated as a percentage of the stated value, will be payable quarterly on
February 28, May 30, August 30 and November 30, commencing August 30, 1991
(each a "dividend payment date"). Dividends on shares of the Cumulative
Preferred Stock will be cumulative from the date of initial issuance of such
shares of Cumulative Preferred Stock. Dividends will be payable, in arrears,
to holders of record as they appear on the stock books of the Corporation on
such record dates, not more than 60 days nor less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board. The amount of dividends
payable for the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day year of twelve
30-day months. No dividends may be declared or paid or set apart for payment
on any Parity Preferred Stock (as defined in paragraph 9(b) below) with regard
to the payment of dividends unless there shall also be or have been declared
and paid or set apart for payment on the Cumulative Preferred Stock, like
dividends for all dividend payment periods of the Cumulative Preferred Stock
ending on or before the dividend payment date of such Parity Preferred Stock,
ratably in proportion to the respective amounts of dividends (x) accumulated
and unpaid or payable on such Parity Preferred Stock, on the one hand, and (y)
accumulated and unpaid through the dividend payment period or periods of the
Cumulative Preferred Stock next preceding such dividend payment date, on the
other hand.
- --------------------
* Terms defined in this Subpart B are so defined for purposes of this
Subpart alone.
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Except as set forth in the preceding sentence, unless full
cumulative dividends on the Cumulative Preferred Stock have been paid, no
dividends (other than in Common Stock of the Corporation) may be paid or
declared and set aside for payment or other distribution made upon the Common
Stock or on any other stock of the Corporation ranking junior to or on a parity
with the Cumulative Preferred Stock as to dividends, nor may any Common Stock
or any other stock of the Corporation ranking junior to or on a parity with the
Cumulative Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock; provided, however,
that any moneys theretofore deposited in any sinking fund with respect to any
preferred stock of the Corporation in compliance with the provisions of such
sinking fund may thereafter be applied to the purchase or redemption of such
preferred stock in accordance with the terms of such sinking fund regardless of
whether at the time of such application full cumulative dividends upon shares
of the Cumulative Preferred Stock outstanding to the last dividend payment date
shall have been paid or declared and set apart for payment) by the Corporation
(except by conversion into or exchange for stock of the Corporation ranking
junior to the Cumulative Preferred Stock as to dividends).
3. Liquidation Preference. The shares of Cumulative Preferred
Stock shall rank, as to liquidation, dissolution or winding up of the
Corporation, prior to the shares of Common Stock and any other class of stock
of the Corporation ranking junior to the Cumulative Preferred Stock as to
rights upon liquidation, dissolution or winding up of the Corporation, so that
in the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Cumulative Preferred Stock
shall be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such junior stock, an amount equal to $25.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an amount equal to
all dividends (whether or not earned or declared) accrued and accumulated and
unpaid on the shares of Cumulative Preferred Stock to the date of final
distribution. The holders of the Cumulative Preferred Stock will not be
entitled to receive the Liquidation Preference until the liquidation preference
of any other class of stock of the Corporation ranking senior to the Cumulative
Preferred Stock as to rights upon
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liquidation, dissolution or winding up shall have been paid (or a sum set aside
therefor sufficient to provide for payment) in full. After payment of the full
amount of the Liquidation Preference and such dividends, the holders of shares
of Cumulative Preferred Stock will not be entitled to any further participation
in any distribution of assets by the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of Parity Preferred
Stock shall be insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable among such
holders ratably in accordance with the respective amounts which would be
payable on such shares if all amounts payable thereon were paid in full. For
the purposes hereof, neither a consolidation or merger of the Corporation with
or into any other corporation, nor a merger of any other corporation with or
into the Corporation, nor a sale or transfer of all or any part of the
Corporation's assets for cash or securities shall be considered a liquidation,
dissolution or winding up of the Corporation.
4. Conversion. The Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock of the
Corporation.
5. Voting Rights. The holders of shares of Cumulative
Preferred Stock shall have no voting rights whatsoever, except for any voting
rights to which they may be entitled under the laws of the State of Delaware,
and except as follows:
(a) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock or on any Parity Preferred Stock
with respect to payment of dividends shall be in arrears for an
aggregate number of days equal to six calendar quarters or more,
whether or not consecutive, the holders of the outstanding shares of
Cumulative Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of stock upon which
like voting rights have been conferred and are exercisable (voting
together as a class), to elect two of the authorized number of members
of the Board of Directors of the Corporation at the Corporation's next
annual meeting of stockholders and at each subsequent annual meeting
of stockholders until such arrearages have been paid or set apart for
payment, at which time such right shall terminate, except as herein or
by law expressly provided, subject to revesting in the
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37
event of each and every subsequent default of the character above
mentioned. Upon any termination of the right of the holders of shares
of Cumulative Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors then in office
elected by the holders of shares of Cumulative Preferred Stock shall
terminate immediately. Any director who shall have been so elected
pursuant to this paragraph may be removed at any time, either with or
without cause. Any vacancy thereby created may be filled, only by the
affirmative vote of the holders of shares of Cumulative Preferred
Stock voting separately as a class (together with the holders of
shares of any other class or series of stock upon which like voting
rights have been conferred and are exercisable). If the office of any
director elected by the holders of shares of Cumulative Preferred
Stock voting as a class becomes vacant for any reason other than
removal from office as aforesaid, the remaining director elected
pursuant to this paragraph may choose a successor who shall hold
office for the unexpired term in respect of which such vacancy
occurred. At elections for such directors, each holder of shares of
Cumulative Preferred Stock shall be entitled to one vote for each
share held (the holders of shares of any other class or series of
preferred stock having like voting rights being entitled to such
number of votes, if any, for each share of such stock held as may be
granted to them).
(b) So long as any shares of Cumulative Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds
of the shares of Cumulative Preferred Stock outstanding at the time
and all other class or series of stock upon which like voting rights
have been conferred and are exercisable (voting together as a class)
given in person or by proxy, either in writing or at any meeting
called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(i) the issuance or increase of the authorized amount of
any class or series of shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the shares of the
Cumulative Preferred Stock; or
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Certificate of
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Incorporation (including this resolution or any provision
hereof) that would materially and adversely affect any power,
preference, or special right of the shares of Cumulative
Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized
Common Stock or authorized Preferred Stock or any increase or decrease
in the number of shares of any series of Preferred Stock or the
creation and issuance of other series of Common Stock or Preferred
Stock, in each case ranking on a parity with or junior to the shares
of Cumulative Preferred Stock with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect
such powers, preferences or special rights.
(c) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of
Cumulative Preferred Stock shall have been redeemed or called for
redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
6. Redemption. The shares of the Cumulative Preferred Stock
may be redeemed at the option of the Corporation, as a whole, or from time to
time in part, at any time, upon not less than 30 days' prior notice mailed to
the holders of the shares to be redeemed at their addresses as shown on the
stock books of the Corporation; provided, however, that shares of the
Cumulative Preferred Stock shall not be redeemable prior to May 30, 1996.
Subject to the foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $25.00 per share together with an amount
equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred Stock
have not been paid, the Cumulative Preferred Stock may not be redeemed in part
and the Corporation may not purchase or acquire any shares of the Cumulative
Preferred Stock otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of the Cumulative Preferred Stock. If fewer than
all the outstanding shares of Cumulative Preferred Stock are to be redeemed,
the Corporation will select those to be redeemed by lot or a substantially
equivalent method.
<PAGE> 39
39
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption, the funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares of Cumulative Preferred Stock so called for
redemption, then, notwithstanding that any certificates for such shares have
not been surrendered for cancellation, on the redemption date dividends shall
cease to accrue on the shares to be redeemed, and at the close of business on
the redemption date the holders of such shares shall cease to be stockholders
with respect to such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be outstanding.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of two years from the redemption date shall revert to
the general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the amounts payable upon such redemption. Any
interest accrued on funds so deposited shall be paid to the Corporation from
time to time.
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation, (b) the
creation, or increase or decrease in the amount, of any class or series of
stock of the Corporation not ranking prior as to dividends or upon liquidation,
dissolution or winding up to the Cumulative Preferred Stock or (c) any increase
or decrease in the amount of authorized Common Stock or any increase, decrease
or change in the par value thereof or in any other terms thereof.
8. Amendment of Resolution. Subject to the provisions of
paragraph 5, the Board reserves the right by subsequent amendment of this
resolution from time to time to increase or decrease the number of shares which
constitute the Cumulative Preferred Stock (but not below the number of shares
thereof then outstanding) and in other respects to amend this resolution within
the limitations provided by law, this resolution and the Certificate of
Incorporation.
9. Rank. For the purposes of this resolution, any stock of
any class or classes of the Corporation shall be deemed to rank:
<PAGE> 40
40
(a) prior to shares of the Cumulative Preferred Stock, either
as to dividends or upon liquidation, dissolution or winding up, or
both, if the holders of stock of such class or classes shall be
entitled by the terms thereof to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of shares of
the Cumulative Preferred Stock;
(b) on a parity with shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof
be different from those of the Cumulative Preferred Stock, if the
holders of stock of such class or classes shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributed
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preference or priority of one over the other as between the
holders of such stock and the holders of shares of Cumulative
Preferred Stock (the term "Parity Preferred Stock" being used to refer
to any stock on a parity with the shares of Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, as the context may require); and
(c) junior to shares of the Cumulative Preferred Stock,
either as to dividends or upon liquidation, dissolution or winding up,
or both, if such class shall be Common Stock or if the holders of the
Cumulative Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the
holders of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as to
dividends and upon liquidation, dissolution or winding up, to the Common Stock
and on a parity with the Corporation's ESOP Convertible Preferred Stock, with a
liquidation value of $35.875 per share, the Corporation's 8.88% Cumulative
Preferred Stock, with a liquidation value of $200.00 per share, and the
Corporation's 8-3/4% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share.
<PAGE> 41
41
Subpart C: 8.88% Cumulative Preferred Stock*
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized by this
resolution shall be the 8.88% Cumulative Preferred Stock, without par value,
with a stated value of $200.00 per share (the "Cumulative Preferred Stock").
The stated value per share of Cumulative Preferred Stock shall not for any
purpose be considered to be a determination by the Board or the Committee with
respect to the capital and surplus of the Corporation. The maximum number of
shares of Cumulative Preferred Stock shall be 975,000. The Cumulative
Preferred Stock is issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative Preferred
Stock will be entitled to receive, when and as declared by the Board or the
Committee out of assets of the Corporation legally available for payment, cash
dividends payable quarterly at the rate of 8.88% per annum. Dividends on the
Cumulative Preferred Stock, calculated as a percentage of the stated value,
will be payable quarterly on February 28, May 30, August 30 and November 30,
commencing February 28, 1992 (each a "dividend payment date"). Dividends on
shares of the Cumulative Preferred Stock will be cumulative from the date of
initial issuance of such shares of Cumulative Preferred Stock. Dividends will
be payable, in arrears, to holders of record as they appear on the stock books
of the Corporation on such record dates, not more than 60 days nor less than 10
days preceding the payment dates thereof, as shall be fixed by the Board or the
Committee. The amount of dividends payable for the initial dividend period or
any period shorter than a full dividend period shall be calculated on the basis
of a 360-day year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock (as defined in
paragraph 9(b) below) with regard to the payment of dividends unless there
shall also be or have been declared and paid or set apart for payment on the
Cumulative Preferred Stock, like dividends for all dividend payment periods of
the Cumulative Preferred Stock ending on or before the dividend payment date of
such Parity Preferred Stock, ratably in proportion to the respective amounts of
dividends (x) accumulated and unpaid or payable on such Parity Preferred Stock,
on the one hand, and (y) accumulated and unpaid
- ---------------------
* Terms defined in this Subpart C are so defined for purposes of this
Subpart alone.
<PAGE> 42
42
through the dividend payment period or periods of the Cumulative Preferred
Stock next preceding such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless full
cumulative dividends on the Cumulative Preferred Stock have been paid, no
dividends (other than in Common Stock of the Corporation) may be paid or
declared and set aside for payment or other distribution made upon the Common
Stock or on any other stock of the Corporation ranking junior to or on a parity
with the Cumulative Preferred Stock as to dividends, nor may any Common Stock
or any other stock of the Corporation ranking junior to or on a parity with the
Cumulative Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired by the Corporation for any consideration or any payment by the
Corporation be made to or available for a sinking fund for the redemption of
any shares of such stock; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund regardless of whether at the
time of such application full cumulative dividends upon shares of the
Cumulative Preferred Stock outstanding to the last dividend payment date shall
have been paid or declared and set apart for payment; and provided further that
any such junior or parity Preferred Stock or Common Stock may be converted into
or exchanged for stock of the Corporation ranking junior to the Cumulative
Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or winding up of the
Corporation, prior to the shares of Common Stock and any other class of stock
of the Corporation ranking junior to the Cumulative Preferred Stock as to
rights upon liquidation, dissolution or winding up of the Corporation, so that
in the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Cumulative Preferred Stock
shall be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such junior stock, an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an amount equal to
all dividends (whether or not earned or declared) accrued and
<PAGE> 43
43
accumulated and unpaid on the shares of Cumulative Preferred Stock to the date
of final distribution. The holders of the Cumulative Preferred Stock will not
be entitled to receive the Liquidation Preference until the liquidation
preference of any other class of stock of the Corporation ranking senior to the
Cumulative Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full amount of the
Liquidation Preference and an amount equal to such dividends, the holders of
shares of Cumulative Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of shares of
Parity Preferred Stock shall be insufficient to pay in full the preferential
amount aforesaid, then such assets, or the proceeds thereof, shall be
distributable among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable thereon
were paid in full. For the purposes hereof, neither a consolidation or merger
of the Corporation with or into any other corporation, nor a merger of any
other corporation with or into the Corporation, nor a sale or transfer of all
or any part of the Corporation's assets for cash or securities shall be
considered a liquidation, dissolution or winding up of the Corporation.
4. Conversion. The Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock of the
Corporation.
5. Voting Rights. The holders of shares of Cumulative
Preferred Stock shall have no voting rights whatsoever, except for any voting
rights to which they may be entitled under the laws of the State of Delaware,
and except as follows:
(a) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock or on any Parity Preferred Stock
with respect to payment of dividends shall be in arrears for an
aggregate number of days equal to six calendar quarters or more,
whether or not consecutive, the holders of the outstanding shares of
Cumulative Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of stock upon which
like voting rights have been conferred and are exercisable (voting
together as a class), to elect two of the authorized number of members
<PAGE> 44
44
of the Board at the Corporation's next annual meeting of stockholders
and at each subsequent annual meeting of stockholders until such
arrearages have been paid or set apart for payment, at which time such
right shall terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every subsequent default
of the character above mentioned. Upon any termination of the right
of the holders of shares of Cumulative Preferred Stock as a class to
vote for directors as herein provided, the term of office of all
directors then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate immediately. Any director
who shall have been so elected pursuant to this paragraph may be
removed at any time, either with or without cause. Any vacancy
thereby created may be filled only by the affirmative vote of the
holders of shares of Cumulative Preferred Stock voting separately as a
class (together with the holders of shares of any other class or
series of stock upon which like voting rights have been conferred and
are exercisable). If the office of any director elected by the
holders of shares of Cumulative Preferred Stock voting as a class
becomes vacant for any reason other than removal from office as
aforesaid, the remaining director elected pursuant to this paragraph
may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. At elections for such
directors, each holder of shares of Cumulative Preferred Stock shall
be entitled to one vote for each share held (the holders of shares of
any other class or series of preferred stock having like voting rights
being entitled to such number of votes, if any, for each share of such
stock held as may be granted to them).
(b) So long as any shares of Cumulative Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds
of the shares of Cumulative Preferred Stock outstanding at the time
and all other classes or series of stock upon which like voting rights
have been conferred and are exercisable (voting together as a class)
given in person or by proxy, either in writing or at any meeting
called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(i) the issuance or increase of the authorized amount of
any class or series of shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the shares of the
Cumulative Preferred Stock; or
<PAGE> 45
45
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Certificate of Incorporation (including this resolution
or any provision hereof) that would materially and adversely
affect any power, preference, or special right of the shares
of Cumulative Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock or any
increase or decrease in the number of shares of any series of
Preferred Stock or the creation and issuance of other series
of Common Stock or Preferred Stock, in each case ranking on a
parity with or junior to the shares of Cumulative Preferred
Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such powers, preferences or special rights.
(c) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of
Cumulative Preferred Stock shall have been redeemed or called for
redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
6. Redemption. The shares of the Cumulative Preferred Stock
may be redeemed at the option of the Corporation, as a whole, or from time to
time in part, at any time, upon not less than 30 days' prior notice mailed to
the holders of the shares to be redeemed at their addresses as shown on the
stock books of the Corporation; provided, however, that shares of the
Cumulative Preferred Stock shall not be redeemable prior to November 30, 1996.
Subject to the foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $200.00 per share together with an amount
equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred Stock
have not been paid, the Cumulative Preferred Stock may not be redeemed in part
and the Corporation may not purchase or acquire any shares of the Cumulative
Preferred Stock otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of the Cumulative Preferred Stock.
<PAGE> 46
46
If fewer than all the outstanding shares of Cumulative
Preferred Stock are to be redeemed, the Corporation will select those to be
redeemed by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption, the funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares of Cumulative Preferred Stock so called for
redemption, then, notwithstanding that any certificates for such shares have
not been surrendered for cancellation, on the redemption date dividends shall
cease to accrue on the shares to be redeemed, and at the close of business on
the redemption date the holders of such shares shall cease to be stockholders
with respect to such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be outstanding.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of two years from the redemption date shall revert to
the general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the amounts payable upon such redemption. Any
interest accrued on funds so deposited shall be paid to the Corporation from
time to time.
All shares of Cumulative Preferred Stock redeemed, purchased
or otherwise acquired by the Corporation shall be retired and cancelled and
shall be restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be issued.
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation, (b) the
creation, or increase or decrease in the amount, of any class or series of
stock of the Corporation not ranking prior as to dividends or upon liquidation,
dissolution or winding up to the Cumulative Preferred Stock or (c) any increase
or decrease in the amount of authorized Common Stock or any increase, decrease
or change in the par value thereof or in any other terms thereof.
<PAGE> 47
47
8. Amendment of Resolution. The Board and the Committee each
reserves the right by subsequent amendment of this resolution from time to time
to increase or decrease the number of shares that constitute the Cumulative
Preferred Stock (but not below the number of shares thereof then outstanding)
and in other respects to amend this resolution within the limitations provided
by law, this resolution and the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any stock of
any class or classes of the Corporation shall be deemed to rank:
(a) prior to shares of the Cumulative Preferred Stock, either
as to dividends or upon liquidation, dissolution or winding up, or
both, if the holders of stock of such class or classes shall be
entitled by the terms thereof to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of shares of
the Cumulative Preferred Stock;
(b) on a parity with shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof
be different from those of the Cumulative Preferred Stock, if the
holders of stock of such class or classes shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributed
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preference or priority of one over the other as between the
holders of such stock and the holders of shares of Cumulative
Preferred Stock (the term "Parity Preferred Stock" being used to refer
to any stock on a parity with the shares of Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, as the context may require); and
(c) junior to shares of the Cumulative Preferred Stock,
either as to dividends or upon liquidation, dissolution or winding up,
or both, if such class shall be Common Stock or if the holders of the
Cumulative Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the
holders of stock of such class or classes.
<PAGE> 48
48
The Cumulative Preferred Stock shall rank prior, as to
dividends and upon liquidation, dissolution or winding up, to the Common Stock
and on a parity with the Corporation's ESOP Convertible Preferred Stock, with a
liquidation value of $35.875 per share, the Corporation's 9.36% Cumulative
Preferred Stock, with a liquidation value of $25.00 per share, and the
Corporation's 8-3/4% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share.
<PAGE> 49
49
Subpart D: 8-3/4% Cumulative Preferred Stock*
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized by this
resolution shall be the 8-3/4% Cumulative Preferred Stock, without par value,
with a stated value of $200.00 per share (the "Cumulative Preferred Stock").
The stated value per share of Cumulative Preferred Stock shall not for any
purpose be considered to be a determination by the Board or the Committee with
respect to the capital and surplus of the Corporation. The number of shares of
Cumulative Preferred Stock shall be 750,000. The Cumulative Preferred Stock is
issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative Preferred
Stock will be entitled to receive, when and as declared by the Board or the
Committee out of assets of the Corporation legally available for payment, cash
dividends payable quarterly at the rate of 8-3/4% per annum. Dividends on the
Cumulative Preferred Stock, calculated as a percentage of the stated value,
will be payable quarterly on February 28, May 30, August 30 and November 30,
commencing May 30, 1992 (each a "dividend payment date"). Dividends on shares
of the Cumulative Preferred Stock will be cumulative from the date of initial
issuance of such shares of Cumulative Preferred Stock. Dividends will be
payable, in arrears, to holders of record as they appear on the stock books of
the Corporation on such record dates, not more than 60 days nor less than 10
days preceding the payment dates thereof, as shall be fixed by the Board or the
Committee. The amount of dividends payable for the initial dividend period or
any period shorter than a full dividend period shall be calculated on the basis
of a 360-day year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock (as defined in
paragraph 9(b) below) with regard to the payment of dividends unless there
shall also be or have been declared and paid or set apart for payment on the
Cumulative Preferred Stock, like dividends for all dividend payment periods of
the Cumulative Preferred Stock ending on or before the dividend payment date of
such Parity Preferred Stock, ratably in proportion to the respective amounts of
dividends (x) accumulated and unpaid or payable on such Parity Preferred Stock,
on the one hand, and (y) accumulated and unpaid through the dividend payment
period or periods of the
- --------------------
* Terms defined in this Subpart D are so defined for purposes of this
Subpart alone.
<PAGE> 50
50
Cumulative Preferred Stock next preceding such dividend payment date, on the
other hand.
Except as set forth in the preceding sentence, unless full
cumulative dividends on the Cumulative Preferred Stock have been paid, no
dividends (other than in Common Stock of the Corporation) may be paid or
declared and set aside for payment or other distribution made upon the Common
Stock or on any other stock of the Corporation ranking junior to or on a parity
with the Cumulative Preferred Stock as to dividends, nor may any Common Stock
or any other stock of the Corporation ranking junior to or on a parity with the
Cumulative Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired by the Corporation for any consideration or any payment by the
Corporation be made to or available for a sinking fund for the redemption of
any shares of such stock; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund regardless of whether at the
time of such application full cumulative dividends upon shares of the
Cumulative Preferred Stock outstanding to the last dividend payment date shall
have been paid or declared and set apart for payment; and provided further that
any such junior or parity Preferred Stock or Common Stock may be converted into
or exchanged for stock of the Corporation ranking junior to the Cumulative
Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or winding up of the
Corporation, prior to the shares of Common Stock and any other class of stock
of the Corporation ranking junior to the Cumulative Preferred Stock as to
rights upon liquidation, dissolution or winding up of the Corporation, so that
in the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the Cumulative Preferred Stock
shall be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other such junior stock, an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an amount equal to
all dividends (whether or not earned or declared) accrued and accumulated and
unpaid on the shares of Cumulative Preferred
<PAGE> 51
51
Stock to the date of final distribution. The holders of the Cumulative
Preferred Stock will not be entitled to receive the Liquidation Preference
until the liquidation preference of any other class of stock of the Corporation
ranking senior to the Cumulative Preferred Stock as to rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. After payment of the full amount
of the Liquidation Preference and an amount equal to such dividends, the
holders of shares of Cumulative Preferred Stock will not be entitled to any
further participation in any distribution of assets by the Corporation. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable among the holders of
shares of Parity Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid, then such assets, or the proceeds thereof, shall
be distributable among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable thereon
were paid in full. For the purposes hereof, neither a consolidation or merger
of the Corporation with or into any other corporation, nor a merger of any
other corporation with or into the Corporation, nor a sale or transfer of all
or any part of the Corporation's assets for cash or securities shall be
considered a liquidation, dissolution or winding up of the Corporation.
4. Conversion. The Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock of the
Corporation.
5. Voting Rights. The holders of shares of Cumulative
Preferred Stock shall have no voting rights whatsoever, except for any voting
rights to which they may be entitled under the laws of the State of Delaware,
and except as follows:
(a) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock or on any Parity Preferred Stock
with respect to payment of dividends shall be in arrears for an
aggregate number of days equal to six calendar quarters or more,
whether or not consecutive, the holders of the outstanding shares of
Cumulative Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of stock upon which
like voting rights have been conferred and are exercisable (voting
together as a class), to elect two of the authorized number of members
of the Board at the Corporation's next annual meeting of
<PAGE> 52
52
stockholders and at each subsequent annual meeting of stockholders
until such arrearages have been paid or set apart for payment, at
which time such right shall terminate, except as herein or by law
expressly provided, subject to revesting in the event of each and
every subsequent default of the character above mentioned. Upon any
termination of the right of the holders of shares of Cumulative
Preferred Stock as a class to vote for directors as herein provided,
the term of office of all directors then in office elected by the
holders of shares of Cumulative Preferred Stock shall terminate
immediately. Any director who shall have been so elected pursuant to
this paragraph may be removed at any time, either with or without
cause. Any vacancy thereby created may be filled only by the
affirmative vote of the holders of shares of Cumulative Preferred
Stock voting separately as a class (together with the holders of
shares of any other class or series of stock upon which like voting
rights have been conferred and are exercisable). If the office of any
director elected by the holders of shares of Cumulative Preferred
Stock voting as a class becomes vacant for any reason other than
removal from office as aforesaid, the remaining director elected
pursuant to this paragraph may choose a successor who shall hold
office for the unexpired term in respect of which such vacancy
occurred. At elections for such directors, each holder of shares of
Cumulative Preferred Stock shall be entitled to one vote for each
share held (the holders of shares of any other class or series of
preferred stock having like voting rights being entitled to such
number of votes, if any, for each share of such stock held as may be
granted to them).
(b) So long as any shares of Cumulative Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds
of the shares of Cumulative Preferred Stock outstanding at the time
and all other classes or series of stock upon which like voting rights
have been conferred and are exercisable (voting together as a class)
given in person or by proxy, either in writing or at any meeting
called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(i) the issuance or increase of the authorized amount of
any class or series of shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the shares of the
Cumulative Preferred Stock; or
<PAGE> 53
53
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Certificate of Incorporation (including this resolution
or any provision hereof) that would materially and adversely
affect any power, preference, or special right of the shares
of Cumulative Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock or any
increase or decrease in the number of shares of any series of
Preferred Stock or the creation and issuance of other series
of Common Stock or Preferred Stock, in each case ranking on a
parity with or junior to the shares of Cumulative Preferred
Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such powers, preferences or special rights.
(c) The foregoing voting provisions shall not apply if, at or
prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of
Cumulative Preferred Stock shall have been redeemed or called for
redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
6. Redemption. The shares of the Cumulative Preferred Stock
may be redeemed at the option of the Corporation, as a whole, or from time to
time in part, at any time, upon not less than 30 days' prior notice mailed to
the holders of the shares to be redeemed at their addresses as shown on the
stock books of the Corporation; provided, however, that shares of the
Cumulative Preferred Stock shall not be redeemable prior to May 30, 1997.
Subject to the foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $200.00 per share together with an amount
equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred Stock
have not been paid, the Cumulative Preferred Stock may not be redeemed in part
and the Corporation may not purchase or acquire any shares of the Cumulative
Preferred Stock otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of the Cumulative Preferred Stock.
<PAGE> 54
54
If fewer than all the outstanding shares of Cumulative
Preferred Stock are to be redeemed, the Corporation will select those to be
redeemed by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption, the funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares of Cumulative Preferred Stock so called for
redemption, then, notwithstanding that any certificates for such shares have
not been surrendered for cancellation, on the redemption date dividends shall
cease to accrue on the shares to be redeemed, and at the close of business on
the redemption date the holders of such shares shall cease to be stockholders
with respect to such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be outstanding.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of two years from the redemption date shall revert to
the general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the amounts payable upon such redemption. Any
interest accrued on funds so deposited shall be paid to the Corporation from
time to time.
All shares of Cumulative Preferred Stock redeemed, purchased
or otherwise acquired by the Corporation shall be retired and cancelled and
shall be restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be issued.
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation, (b) the
creation, or increase or decrease in the amount, of any class or series of
stock of the Corporation not ranking prior as to dividends or upon liquidation,
dissolution or winding up to the Cumulative Preferred Stock or (c) any increase
or decrease in the amount of authorized Common Stock or any increase, decrease
or change in the par value thereof or in any other terms thereof.
<PAGE> 55
55
8. Amendment of Resolution. The Board and the Committee each
reserves the right by subsequent amendment of this resolution from time to time
to increase or decrease the number of shares that constitute the Cumulative
Preferred Stock (but not below the number of shares thereof then outstanding)
and in other respects to amend this resolution within the limitations provided
by law, this resolution and the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any stock of
any class or classes of the Corporation shall be deemed to rank:
(a) prior to shares of the Cumulative Preferred Stock, either
as to dividends or upon liquidation, dissolution or winding up, or
both, if the holders of stock of such class or classes shall be
entitled by the terms thereof to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of shares of
the Cumulative Preferred Stock;
(b) on a parity with shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof
be different from those of the Cumulative Preferred Stock, if the
holders of stock of such class or classes shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributed
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preference or priority of one over the other as between the
holders of such stock and the holders of shares of Cumulative
Preferred Stock (the term "Parity Preferred Stock" being used to refer
to any stock on a parity with the shares of Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, as the context may require); and
(c) junior to shares of the Cumulative Preferred Stock,
either as to dividends or upon liquidation, dissolution or winding up,
or both, if such class shall be Common Stock or if the holders of the
Cumulative Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the
holders of stock of such class or classes.
<PAGE> 56
56
The Cumulative Preferred Stock shall rank prior, as to
dividends and upon liquidation, dissolution or winding up, to the Common Stock
and on a parity with the Corporation's ESOP Convertible Preferred Stock, with a
liquidation value of $35.875 per share, the Corporation's 9.36% Cumulative
Preferred Stock, with a liquidation value of $25.00 per share, and the
Corporation's 8.88% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share.
<PAGE> 57
57
PART II -- COMMON STOCK (a) Dividends. Subject to the
preferential dividend rights applicable to shares of any class or series of
stock having preference over the Common Stock as to dividends, the holders of
shares of Common Stock shall be entitled to receive such dividends when and as
declared by the Board of Directors and shall share equally, share for share
alike, in such dividends.
(b) Liquidation, Dissolution or Winding Up. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, after distribution in full of the preferential amounts to be
distributed to the holders of shares of any class or series of stock having
preference over the Common Stock upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation available for distribution, ratably in proportion to the number of
shares of the Common Stock held.
(c) Voting. Each share of Common Stock shall entitle the
holder thereof to one vote on all matters submitted to a vote of the
stockholders of the Corporation. The holders of the shares of Common Stock
shall at all times, except as otherwise provided in this Restated Certificate
of Incorporation or required by law, vote as one class, together with the
holders of any other class or series of stock of the Corporation accorded such
general class voting right.
SECTION 3. Definitions. For the purposes of this Restated
Certificate of Incorporation:
(a) the term "outstanding", when used in reference to shares
of stock, shall mean issued shares, excluding shares held by the
Corporation or a Subsidiary; and
(b) the term "Subsidiary" or "Subsidiaries" shall mean a
corporation(s) of which the Corporation, directly or indirectly, has
the power, whether through the ownership of voting securities,
contract or otherwise, to elect at least a majority of the members of
such corporation's board of directors; provided, however, that for
purposes of Article VI of the Restated Certificate of Incorporation,
the term "Subsidiary" or "Subsidiaries" shall mean a corporation(s),
all of the capital stock of which is owned by the Corporation, other
than directors' qualifying shares.
<PAGE> 58
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ARTICLE V
BOARD OF DIRECTORS
SECTION 1. Number, Election and Terms of Directors.
The business and affairs of the Corporation shall be managed by or under the
direction of a Board of Directors consisting of not fewer than four nor more
than fifteen persons; provided, however, that, pursuant to the provisions of
Section 141(a) of the General Corporation Law of the State of Delaware, the
powers and authority of the Board of Directors with respect to any stock
option, performance unit or other compensation or employee benefit plan of the
Corporation, to the extent not otherwise assigned or reserved to the Board of
Directors by the provisions of any such plan, are hereby conferred upon and
shall be exercised by a committee or committees designated by resolution passed
by the Board of Directors to consist of one or more persons who may or may not
be directors of the Corporation, unless the Board of Directors, by resolution
passed by the Board of Directors, shall determine that any or all such powers
and authority shall instead be conferred upon and exercised by the Board of
Directors. The exact number of directors within the minimum and maximum
limitations specified in the preceding sentence may be established from time to
time by the Board of Directors pursuant to a resolution adopted by a majority
of the entire Board of Directors. Subject to the rights of the holders of any
class or series of stock having preference over the Common Stock as to
dividends or upon liquidation, dissolution or winding up of the Corporation to
elect directors under specified circumstances, if any, directors shall be
elected each year at the annual meeting of stockholders and shall hold office
until their successors shall have been duly elected and qualified, or until
their earlier resignation or removal.
SECTION 2. Calling Special Meetings of Stockholders.
A special meeting of the stockholders may be called at any time and for any
purpose or purposes by the President or the Chairman of the Board or by order
of the Board of Directors, and shall be called by the Secretary upon the
written request of the holders of record of at least 80% of the voting power of
the then outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (the "Voting Stock").
SECTION 3. Newly Created Directorships and Vacancies on the
Board of Directors. Subject to the rights of any class or series of stock
having preference over the
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59
Common Stock as to dividends or upon liquidation, dissolution or winding up of
the Corporation to elect directors under specified circumstances, if any,
newly-created directorships resulting from any increase in the authorized
number of directors or any vacancies on the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office or other
cause shall be filled by a majority vote of the directors then in office,
although less than a quorum; and any director so chosen shall hold office for
the remaining term of his predecessor or, if there shall have been no
predecessor, until the next annual election of directors or until his successor
shall have been duly elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
SECTION 4. Removal of Directors. Subject to the rights of
the holders of any class or series of stock having preference over the Common
Stock as to dividends or upon liquidation, dissolution or winding up of the
Corporation to elect directors under specified circumstances, if any, any
director, or the entire Board of Directors, may be removed from office at any
time, with or without cause, only by the affirmative vote of the holders of at
least 80% of the voting power of the Voting Stock, voting together as a single
class.
SECTION 5. Amendment of By-Laws. In furtherance of and not
in limitation of the powers conferred by statute, the Board of Directors of the
Corporation from time to time, may amend, repeal or adopt By-Laws of the
Corporation; provided, that any By-Laws made, amended or repealed by the Board
of Directors or the stockholders may be amended or repealed, and that any
By-Laws may be made, by the stockholders of the Corporation. Notwithstanding
any other provisions of this Restated Certificate of Incorporation or the
By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Restated Certificate of Incorporation
or the By-Laws of the Corporation), the affirmative vote of the holders of at
least 80% of the voting power of the Voting Stock, voting together as a single
class, shall be required for the stockholders of the Corporation to amend,
repeal or adopt any By-Laws of the Corporation or to adopt any amendment to
this Restated Certificate of Incorporation inconsistent with the By-Laws of the
Corporation.
SECTION 6. Amendment of Certificate of Incorporation.
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the By-Laws of the
<PAGE> 60
60
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Restated Certificate of Incorporation or the By-Laws of
the Corporation), the affirmative vote of the holders of at least 80% of the
voting power of the Voting Stock, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article V hereof.
SECTION 7. Other Powers. The By-Laws of the Corporation may
confer upon the Board of Directors powers in addition to the foregoing and in
addition to the powers and authorities expressly conferred upon them by law,
but only to the extent permitted by law and not prohibited by the provisions of
this Restated Certificate of Incorporation.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent
permitted by applicable law, any person who was or is a party or is threatened
to be made a party to, or is involved in any manner in, any threatened, pending
or completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person (1) is
or was a director or officer of the Corporation or a Subsidiary or (2) is or
was serving at the request of the Corporation or a Subsidiary as a director,
officer, partner, member, employee or agent of another corporation,
partnership, joint venture, trust, committee or other enterprise.
To the extent deemed advisable by the Board of Directors, the
Corporation may indemnify, to the fullest extent permitted by applicable law,
any person who was or is a party or is threatened to be made a party to, or is
involved in any manner in, any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) by reason
of the fact that the person is or was an employee or agent (other than a
director or officer) of the Corporation or a Subsidiary.
The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or a Subsidiary, or is or was serving at the
request of the Corporation or a Subsidiary as a director, officer, partner,
<PAGE> 61
61
member, employee or agent of another corporation, partnership, joint venture,
trust, committee or other enterprise, against any expense, liability or loss
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation or a Subsidiary would
have the power to indemnify him against such expense, liability or loss under
the provisions of applicable law.
No repeal, modification or amendment of, or adoption of any
provision inconsistent with, this Article VI nor, to the fullest extent
permitted by applicable law, any modification of law shall adversely affect any
right or protection of any person granted pursuant hereto existing at, or with
respect to events that occurred prior to, the time of such repeal, amendment,
adoption or modification.
For purposes of this Article VI, the term "Subsidiary" or
"Subsidiaries" shall mean a corporation(s), all of the capital stock of which
is owned directly or indirectly by the Corporation, other than directors'
qualifying shares.
The right to indemnification conferred in this Article VI also
includes, to the fullest extent permitted by applicable law, the right to be
paid the expenses (including attorneys' fees) incurred in connection with any
such proceeding in advance of its final disposition. The payment of any
amounts to any director, officer, partner, member, employee or agent pursuant
to this Article VI shall subrogate the Corporation to any right such director,
officer, partner, member, employee or agent may have against any other person
or entity. The rights conferred in this Article VI shall be contract rights.
ARTICLE VII
LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach by the
director of his duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction from which
the director derived an improper personal benefit.
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No repeal, modification or amendment of, or adoption of any
provision inconsistent with, this Article VII nor, to the fullest extent
permitted by law, any modification of law shall adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal, amendment, adoption or modification or affect the liability of any
director of the Corporation for any action taken or any omission that occurred
prior to the time of such repeal, amendment, adoption or modification.
If the General Corporation Law of the State of Delaware shall
be amended, after this Restated Certificate of Incorporation is amended to
include this Article VII, to authorize corporate action further eliminating or
limiting the liability of directors, then a director of the Corporation, in
addition to the circumstances in which he is not liable immediately prior to
such amendment, shall be free of liability to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
SEVENTH: That this restatement has been duly adopted by
resolution of the Board of Directors of the Corporation in accordance with
Section 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has caused this
Certificate to be executed by its President and attested by its Assistant
Secretary and its corporate seal to be affixed hereto this 14th day of
September, 1992.
/s/ Robert F. Greenhill
(Seal) ----------------------------
Robert F. Greenhill
President
Attest:
/s/ Patricia A. Kurtz
- -------------------------
Patricia A. Kurtz
Assistant Secretary
<PAGE> 63
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
MORGAN STANLEY GROUP INC.
(Pursuant to Section 242 of the
Delaware General Corporation Law)
MORGAN STANLEY GROUP INC., a Delaware corporation, HEREBY
CERTIFIES AS FOLLOWS;
1. The name of the Corporation is Morgan Stanley Group Inc.
The date of filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was July 10, 1975. The date of
filing of the most recent Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware was September 15, 1992.
2. This Certificate of Amendment sets forth amendments to the
Restated Certificate of Incorporation of the Corporation that were duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
3. Article IV, Section 2, Part I, Subpart A, Section 1(A) of
the Restated Certificate of Incorporation is hereby amended in full to be and
read as follows:
(A) The shares of such series shall be designated ESOP
CONVERTIBLE PREFERRED STOCK (hereinafter referred to as the "ESOP
Preferred Stock") and such series shall consist of 3,902,438 shares.
Such number of shares may be increased or decreased from time to time
by resolution of the Pricing Committee of this Board of Directors (the
"Pricing Committee"), but no such increase shall result in such series
consisting of more than 4,000,000 shares, and no decrease shall reduce
the number of shares of ESOP Preferred Stock to a number less than
that of shares of ESOP Preferred Stock then outstanding plus the
number of shares issuable upon exercise of any rights, options or
warrants or upon conversion of outstanding securities issued by the
Corporation relating to such shares. Notwithstanding the preceding
sentence, the Board of Directors may increase the number of shares of
ESOP
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2
Preferred Stock to a number greater than 4,000,000 shares, or may
decrease the number of such shares, subject only to any limitations
imposed by applicable law or this Restated Certificate of
Incorporation. Any shares of ESOP Preferred Stock redeemed or
purchased by the Corporation shall remain issued and outstanding for
all purposes (except that as long as such shares are held by the
Corporation or its nominee, no dividends shall be paid on such shares
and they shall neither be entitled to vote nor counted for quorum
purposes) and may thereafter be transferred by the Corporation from
time to time to a trustee or trustees referred to in paragraph (B) of
this Section 1 (whereupon the voting and dividend rights of such
shares shall be restored); provided that the Corporation may provide
at the time of or at any time after such redemption or purchase that
any such shares then held by the Corporation or its nominee shall be
retired, and such shares shall then be restored to the status of
authorized but unissued shares of preferred stock of the Corporation.
4. Article IV, Section 2, Part I, Subpart A, Section 9,
Paragraphs (A), (B), (C), (D), (E), (F), (G) and (I) of the Restated
Certificate of Incorporation are hereby amended in full to be and read as
follows:
(A)(1) In the event the Corporation shall, at any time or
from time to time while any of the shares of the ESOP Preferred Stock
are outstanding, (i) pay a dividend or make a distribution in respect
of the Common Stock in shares of Common Stock or (ii) subdivide the
outstanding shares of Common Stock into a greater number of shares, in
each case whether by reclassification of shares, recapitalization of
the Corporation (excluding a recapitalization or reclassification
effected by a merger or consolidation to which Section 8 applies) or
otherwise, then, in such event, the Conversion Price shall, subject to
the provisions of paragraphs (E) and (F) of this Section 9,
automatically be adjusted by dividing such Conversion Price by a
fraction (the "Section 9(A) Fraction"), the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock outstanding immediately before such event. Such adjustment to
the Conversion Price shall be effective, upon payment of such dividend
or distribution in respect of the Common Stock, as of the record date
for the determination of stockholders entitled to receive such
dividend or distribution (on a
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3
retroactive basis), and in the case of a subdivision shall become
effective immediately as of the effective date thereof. An adjustment
to the Conversion Price pursuant to this Section 9(A)(1) shall have no
effect on the Liquidation Price or the Preferred Dividend Rate of the
ESOP Preferred Stock.
(2) In the event the Corporation shall, at any time or from
time to time while any of the shares of the ESOP Preferred Stock are
outstanding, combine the outstanding shares of Common Stock into a
lesser number of shares, whether by reclassification of shares,
recapitalization of the Corporation (excluding a recapitalization or
reclassification effected by a merger, consolidation or other
transaction to which Section 8 applies) or otherwise, then, in such
event, the Conversion Price shall, subject to the provisions of
paragraph (F) of this Section 9, automatically be adjusted by dividing
the Conversion Price in effect immediately before such event by the
Section 9(A) Fraction. An adjustment to the Conversion Price made
pursuant to this paragraph 9(A)(2) shall be given effect immediately
as of the effective date of such combination and shall have no effect
on the Liquidation Price or the Preferred Dividend Rate of the ESOP
Preferred Stock.
(B) In the event the Corporation shall, at any time or from
time to time while any of the shares of ESOP Preferred Stock are
outstanding, issue to holders of shares of Common Stock as a dividend
or distribution, including by way of a reclassification of shares or a
recapitalization of the Corporation, any right or warrant to purchase
shares of Common Stock (but not including as a right or warrant for
this purpose any security convertible into or exchangeable for shares
of Common Stock) for a consideration having a Fair Market Value (as
hereinafter defined) per share less than the Fair Market Value of a
share of Common Stock on the date of issuance of such right or warrant
(other than pursuant to any employee or director incentive,
compensation or benefit plan or arrangement of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted), then,
in such event, the Conversion Price shall, subject to the provisions
of paragraphs (E) and (F) of this Section 9, automatically be adjusted
by dividing such Conversion Price by a fraction (the "Section 9(B)
Fraction"), the numerator of which is the number of shares of Common
Stock outstanding immediately before such issuance of rights or
warrants plus the maximum
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number of shares of Common Stock that could be acquired upon exercise
in full of all such rights and warrants and the denominator of which
is the number of shares of Common Stock outstanding immediately before
such issuance of warrants or rights plus the number of shares of
Common Stock that could be purchased at the Fair Market Value of a
share of Common Stock at the time of such issuance for the maximum
aggregate consideration payable upon exercise in full of all such
rights and warrants. Such adjustment to the Conversion Price shall be
effective upon such issuance of rights or warrants. An adjustment to
the Conversion Price pursuant to this Section 9(B) shall have no
effect on the Liquidation Price or the Preferred Dividend Rate of the
ESOP Preferred Stock.
(C)(1) In the event the Corporation shall, at any time or
from time to time while any of the shares of ESOP Preferred Stock are
outstanding, issue, sell or exchange shares of Common Stock (other
than pursuant to (x) any right or warrant to purchase or acquire
shares of Common Stock (including as such a right or warrant for this
purpose any security convertible into or exchangeable for shares of
Common Stock) or (y) any employee or director incentive, compensation
or benefit plan or arrangement of the Corporation or any subsidiary of
the Corporation heretofore or hereafter adopted) at a purchase price
per share less than the Fair Market Value of a share of Common Stock
on the date of such issuance, sale or exchange, then, in such event,
the Conversion Price shall, subject to the provisions of paragraphs
(E) and (F) of this Section 9, automatically be adjusted by dividing
such Conversion Price by a fraction (the "Section 9(C)(1) Fraction"),
the numerator of which is the number of shares of Common Stock
outstanding immediately before such issuance, sale or exchange plus
the number of shares of Common Stock so issued, sold or exchanged and
the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance, sale or exchange plus
the number of shares of Common Stock that could be purchased at the
Fair Market Value of a share of Common Stock at the time of such
issuance, sale or exchange for the maximum aggregate consideration
paid therefor.
(2) In the event that the Corporation shall, at any time or
from time to time while any ESOP Preferred Stock is outstanding, issue,
sell or exchange any right or warrant to purchase or acquire
shares of Common Stock (including as such a right or warrant for this
purpose
<PAGE> 67
5
any security convertible into or exchangeable for shares of Common
Stock other than pursuant to any employee or director incentive,
compensation or benefit plan or arrangement of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted) for a
consideration having a Fair Market Value, on the date of such
issuance, sale or exchange, less than the Non-Dilutive Amount (as
hereinafter defined), then, in such event, the Conversion Price shall,
subject to the provisions of paragraphs (E) and (F) of this Section 9,
automatically be adjusted by dividing such Conversion Price by a
fraction (the "Section 9(C)(2) Fraction"), the numerator of which is
the number of shares of Common Stock outstanding immediately before
such issuance of rights or warrants plus the maximum number of shares
of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of
shares of Common Stock outstanding immediately before such issuance of
rights or warrants plus the number of shares of Common Stock that
could be purchased at the Fair Market Value of a share of Common Stock
at the time of such issuance for the total of (x) the maximum
aggregate consideration payable at the time of the issuance, sale or
exchange of such right or warrant and (y) the maximum aggregate
consideration payable upon exercise in full of all such rights or
warrants.
(3) An adjustment to the Conversion Price pursuant to this
Section 9(C) shall be effective upon the effective date of any
issuance, sale or exchange described in paragraph (1) or (2) above.
Any such adjustment shall have no effect on the Liquidation Price or
the Preferred Dividend Rate of the ESOP Preferred Stock.
(D) In the event the Corporation shall, at any time or from
time to time while any of the shares of ESOP Preferred Stock are
outstanding, make an Extraordinary Distribution (as hereinafter
defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the
Corporation (including capitalization or reclassification effected by
a merger or consolidation to which Section 8 does not apply) or effect
a Pro Rata Repurchase (as hereinafter defined) of Common Stock, then,
in such event, the Conversion Price shall, subject to the provisions
of paragraphs (E) and (F) of this Section 9, automatically be adjusted
by dividing such Conversion
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6
Price by a fraction (the "Section 9(D) Fraction"), the numerator of
which is the product of (a) the number of shares of Common Stock
outstanding immediately before such Extraordinary Distribution or Pro
Rata Repurchase minus, in the case of a Pro Rata Repurchase, the
number of shares of Common Stock repurchased by the Corporation
multiplied by (b) the Fair Market Value of a share of Common Stock on
the day before the ex-dividend date with respect to an Extraordinary
Distribution that is paid in cash and on the distribution date with
respect to an Extraordinary Distribution that is paid other than in
cash, or on the applicable expiration date (including all extensions
thereof) of any tender offer that is a Pro Rata Repurchase or on the
date of purchase with respect to any Pro Rata Repurchase that is not a
tender offer, as the case may be, and the denominator of which is (i)
the product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata
Repurchase multiplied by (y) the Fair Market Value of a share of
Common Stock on the day before the ex-dividend date with respect to an
Extraordinary Distribution that is paid in cash and on the
distribution date with respect to an Extraordinary Distribution that
is paid other than in cash, or on the applicable expiration date
(including all extensions thereof) of any tender offer that is a Pro
Rata Repurchase, or on the date of purchase with respect to any Pro
Rata Repurchase that is not a tender offer, as the case may be, minus
(ii) the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may
be. The Corporation shall send each holder of ESOP Preferred Stock
(i) notice of its intent to make any Extraordinary Distribution and
(ii) notice of any offer by the Corporation to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated to holders of
Common Stock or, in the case of an Extraordinary Distribution, the
announcement of a record date in accordance with the rules of any
stock exchange on which the Common Stock is listed or admitted to
trading. Such notice shall indicate the intended record date and the
amount and nature of such dividend or distribution, or the number of
shares subject to such offer for a Pro Rata Repurchase and the
purchase price payable by the Corporation pursuant to such offer, as
well as the Conversion Price and the number of shares of Common Stock
into which a share of ESOP Preferred Stock may be converted at such
time. An adjustment to the Conversion Price pursuant to
<PAGE> 69
7
this Section 9(D) shall be effective (i) in the case of an
Extraordinary Dividend as of the record date for the determination of
holders entitled to receive such Extraordinary Dividend (on a
retroactive basis) and (ii) in the case of a Pro Rata Repurchase upon
the expiration date thereof (if such Pro Rata Repurchase is a tender
offer) or the effective date thereof (if such Pro Rata Repurchase is
not a tender offer). Any such adjustment shall have no effect on the
Liquidation Price or the Preferred Dividend Rate of the ESOP Preferred
Stock.
(E) The Board of Directors shall have the authority to
determine that any adjustment to the Conversion Price provided for in
paragraph (A)(1), (B), (C) or (D) of this Section 9 shall not be made
(or if already made, to determine that such adjustment shall be
cancelled prospectively), and in lieu thereof to declare a dividend in
respect of the ESOP Preferred Stock in shares of ESOP Preferred Stock
(a "Special Dividend") in such a manner that a holder of ESOP
Preferred Stock will become a holder of that number of shares of ESOP
Preferred Stock equal to the product of the number of such shares held
prior to such event times the Section 9(A), Section 9(B), Section
9(C)(1), Section 9(C)(2) or Section 9(D) Fraction, as applicable. The
declaration of such a Special Dividend shall be authorized, if at all,
by the Board of Directors no later than 30 calendar days following the
authorization by the Board of Directors (or by a committee duly
authorized by the Board of Directors) of the transaction or other
event described in any of the foregoing paragraphs (A)(1), (B), (C) or
(D) that would otherwise result in an adjustment to the Conversion
Price being made pursuant to any such paragraphs, and if the Board of
Directors does not authorize the declaration of a Special Dividend by
the end of such 30-day period, then no such Special Dividend shall be
declared and the adjustment to the Conversion Price provided for in
paragraph (A)(1), (B), (C) or (D) of this Section 9 shall become final
and binding on the Corporation and all stockholders of the
Corporation. Concurrently with the declaration of any Special
Dividend pursuant to this paragraph (E), the Conversion Price, the
Liquidation Price and the Preferred Dividend Rate of all shares of
ESOP Preferred Stock shall be adjusted by dividing the Conversion
Price, the Liquidation Price and the Preferred Dividend Rate,
respectively, in effect immediately before such event by the Section
9(A), Section 9(B), Section 9(C)(1), Section 9(C)(2) or Section 9(D)
Fraction, as applicable.
<PAGE> 70
8
(F) Unless the Board of Directors determines otherwise, and
notwithstanding any other provision of this Section 9, any adjustment
to the Conversion Price provided for in any of paragraphs (A), (B), (C)
or (D) of this Section 9 shall not be made unless such adjustment
would require an increase or decrease of at least one percent (1%) in
the Conversion Price and, similarly, the Board of Directors shall not
declare any Special Dividend pursuant to paragraph (E) of this Section
9 unless such Special Dividend or adjustment would require an
increase or decrease of at least one percent (1%) in the number of
shares of ESOP Preferred Stock outstanding. Any lesser adjustment to
the Conversion Price or Special Dividend shall be carried forward and
shall be made no later than the time of, and together with, the next
subsequent adjustment to the Conversion Price or Special Dividend
which, together with any adjustment or adjustments or Special Dividend
or Dividends so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the Conversion Price or an
increase or decrease of at least one percent (1%) in the number of
shares of ESOP Preferred Stock outstanding, whichever the case may be.
(G) If the Corporation shall make any dividend or
distribution on the Common Stock or issue any Common Stock, other
capital stock or other security of the Corporation or any rights or
warrants to purchase or acquire any such security, which transaction
does not result in an adjustment to the Conversion Price or to the
number of shares of ESOP Preferred Stock outstanding pursuant to the
foregoing provisions of this Section 9, the Board of Directors of the
Corporation may, in its sole discretion, consider whether such action
is of such a nature that some type of equitable adjustment should be
made in respect of such transaction. If in such case the Board of
Directors of the Corporation determines that some type of adjustment
should be made, an adjustment shall be made effective as of such date
as determined by the Board of Directors of the Corporation. The
determination of the Board of Directors of the Corporation as to
whether some type of adjustment should be made pursuant to the
foregoing provisions of this Section 9(G), and, if so, as to what
adjustment should be made and when, shall be final and binding on the
Corporation and all stockholders of the Corporation. The Corporation
shall be entitled, but not required, to make such additional
adjustments, in addition to those required by the foregoing provisions
of this Section 9, as shall be necessary in order that any dividend or
<PAGE> 71
9
distribution in shares of capital stock of the Corporation,
subdivision, reclassification or combination of shares of the
Corporation or any reclassification of the Corporation shall not be
taxable to holders of the Common Stock.
* * *
(I) Whenever an adjustment to the Conversion Price of the
ESOP Preferred Stock is required pursuant to this Section 9, the
Corporation shall forthwith place on file with the transfer agent for
the Common Stock and the ESOP Preferred Stock, if there be one, and
with the Treasurer of the Corporation, a statement signed by the
Treasurer or any Assistant Treasurer of the Corporation stating the
adjusted Conversion Price determined as provided herein. In addition,
whenever a Special Dividend is declared pursuant to paragraph (E) of
this Section 9, (i) the maximum number of shares of ESOP Preferred
Stock shall be adjusted by multiplying 4,000,000 (or such other number
as shall be the maximum number of shares of ESOP Preferred Stock in
effect prior to the authorization of such Special Dividend) by the
Section 9(A), Section 9(B), Section 9(C)(1), Section 9(C)(2) or
Section 9(D) Fraction, as the case may be, (ii) the Board of Directors
shall take action as is necessary so that a sufficient number of
shares of ESOP Preferred Stock are designated with respect to any
increase in the number of shares of ESOP Preferred Stock to be
outstanding as a result of such Special Dividend and (iii) the
Corporation shall forthwith place on file with the transfer agent for
the Common Stock and the ESOP Preferred Stock, if there be one, and
with the Treasurer of the Corporation, a statement signed by the
Treasurer or any Assistant Treasurer of the Corporation stating the
adjusted maximum number of shares of ESOP Preferred Stock, Conversion
Price, Liquidation Price and Preferred Dividend Rate determined as
provided herein. The statement required by either of the two
preceding sentences shall set forth in reasonable detail such facts as
shall be necessary to show the reason and the manner of computing such
adjustments, including any determination of Fair Market Value involved
in such computation. Promptly after each adjustment to the maximum
number of shares of ESOP Preferred Stock, Conversion Price, the
Liquidation Price, the Preferred Dividend Rate, or the number of
shares of ESOP Preferred Stock outstanding, the Corporation shall mail
a notice thereof and of the then prevailing maximum number of shares
of ESOP Preferred Stock, Conversion Price, Liquidation Price,
Preferred Dividend Rate and
<PAGE> 72
10
number of shares of ESOP Preferred Stock outstanding to each holder of
shares of ESOP Preferred Stock.
IN WITNESS WHEREOF, MORGAN STANLEY GROUP INC. has caused this
Certificate to be signed by John J. Mack, its President, and attested by
Jonathan M. Clark, its General Counsel and Secretary, this 30th day of June,
1993.
MORGAN STANLEY GROUP INC.
By: /s/ John J. Mack
--------------------
Name: John J. Mack
Title: President
ATTEST:
/s/ Jonathan M. Clark
- --------------------------
Name: Jonathan M. Clark
Title: General Counsel and
Secretary
<PAGE> 73
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
7-3/8% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors (the "Board") of Morgan
Stanley Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), by unanimous written consent in lieu of a meeting dated as of
July 27, 1993, with certain of the designations, preferences and rights having
been fixed by the Pricing Committee of the Board (the "Committee") at a meeting
on August 18, 1993, pursuant to authority delegated to it by the Board pursuant
to the provisions of Section 141(c) of the General Corporation Law of the State
of Delaware:
RESOLVED that, pursuant to authority expressly granted to and
vested in the Committee by the Board and in the Board by provisions of
the Restated Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the issuance of a series
of Preferred Stock, without par value (the "Preferred Stock"), which
shall consist of 1,000,000 of the 30,000,000 shares of Preferred Stock
which the Corporation now has authority to issue, is authorized, and
the Board and, pursuant to the authority expressly granted to the
Committee by the Board pursuant to the provisions of Section 141(c) of
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Committee, fix the powers,
<PAGE> 74
2
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations
or restrictions thereof, set forth in the Certificate of Incorporation
which may be applicable to the Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized
by this resolution shall be the 7-3/8% Cumulative Preferred
Stock, without par value, with a stated value of $200.00 per
share (the "Cumulative Preferred Stock"). The stated value
per share of Cumulative Preferred Stock shall not for any
purpose be considered to be a determination by the Board or
the Committee with respect to the capital and surplus of the
Corporation. The number of shares of Cumulative Preferred
Stock shall be 1,000,000. The Cumulative Preferred Stock is
issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative
Preferred Stock will be entitled to receive, when, as and if
declared by the Board or the Committee out of assets of the
Corporation legally available for payment, cash dividends
payable quarterly at the rate of 7-3/8% per annum. Dividends
on the Cumulative Preferred Stock, calculated as a percentage
of the stated value, will be payable quarterly on February 28,
May 30, August 30 and November 30 commencing November 30, 1993
(each a "dividend payment date"). Dividends on shares of the
Cumulative Preferred Stock will be cumulative from the date of
initial issuance of such shares of Cumulative Preferred Stock.
Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Corporation on such
record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the
Board or the Committee. The amount of dividends payable for
the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day
year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock
(as defined in paragraph 9(b) below) with regard to the
payment of dividends
<PAGE> 75
3
unless there shall also be or have been declared and paid or
set apart for payment on the Cumulative Preferred Stock, like
dividends for all dividend payment periods of the Cumulative
Preferred Stock ending on or before the dividend payment date
of such Parity Preferred Stock, ratably in proportion to the
respective amounts of dividends (x) accumulated and unpaid or
payable on such Parity Preferred Stock, on the one hand, and
(y) accumulated and unpaid through the dividend payment
period or periods of the Cumulative Preferred Stock next
preceding such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless
full cumulative dividends on the Cumulative Preferred Stock
have been paid, no dividends (other than in Common Stock of
the Corporation) may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or on
any other stock of the Corporation ranking junior to or on a
parity with the Cumulative Preferred Stock as to dividends,
nor may any Common Stock or any other stock of the Corporation
ranking junior to or on a parity with the Cumulative Preferred
Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or
available for a sinking fund for the redemption of any shares
of such stock; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred
stock of the Corporation in compliance with the provisions of
such sinking fund may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the
terms of such sinking fund, regardless of whether at the time
of such application full cumulative dividends upon shares of
the Cumulative Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set
apart for payment) by the Corporation; provided that any such
junior or parity Preferred Stock or Common Stock may be
converted into or exchanged for stock of the Corporation
ranking junior to the Cumulative Preferred Stock as to
dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or
winding up of the Corporation, prior to the shares of Common
Stock and any other class of stock of the Corporation ranking
<PAGE> 76
4
junior to the Cumulative Preferred Stock as to rights upon
liquidation, dissolution or winding up of the Corporation, so
that in the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the
holders of the Cumulative Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital,
surplus or earnings, before any distribution is made to
holders of shares of Common Stock or any other such junior
stock, an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an
amount equal to all dividends (whether or not earned or
declared) accrued and accumulated and unpaid on the shares of
Cumulative Preferred Stock to the date of final distribution.
The holders of the Cumulative Preferred Stock will not be
entitled to receive the Liquidation Preference until the
liquidation preference of any other class of stock of the
Corporation ranking senior to the Cumulative Preferred Stock
as to rights upon liquidation, dissolution or winding up shall
have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full
amount of the Liquidation Preference and such dividends, the
holders of shares of Cumulative Preferred Stock will not be
entitled to any further participation in any distribution of
assets by the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of
the Corporation, or proceeds thereof, distributable among the
holders of shares of Parity Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be
distributable among such holders ratably in accordance with
the respective amounts which would be payable on such shares
if all amounts payable thereon were paid in full. For the
purposes hereof, neither a consolidation or merger of the
Corporation with or into any other corporation, nor a merger
of any other corporation with or into the Corporation, nor a
sale or transfer of all or any part of the Corporation's
assets for cash or securities shall be considered a
liquidation, dissolution or winding up of the Corporation.
4. Conversion. The Cumulative Preferred Stock is
not convertible into shares of any other class or series of
stock of the Corporation.
<PAGE> 77
5
5. Voting Rights. The holders of shares of
Cumulative Preferred Stock shall have no voting rights
whatsoever, except for any voting rights to which they may be
entitled under the laws of the State of Delaware, and except
as follows:
(a) Whenever, at any time or times,
dividends payable on the shares of Cumulative
Preferred Stock or on any Parity Preferred Stock with
respect to payment of dividends, shall be in arrears
for an aggregate number of days equal to six calendar
quarters or more, whether or not consecutive, the
holders of the outstanding shares of Cumulative
Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of
stock upon which like voting rights have been
conferred and are exercisable (voting together as a
class), to elect two of the authorized number of
members of the Board at the Corporation's next annual
meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have
been paid or set apart for payment, at which time
such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the
event of each and every subsequent default of the
character above mentioned. Upon any termination of
the right of the holders of shares of Cumulative
Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors
then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate
immediately.
Any director who shall have been so elected pursuant
to this paragraph may be removed at any time, either
with or without cause. Any vacancy thereby created
may be filled only by the affirmative vote of the
holders of shares of Cumulative Preferred Stock
voting separately as a class (together with the
holders of shares of any other class or series of
stock upon which like voting rights have been
conferred and are exercisable). If the office of any
director elected by the holders of shares of
Cumulative Preferred Stock voting as a class becomes
vacant for any reason other than removal from office
as aforesaid, the remaining
<PAGE> 78
6
director elected pursuant to this paragraph may
choose a successor who shall hold office for the
unexpired term in respect of which such vacancy
occurred. At elections for such directors, each
holder of shares of Cumulative Preferred Stock shall
be entitled to one vote for each share held (the
holders of shares of any other class or series of
preferred stock having like voting rights being
entitled to such number of votes, if any, for each
share of such stock held as may be granted to them).
(b) So long as any shares of Cumulative
Preferred Stock remain outstanding, the consent of
the holders of at least two-thirds of the shares of
Cumulative Preferred Stock outstanding at the time
and all other classes or series of stock upon which
like voting rights have been conferred and are
exercisable (voting together as a class) given in
person or by proxy, either in writing or at any
meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the
following:
(i) the issuance or increase of the
authorized amount of any class or series of
shares ranking prior (as that term is defined
in paragraph 9(a) hereof) to the shares of
the Cumulative Preferred Stock; or
(ii) the amendment, alteration or
repeal, whether by merger, consolidation or
otherwise, of any of the provisions of the
Certificate of Incorporation, (including this
resolution or any provision hereof) that
would materially and adversely affect any
power, preference, or special right of the
shares of Cumulative Preferred Stock or of
the holders thereof;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock
or any increase or decrease in the number of shares
of any series of Preferred Stock or the creation and
issuance of other series of Common Stock or Preferred
Stock, in each case ranking on a parity with or
junior to the shares of Cumulative Preferred Stock
with
<PAGE> 79
7
respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to materially and
adversely affect such powers, preferences or special
rights.
(c) The foregoing voting provisions shall
not apply if, at or prior to the time when the act
with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of
Cumulative Preferred Stock shall have been redeemed
or called for redemption and sufficient funds shall
have been deposited in trust to effect such
redemption.
6. Redemption. The shares of the Cumulative
Preferred Stock may be redeemed at the option of the
Corporation, as a whole, or from time to time in part, at any
time, upon not less than 30 days' prior notice mailed to the
holders of the shares to be redeemed at their addresses as
shown on the stock books of the Corporation; provided,
however, that shares of the Cumulative Preferred Stock shall
not be redeemable prior to August 30, 1998. Subject to the
foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $200.00 per share together
with an amount equal to all dividends (whether or not earned
or declared) accrued and accumulated and unpaid to, but
excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative
Preferred Stock have not been paid, the Cumulative Preferred
Stock may not be redeemed in part and the Corporation may not
purchase or acquire any shares of the Cumulative Preferred
Stock otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Cumulative
Preferred Stock. If fewer than all the outstanding shares of
Cumulative Preferred Stock are to be redeemed, the Corporation
will select those to be redeemed by lot or a substantially
equivalent method.
If a notice of redemption has been given pursuant to
this paragraph 6 and if, on or before the date fixed for
redemption, the funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders
of the shares of Cumulative Preferred Stock
<PAGE> 80
8
so called for redemption, then, notwithstanding that any
certificates for such shares have not been surrendered for
cancellation, on the redemption date dividends shall cease to
accrue on the shares to be redeemed, and at the close of
business on the redemption date the holders of such shares
shall cease to be stockholders with respect to such shares and
shall have no interest in or claims against the Corporation by
virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys
payable upon surrender (and endorsement, if required by the
Corporation) of their certificates, and the shares evidenced
thereby shall no longer be outstanding. Subject to applicable
escheat laws, any moneys so set aside by the Corporation and
unclaimed at the end of two years from the redemption date
shall revert to the general funds of the Corporation, after
which reversion the holders of such shares so called for
redemption shall look only to the general funds of the
Corporation for the payment of the amounts payable upon such
redemption. Any interest accrued on funds so deposited shall
be paid to the Corporation from time to time.
7. Authorization and Issuance of Other Securities.
No consent of the holders of the Cumulative Preferred Stock
shall be required for (a) the creation of any indebtedness of
any kind of the Corporation, (b) the creation, or increase or
decrease in the amount, of any class or series of stock of the
Corporation not ranking prior as to dividends or upon
liquidation, dissolution or winding up to the Cumulative
Preferred Stock or (c) any increase or decrease in the amount
of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
8. Amendment of Resolution. The Board and the
Committee each reserves the right by subsequent amendment of
this resolution from time to time to increase or decrease the
number of shares that constitute the Cumulative Preferred
Stock (but not below the number of shares thereof then
outstanding) and in other respects to amend this resolution
within the limitations provided by law, this resolution and
the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any
stock of any class or classes of the Corporation shall be
deemed to rank:
<PAGE> 81
9
(a) prior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
the holders of stock of such class or classes shall
be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of
shares of the Cumulative Preferred Stock;
(b) on a parity with shares of the
Cumulative Preferred Stock, either as to dividends or
upon liquidation, dissolution or winding up, or both,
whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share
thereof be different from those of the Cumulative
Preferred Stock, if the holders of stock of such
class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding
up, as the case may be, in proportion to their
respective dividend rates or liquidation prices,
without preference or priority of one over the other
as between the holders of such stock and the holders
of shares of Cumulative Preferred Stock (the term
"Parity Preferred Stock" being used to refer to any
stock on a parity with the shares of Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as
the context may require); and
(c) junior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
such class shall be Common Stock or if the holders of
the Cumulative Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders
of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as
to dividends and upon liquidation, dissolution or winding up,
to the Common Stock and on a parity with the Corporation's
ESOP Convertible
<PAGE> 82
10
Preferred Stock, with a liquidation value of $35.88 per share,
the Corporation's 9.36% Cumulative Preferred Stock, with a
liquidation value of $25.00 per share, the Corporation's 8.88%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share and the Corporation's 8-3/4% Cumulative
Preferred Stock, with a liquidation value of $200.00 per
share.
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has
caused this Certificate to be made under the seal of the Corporation
and signed by Barton M. Biggs, its Managing Director, and attested by
Ralph L. Pellecchio, its Assistant Secretary, this 24th day of August,
1993.
MORGAN STANLEY GROUP INC.
By: /s/ Barton M. Biggs
---------------------
Name: Barton M. Biggs
Title: Managing Director,
who is duly authorized to
exercise the duties of a
Vice President.
[SEAL]
Attest:
/s/ Ralph L. Pellecchio
-----------------------
Assistant Secretary
<PAGE> 83
CERTIFICATE OF CORRECTION FILED
TO CORRECT A CERTAIN ERROR IN THE
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE 7-3/8% CUMULATIVE PREFERRED STOCK
($200.00 STATED VALUE)
OF
MORGAN STANLEY GROUP INC,
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF
THE STATE OF DELAWARE ON AUGUST 24, 1993, AND
FORWARDED TO THE OFFICE OF THE RECORDER OF DEEDS
IN AND FOR KENT COUNTY, DELAWARE ON AUGUST 25, 1993
Pursuant to Section 103(f) of the
General Corporation Law of the State of Delaware
Morgan Stanley Group Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Morgan Stanley Group
Inc. (the "Corporation").
2. A Certificate of Designation of Preferences and Rights
of the 7-3/8% Cumulative Preferred Stock ($200.00 Stated Value) of the
Corporation was filed on August 24, 1993 and forwarded to the Office of the
Recorder of Deeds in and for Kent County, Delaware on August 25, 1993 (the
"Certificate").
3. The Certificate requires correction as permitted by
subsection (f) of the Section 103 of the General Corporation Law of the State
of Delaware.
<PAGE> 84
4. The inaccuracy or defect of the Certificate to be
corrected is that the concluding clause is corrected to read as follows:
"IN WITNESS WHEREOF, Morgan Stanley Group Inc. has
caused this Certificate to be made under the seal of the
Corporation and signed by Barton M. Biggs, its Managing
Director, and attested by Ralph Pallecchio, its Assistant
Secretary, this 24th day of August, 1993."
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has caused this
Certificate of Correction to be made under the seal of the Corporation and
signed by Anson M. Beard, Jr., its Managing Director, and attested by Patricia
A. Kurtz, its Assistant Secretary, this 27th day of August, 1993.
MORGAN STANLEY GROUP INC.
By: /s/ Anson M. Beard, Jr.
--------------------------------
Name: Anson M. Beard, Jr.
Title: Managing Director,
who is duly authorized
to exercise the duties
of a Vice President
[SEAL]
Attest:
/s/ Patricia A. Kurtz
-------------------------
Assistant Secretary
<PAGE> 85
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
7.82% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors (the "Board") of Morgan
Stanley Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), by unanimous written consent in lieu of a meeting dated as of
October 29, 1993, with certain of the designations, preferences and rights
having been fixed by the Pricing Committee of the Board (the "Committee") at a
meeting on November 19, 1993, pursuant to authority delegated to it by the
Board pursuant to the provisions of Section 141(c) of the General Corporation
Law of the State of Delaware:
RESOLVED that, pursuant to authority expressly granted to and
vested in the Committee by the Board and in the Board by provisions of
the Restated Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the issuance of a series
of Preferred Stock, without par value (the "Preferred Stock"), which
shall consist of 682,813 of the 30,000,000 shares of Preferred Stock
which the Corporation now has authority to issue, is authorized, and
the Board and, pursuant to the authority expressly granted to the
Committee by the Board pursuant to the provisions of Section 141(c) of
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Committee, fix the powers,
designations, preferences
<PAGE> 86
2
and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, of the
shares of such series (in addition to the powers, designations,
preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof,
set forth in the Certificate of Incorporation which may be applicable
to the Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized by
this resolution shall be the 7.82% Cumulative Preferred Stock,
without par value, with a stated value of $200.00 per share (the
"Cumulative Preferred Stock"). The stated value per share of
Cumulative Preferred Stock shall not for any purpose be
considered to be a determination by the Board or the Committee
with respect to the capital and surplus of the Corporation. The
maximum number of shares of Cumulative Preferred Stock shall be
682,813. The Cumulative Preferred Stock is issuable in whole
shares only.
2. Dividends. Holders of shares of Cumulative Preferred
Stock will be entitled to receive, when, as and if declared by
the Board or the Committee out of assets of the Corporation
legally available for payment, cash dividends payable quarterly
at the rate of 7.82% per annum. Dividends on the Cumulative
Preferred Stock will be payable quarterly on February 28, May 30,
August 30 and November 30 (each a "dividend payment date").
Dividends on shares of the Cumulative Preferred Stock will be
cumulative from the date of initial issuance of such shares of
Cumulative Preferred Stock. Dividends will be payable, in
arrears, to holders of record as they appear on the stock books
of the Corporation on such record dates, not more than 60 days
nor less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board or the Committee. The amount of
dividends payable for the initial dividend period or any period
shorter than a full dividend period shall be calculated on the
basis of a 360-day year of twelve 30-day months. No dividends
may be declared or paid or set apart for payment on any Parity
Preferred Stock (as defined in paragraph 9(b) below) with regard
to the payment of dividends unless there shall also be or have
been declared and paid or set apart for payment on the Cumulative
<PAGE> 87
3
Preferred Stock, like dividends for all dividend payment periods
of the Cumulative Preferred Stock ending on or before the
dividend payment date of such Parity Preferred Stock, ratably in
proportion to the respective amounts of dividends (x) accumulated
and unpaid or payable on such Parity Preferred Stock, on the one
hand, and (y) accumulated and unpaid through the dividend payment
period or periods of the Cumulative Preferred Stock next
preceding such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless full
cumulative dividends on the Cumulative Preferred Stock have been
paid, no dividends (other than in Common Stock of the
Corporation) may be paid or declared and set aside for payment
or other distribution made upon the Common Stock or on any other
stock of the Corporation ranking junior to or on a parity with
the Cumulative Preferred Stock as to dividends, nor may any
Common Stock or any other stock of the Corporation ranking junior
to or on a parity with the Cumulative Preferred Stock as to
dividends be redeemed, purchased or otherwise acquired for any
consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock;
provided, however, that any moneys theretofore deposited in any
sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking
fund may thereafter be applied to the purchase or redemption of
such preferred stock in accordance with the terms of such sinking
fund, regardless of whether at the time of such application full
cumulative dividends upon shares of the Cumulative Preferred
Stock outstanding to the last dividend payment date shall have
been paid or declared and set apart for payment) by the
Corporation; provided that any such junior or parity Preferred
Stock or Common Stock may be converted into or exchanged for
stock of the Corporation ranking junior to the Cumulative
Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or
winding up of the Corporation, prior to the shares of Common
Stock and any other class of stock of the Corporation ranking
junior to the Cumulative Preferred Stock as to
<PAGE> 88
4
rights upon liquidation, dissolution or winding up of the
Corporation, so that in the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Cumulative Preferred Stock shall
be entitled to receive out of the assets of the Corporation
available for distribution to its stockholders, whether from
capital, surplus or earnings, before any distribution is made to
holders of shares of Common Stock or any other such junior stock,
an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an
amount equal to all dividends (whether or not earned or declared)
accrued and accumulated and unpaid on the shares of Cumulative
Preferred Stock to the date of final distribution. The holders
of the Cumulative Preferred Stock will not be entitled to receive
the Liquidation Preference until the liquidation preference of
any other class of stock of the Corporation ranking senior to the
Cumulative Preferred Stock as to rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full. After
payment of the full amount of the Liquidation Preference and such
dividends, the holders of shares of Cumulative Preferred Stock
will not be entitled to any further participation in any
distribution of assets by the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable
among the holders of shares of Parity Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid,
then such assets, or the proceeds thereof, shall be distributable
among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts
payable thereon were paid in full. For the purposes hereof,
neither a consolidation or merger of the Corporation with or into
any other corporation, nor a merger of any other corporation with
or into the Corporation, nor a sale or transfer of all or any
part of the Corporation's assets for cash or securities shall be
considered a liquidation, dissolution or winding up of the
Corporation.
4. Conversion. The Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock of
the Corporation.
<PAGE> 89
5
5. Voting Rights. The holders of shares of Cumulative
Preferred Stock shall have no voting rights whatsoever, except
for any voting rights to which they may be entitled under the
laws of the State of Delaware, and except as follows:
(a) Whenever, at any time or times, dividends payable
on the shares of Cumulative Preferred Stock or on any Parity
Preferred Stock with respect to payment of dividends, shall
be in arrears for an aggregate number of days equal to six
calendar quarters or more, whether or not consecutive, the
holders of the outstanding shares of Cumulative Preferred
Stock shall have the right, with holders of shares of any
one or more other class or series of stock upon which like
voting rights have been conferred and are exercisable
(voting together as a class), to elect two of the authorized
number of members of the Board at the Corporation's next
annual meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have been paid
or set apart for payment, at which time such right shall
terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every
subsequent default of the character above mentioned. Upon
any termination of the right of the holders of shares of
Cumulative Preferred Stock as a class to vote for directors
as herein provided, the term of office of all directors then
in office elected by the holders of shares of Cumulative
Preferred Stock shall terminate immediately.
Any director who shall have been so elected pursuant to this
paragraph may be removed at any time, either with or without
cause. Any vacancy thereby created may be filled only by
the affirmative vote of the holders of shares of Cumulative
Preferred Stock voting separately as a class (together with
the holders of shares of any other class or series of stock
upon which like voting rights have been conferred and are
exercisable). If the office of any director elected by the
holders of shares of Cumulative Preferred Stock voting as a
class becomes vacant for any reason other than removal from
office as aforesaid, the remaining
<PAGE> 90
6
director elected pursuant to this paragraph may choose
a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. At elections for
such directors, each holder of shares of Cumulative
Preferred Stock shall be entitled to one vote for each share
held (the holders of shares of any other class or series of
preferred stock having like voting rights being entitled to
such number of votes, if any, for each share of such stock
held as may be granted to them).
(b) So long as any shares of Cumulative Preferred
Stock remain outstanding, the consent of the holders of at
least two-thirds of the shares of Cumulative Preferred Stock
outstanding at the time and all other classes or series of
stock upon which like voting rights have been conferred and
are exercisable (voting together as a class) given in person
or by proxy, either in writing or at any meeting called for
the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(i) the issuance or increase of the authorized
amount of any class or series of shares ranking prior
(as that term is defined in paragraph 9(a) hereof) to
the shares of the Cumulative Preferred Stock; or
(ii) the amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of any
of the provisions of the Certificate of
Incorporation, (including this resolution or any
provision hereof) that would materially and adversely
affect any power, preference, or special right of the
shares of Cumulative Preferred Stock or of the
holders thereof;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock
or any increase or decrease in the number of shares
of any series of Preferred Stock or the creation and
issuance of other series of Common Stock or Preferred
Stock, in each case ranking on a parity with or
junior to the shares of Cumulative Preferred Stock
with
<PAGE> 91
7
respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to materially and
adversely affect such powers, preferences or special
rights.
(c) The foregoing voting provisions shall not apply
if, at or prior to the time when the act with respect to
which such vote would otherwise be required shall be
effected, all outstanding shares of Cumulative Preferred
Stock shall have been redeemed or called for redemption and
sufficient funds shall have been deposited in trust to
effect such redemption.
6. Redemption Shares. The shares of the Cumulative
Preferred Stock may be redeemed at the option of the Corporation,
as a whole, or from time to time in part, at any time, upon not
less than 30 days' prior notice mailed to the holders of the
shares to be redeemed at their addresses as shown on the stock
books of the Corporation; provided, however, that shares of the
Cumulative Preferred Stock shall not be redeemable prior to
November 30, 1998. Subject to the foregoing, on or after such
date, shares of the Cumulative Preferred Stock are redeemable at
$200.00 per share together with an amount equal to all dividends
(whether or not earned or declared) accrued and accumulated and
unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred
Stock have not been paid, the Cumulative Preferred Stock may not
be redeemed in part and the Corporation may not purchase or
acquire any shares of the Cumulative Preferred Stock otherwise
than pursuant to a purchase or exchange offer made on the same
terms to all holders of the Cumulative Preferred Stock. If fewer
than all the outstanding shares of Cumulative Preferred Stock are
to be redeemed, the Corporation will select those to be redeemed
by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption,
the funds necessary for such redemption shall have been set aside
by the Corporation, separate and apart from its other funds, in
trust for the pro rata benefit of the holders of the shares of
Cumulative Preferred Stock
<PAGE> 92
8
so called for redemption, then, notwithstanding that any
certificates for such shares have not been surrendered for
cancellation, on the redemption date dividends shall cease to
accrue on the shares to be redeemed, and at the close of business
on the redemption date the holders of such shares shall cease to
be stockholders with respect to such shares and shall have no
interest in or claims against the Corporation by virtue thereof
and shall have no voting or other rights with respect to such
shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of
their certificates, and the shares evidenced thereby shall no
longer be outstanding. Subject to applicable escheat laws, any
moneys so set aside by the Corporation and unclaimed at the end
of two years from the redemption date shall revert to the general
funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the
general funds of the Corporation for the payment of the amounts
payable upon such redemption. Any interest accrued on funds so
deposited shall be paid to the Corporation from time to time.
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall be
required for (a) the creation of any indebtedness of any kind of
the Corporation, (b) the creation, or increase or decrease in the
amount, of any class or series of stock of the Corporation not
ranking prior as to dividends or upon liquidation, dissolution or
winding up to the Cumulative Preferred Stock or (c) any increase
or decrease in the amount of authorized Common Stock or any
increase, decrease or change in the par value thereof or in any
other terms thereof.
8. Amendment of Resolution. The Board and the Committee
each reserves the right by subsequent amendment of this
resolution from time to time to increase or decrease the number
of shares that constitute the Cumulative Preferred Stock (but not
below the number of shares thereof then outstanding) and in other
respects to amend this resolution within the limitations provided
by law, this resolution and the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any stock
of any class or classes of the Corporation shall be deemed to
rank:
<PAGE> 93
9
(a) prior to shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, if the holders of stock
of such class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up,
as the case may be, in preference or priority to the holders
of shares of the Cumulative Preferred Stock;
(b) on a parity with shares of the Cumulative
Preferred Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, whether or not the
dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those
of the Cumulative Preferred Stock, if the holders of stock
of such class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority
of one over the other as between the holders of such stock
and the holders of shares of Cumulative Preferred Stock (the
term "Parity Preferred Stock" being used to refer to any
stock on a parity with the shares of Cumulative Preferred
Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, as the context may
require); and
(c) junior to shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, if such class shall be
Common Stock or if the holders of the Cumulative Preferred
Stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to
the holders of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as to
dividends and upon liquidation, dissolution or winding up, to the
Common Stock and on a parity with the Corporation's ESOP
Convertible
<PAGE> 94
10
Preferred Stock, with a liquidation value of $35.88 per share,
the Corporation's 9.36% Cumulative Preferred Stock, with a
liquidation value of $25.00 per share, the Corporation's 8.88%
Cumulative Preferred Stock, with a liquidation value of $200.00
per share, the Corporation's 8-3/4% Cumulative Preferred Stock,
with a liquidation value of $200.00 per share and the
Corporation's 7-3/8% Cumulative Preferred Stock, with a
liquidation value of $200.00 per share.
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has caused
this Certificate to be made under the seal of the Corporation and signed by
Richard B. Fisher, its Chairman, and attested by Patricia A. Kurtz, its
Assistant Secretary, this 23rd day of November, 1993.
MORGAN STANLEY GROUP INC.
/s/ Richard B. Fisher
By: ------------------------
Name: Richard B. Fisher
Title: Chairman
[SEAL]
Attest:
/s/ Patricia A. Kurtz
- -----------------------------
Assistant Secretary
<PAGE> 95
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
7.80% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
-------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------------
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors (the "Board") of Morgan
Stanley Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), by unanimous written consent in lieu of a meeting dated as of
October 29, 1993, with certain of the designations, preferences and rights
having been fixed by the Pricing Committee of the Board (the "Committee") at a
meeting on February 1, 1994, pursuant to authority delegated to it by the Board
pursuant to the provisions of Section 141(c) of the General Corporation Law of
the State of Delaware:
RESOLVED that, pursuant to authority expressly granted to and
vested in the Committee by the Board and in the Board by provisions of
the Restated Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the issuance of a series
of Preferred Stock, without par value (the "Preferred Stock"), which
shall consist of 1,150,000 of the 30,000,000 shares of Preferred
Stock which the Corporation now has authority to issue, is authorized,
and the Board and, pursuant to the authority expressly granted to the
Committee by the Board pursuant to the provisions of Section 141(c) of
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Committee, fix the powers,
<PAGE> 96
2
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations
or restrictions thereof, set forth in the Certificate of Incorporation
which may be applicable to the Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares.
The designation for such series of the Preferred Stock
authorized by this resolution shall be the 7.80% Cumulative
Preferred Stock, without par value, with a stated value of
$200.00 per share (the "Cumulative Preferred Stock"). The
stated value per share of Cumulative Preferred Stock shall not
for any purpose be considered to be a determination by the
Board or the Committee with respect to the capital and surplus
of the Corporation. The maximum number of shares of
Cumulative Preferred Stock shall be 1,150,000. The Cumulative
Preferred Stock is issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative
Preferred Stock will be entitled to receive, when, as and if
declared by the Board or the Committee out of assets of the
Corporation legally available for payment, cash dividends
payable quarterly at the rate of 7.80% per annum. Dividends
on the Cumulative Preferred Stock will be payable quarterly on
February 28, May 30, August 30 and November 30 (each a
"dividend payment date"). Dividends on shares of the
Cumulative Preferred Stock will be cumulative from the date of
initial issuance of such shares of Cumulative Preferred Stock.
Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Corporation on such
record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the
Board or the Committee. The amount of dividends payable for
the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day
year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock
(as defined in paragraph 9(b) below) with regard to the
payment of dividends unless there shall also be or have been
declared and paid or set apart for payment on the Cumulative
<PAGE> 97
3
Preferred Stock, like dividends for all dividend payment
periods of the Cumulative Preferred Stock ending on or before
the dividend payment date of such Parity Preferred Stock,
ratably in proportion to the respective amounts of dividends
(x) accumulated and unpaid or payable on such Parity Preferred
Stock, on the one hand, and (y) accumulated and unpaid through
the dividend payment period or periods of the Cumulative
Preferred Stock next preceding such dividend payment date, on
the other hand.
Except as set forth in the preceding sentence, unless
full cumulative dividends on the Cumulative Preferred Stock
have been paid, no dividends (other than in Common Stock of
the Corporation) may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or on
any other stock of the Corporation ranking junior to or on a
parity with the Cumulative Preferred Stock as to dividends,
nor may any Common Stock or any other stock of the Corporation
ranking junior to or on a parity with the Cumulative Preferred
Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration (or any payment be made to or
available for a sinking fund for the redemption of any shares
of such stock; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred
stock of the Corporation in compliance with the provisions of
such sinking fund may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the
terms of such sinking fund, regardless of whether at the time
of such application full cumulative dividends upon shares of
the Cumulative Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set
apart for payment) by the Corporation; provided that any such
junior or parity Preferred Stock or Common Stock may be
converted into or exchanged for stock of the Corporation
ranking junior to the Cumulative Preferred Stock as to
dividends.
3. Liquidation Preference. The shares of
Cumulative Preferred Stock shall rank, as to liquidation,
dissolution or winding up of the Corporation, prior to the
shares of Common Stock and any other class of stock of the
Corporation ranking junior to the Cumulative Preferred Stock
as to
<PAGE> 98
4
rights upon liquidation, dissolution or winding up of the
Corporation, so that in the event of any liquidation,
dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of the Cumulative
Preferred Stock shall be entitled to receive out of the assets
of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common
Stock or any other such junior stock, an amount equal to
$200.00 per share (the "Liquidation Preference" of a share of
Cumulative Preferred Stock) plus an amount equal to all
dividends (whether or not earned or declared) accrued and
accumulated and unpaid on the shares of Cumulative Preferred
Stock to the date of final distribution. The holders of the
Cumulative Preferred Stock will not be entitled to receive the
Liquidation Preference until the liquidation preference of any
other class of stock of the Corporation ranking senior to the
Cumulative Preferred Stock as to rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full.
After payment of the full amount of the Liquidation Preference
and such dividends, the holders of shares of Cumulative
Preferred Stock will not be entitled to any further
participation in any distribution of assets by the
Corporation. If, upon any liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of
Parity Preferred Stock shall be insufficient to pay in full
the preferential amount aforesaid, then such assets, or the
proceeds thereof, shall be distributable among such holders
ratably in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were
paid in full. For the purposes hereof, neither a
consolidation or merger of the Corporation with or into any
other corporation, nor a merger of any other corporation with
or into the Corporation, nor a sale or transfer of all or any
part of the Corporation's assets for cash or securities shall
be considered a liquidation, dissolution or winding up of the
Corporation.
4. Conversion. The Cumulative Preferred Stock
is not convertible into shares of any other class or series of
stock of the Corporation.
<PAGE> 99
5
5. Voting Rights. The holders of shares of
Cumulative Preferred Stock shall have no voting rights
whatsoever, except for any voting rights to which they may be
entitled under the laws of the State of Delaware, and except
as follows:
(a) Whenever, at any time or times,
dividends payable on the shares of Cumulative
Preferred Stock or on any Parity Preferred Stock with
respect to payment of dividends, shall be in arrears
for an aggregate number of days equal to six calendar
quarters or more, whether or not consecutive, the
holders of the outstanding shares of Cumulative
Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of
stock upon which like voting rights have been
conferred and are exercisable (voting together as a
class), to elect two of the authorized number of
members of the Board at the Corporation's next annual
meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have
been paid or set apart for payment, at which time
such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the
event of each and every subsequent default of the
character above mentioned. Upon any termination of
the right of the holders of shares of Cumulative
Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors
then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate
immediately.
Any director who shall have been so elected pursuant
to this paragraph may be removed at any time, either
with or without cause. Any vacancy thereby created
may be filled only by the affirmative vote of the
holders of shares of Cumulative Preferred Stock
voting separately as a class (together with the
holders of shares of any other class or series of
stock upon which like voting rights have been
conferred and are exercisable). If the office of any
director elected by the holders of shares of
Cumulative Preferred Stock voting as a class becomes
vacant for any reason other than removal from office
as aforesaid, the remaining
<PAGE> 100
6
director elected pursuant to this paragraph may choose a successor who
shall hold office for the unexpired term in respect of which such
vacancy occurred. At elections for such directors, each holder of
shares of Cumulative Preferred Stock shall be entitled to one vote for
each share held (the holders of shares of any other class or series of
preferred stock having like voting rights being entitled to such number
of votes, if any, for each share of such stock held as may be granted to
them).
(b) So long as any shares of Cumulative Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of
the shares of the Cumulative Preferred Stock outstanding at the time and
all other classes or series of stock upon which like voting rights have
been conferred and are exercisable (voting together as a class) given in
person or by proxy, either in writing or at any meeting called for the
purpose, shall be necessary to permit, effect or validate any one or
more of the following:
(i) the issuance or increase of the authorized amount of
any class or series of shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the shares of the
Cumulative Preferred Stock; or
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of
the Certificate of Incorporation, (including this resolution or
any provision hereof) that would materially and adversely
affect any power, preference, or special right of the shares of
Cumulative Preferred Stock or of the holders thereof;
provided, however, that any increase in the amount of authorized
Common Stock or authorized Preferred Stock or any increase or
decrease in the number of shares of any series of Preferred
Stock or the creation and issuance of other series of Common
Stock or Preferred Stock, in each case ranking on a parity with
or junior to the shares of Cumulative Preferred Stock with
<PAGE> 101
7
respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up, shall
not be deemed to materially and adversely affect such
powers, preferences or special rights.
(c) The foregoing voting provisions shall not
apply if, at or prior to the time when the act with respect to
which such vote would otherwise be required shall be effected,
all outstanding shares of Cumulative Preferred Stock shall have
been redeemed or called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.
6. Redemption Shares. The shares of the Cumulative
Preferred Stock may be redeemed at the option of the Corporation, as a
whole, or from time to time in part, at any time, upon not less than 30
days' prior notice mailed to the holders of the shares to be redeemed at
their addresses as shown on the stocks books of the Corporation;
provided, however, that shares of the Cumulative Preferred Stock shall
not be redeemable prior to February 28, 1999. Subject to the foregoing,
on or after such date, shares of the Cumulative Preferred Stock are
redeemable at $200.00 per share together with an amount equal to all
dividends (whether or not earned or declared) accrued and accumulated
and unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred Stock
have not been paid, the Cumulative Preferred Stock may not be redeemed
in part and the Corporation may not purchase or acquire any shares of
the Cumulative Preferred Stock otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of the Cumulative
Preferred Stock. If fewer than all the outstanding shares of Cumulative
Preferred Stock are to be redeemed, the Corporation will select those to
be redeemed by lot or a substantially equivalent method.
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption, the
funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in trust for the
pro rata benefit of the holders of the shares of Cumulative Preferred
Stock
<PAGE> 102
8
so called for redemption, then, notwithstanding that any certificates
for such shares have not been surrendered for cancellation, on the
redemption date dividends shall cease to accrue on the shares to
be redeemed, and at the close of business on the redemption date the
holders of such shares shall cease to be stockholders with respect to
such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights
with respect to such shares, except the right to receive the moneys
payable upon surrender (and endorsement, if required by the Corporation)
of their certificates, and the shares evidenced thereby shall no longer
be outstanding. Subject to applicable escheat laws, any moneys so set
aside by the Corporation and unclaimed at the end of two years from the
redemption date shall revert to the general funds of the Corporation,
after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for
the payment of the amounts payable upon such redemption. Any interest
accrued on funds so deposited shall be paid to the Corporation from time
to time.
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall be
required for (a) the creation of any indebtedness of any kind of the
Corporation, (b) the creation, or increase or decrease in the amount, of
any class or series of stock of the Corporation not ranking prior as to
dividends or upon liquidation, dissolution or winding up to the
Cumulative Preferred Stock or (c) any increase or decrease in the amount
of authorized Common Stock or any increase, decrease or change in the
par value thereof or in any other terms thereof.
8. Amendment of Resolution. The Board and the Committee
each reserves the right by subsequent amendment of this resolution from
time to time to increase or decrease the number of shares that
constitute the Cumulative Preferred Stock (but not below the number of
shares thereof then outstanding) and in other respects to amend this
resolution within the limitations provided by law, this resolution and
the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any stock
of any class or classes of the Corporation shall be deemed to rank:
<PAGE> 103
9
(a) prior to shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution
or winding up, or both, if the holders of stock of such class
or classes shall be entitled by the terms thereof to the
receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of shares of the
Cumulative Preferred Stock;
(b) on a parity with shares of the Cumulative
Preferred Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, whether or not the dividend
rates, dividend payment dates, or redemption or liquidation
prices per share thereof be different from those of the
Cumulative Preferred Stock, if the holders of stock of such
class or classes shall be entitled by the terms thereof to the
receipt of dividends or of amounts distributed upon
liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority of one over the other as
between the holders of such stock and the holders of shares of
Cumulative Preferred Stock (the term "Parity Preferred Stock"
being used to refer to any stock on a parity with the shares of
Cumulative Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as the context
may require); and
(c) junior to shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution
or winding up, or both, if such class shall be Common Stock or
if the holders of the Cumulative Preferred Stock shall be
entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of
stock in such class or classes.
The Cumulative Preferred Stock shall rank prior, as to
dividends and upon liquidation, dissolution or winding up, to the Common
Stock and on a parity with the Corporation's ESOP Convertible
<PAGE> 104
10
Preferred Stock, with a liquidation value of $35.88
per share, the Corporation's 9.36% Cumulative
Preferred Stock, with a liquidation value of $25.00
per share, the Corporation's 8.88% Cumulative
Preferred Stock, with a liquidation value of $200.00
per share, the Corporation's 8-3/4% Cumulative
Preferred Stock, with a liquidation value of $200.00
per share, the Corporation's 7-3/8% Cumulative
Preferred Stock, with a liquidation value of $200.00
per share and, if issued, the Corporation's 7.82%
Cumulative Preferred Stock with a liquidation value
of $200.00 per share.
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has caused
this Certificate to be made under the seal of the Corporation and signed
by Richard B. Fisher, its Chairman, and attested by Patricia A. Kurtz,
its Assistant Secretary, this 4 day of February, 1994.
MORGAN STANLEY GROUP INC.
By: /s/ Richard B. Fisher
---------------------------
Name: Richard B. Fisher
Title: Chairman of the Board
[SEAL]
Attest:
/s/ Patricia A. Kurtz
- -------------------------
Patricia A. Kurtz
Assistant Secretary
<PAGE> 105
CERTIFICATE OF DECREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
7.82% CUMULATIVE PREFERRED STOCK
Morgan Stanley Group Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
That the Restated Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of Delaware on September 15, 1992
and forwarded for recording in the Office of the Recorder of Deeds for Kent
County, Delaware on September 15, 1992 and a Certificate of Designation of
Preferences and Rights ("Certificate of Designation") of the 7.82% Cumulative
Preferred Stock, was filed in said Office of the Secretary of State on November
24, 1993 and forwarded for recording in the office of the Recorder of Deeds on
even date therewith.
That pursuant to authority expressly granted to and vested in the
Pricing Committee of the Board of Directors of the Corporation (the "Pricing
Committee"), by resolutions duly adopted by said Board of Directors on October
29, 1993 (the "Resolutions"), the Pricing Committee fixed certain designations,
preferences and rights of the aforesaid 7.82% Cumulative Preferred Stock as set
forth in the Certificate of Designation.
That pursuant to authority expressly granted to and vested in the
Pricing Committee by the Resolutions, the Pricing Committee by a written
unanimous consent in lieu of a meeting dated as of April 12, 1994 duly adopted
a resolution authorizing and directing a decrease in the authorized number of
shares of the 7.82% Cumulative Preferred Stock of the Corporation, from 682,813
shares to 611,238 shares and providing that the 71,575 shares of the 7.82%
Cumulative Preferred Stock designated by the Pricing Committee but not issued
and outstanding resume the status of authorized and unissued Preferred Stock,
all in accordance with the provisions of Section 151 of The General Corporation
Law of the State of Delaware and the aforesaid Restated Certificate of
Incorporation of the Corporation.
<PAGE> 106
IN WITNESS WHEREOF, said Morgan Stanley Group Inc., has caused this
certificate to be signed by Richard B. Fisher, its Chairman, and attested by
Patricia A. Kurtz, its Assistant Secretary, this 12 day of April, 1994.
By /s/ Richard B. Fisher
------------------------------
Name: Richard B. Fisher
Title: Chairman
ATTEST:
By /s/ Patricia A. Kurtz
------------------------------
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 107
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
9.00% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------
The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted by the Board of Directors (the "Board") of Morgan Stanley Group
-----
Inc., a Delaware corporation (hereinafter called the "Corporation"), by
-----------
unanimous written consent in lieu of a meeting dated as of October 29, 1993 with
certain of the designations, preferences and rights having been fixed by the
Pricing Committee of the Board (the "Committee") at a meeting on February 10,
---------
1995, pursuant to authority delegated to it by the Board pursuant to the
provisions of Section 141(c) of the General Corporation Law of the State of
Delaware:
RESOLVED that, pursuant to authority expressly granted to and vested
in the Committee by the Board and in the Board by provisions of the
Restated Certificate of Incorporation of the Corporation, as amended (the
"Certificate of Incorporation"), the issuance of a series of Preferred
-----------------------------
Stock, without par value (the "Preferred Stock"), which shall consist of
---------------
738,763 of the 30,000,000 shares of Preferred Stock which the Corporation
now has authority to issue, is authorized, and the Board and, pursuant to
the authority expressly granted to the Committee by the Board pursuant to
the provisions of Section 141(c) of the General Corporation Law of the
State of Delaware and the Certificate of Incorporation, the Committee fix
the powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, set
<PAGE> 108
2
forth in the Certificate of Incorporation which may be applicable to the
Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares. The designation
-----------------------------------------
for such series of the Preferred Stock authorized by this resolution
shall be the 9.00% Cumulative Preferred Stock, without par value, with
a stated value of $200.00 per share (the "Cumulative Preferred
--------------------
Stock"). The stated value per share of Cumulative Preferred Stock
------
shall not for any purpose be considered to be a determination by the
Board or the Committee with respect to the capital and surplus of the
Corporation. The maximum number of shares of Cumulative Preferred
Stock shall be 738,763. The Cumulative Preferred Stock is issuable in
whole shares only.
2. Dividends. Holders of shares of Cumulative Preferred Stock
---------
will be entitled to receive, when, as and if declared by the Board or
the Committee out of assets of the Corporation legally available for
payment, cash dividends payable quarterly at the rate of 9.00% per
annum. Dividends on the Cumulative Preferred Stock will be payable
quarterly on February 28, May 30, August 30 and November 30 (each a
"dividend payment date"). Dividends on shares of the Cumulative
----------------------
Preferred Stock will be cumulative from the date of initial issuance
of such shares of Cumulative Preferred Stock. Dividends will be
payable, in arrears, to holders of record as they appear on the stock
books of the Corporation on such record dates, not more than 60 days
nor less than 10 days preceding the payment dates thereof, as shall be
fixed by the Board or the Committee. The amount of dividends payable
for the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day year of
twelve 30-day months. No dividends may be declared or paid or set
apart for payment on any Parity Preferred Stock (as defined in
paragraph 9(b) below) with regard to the payment of dividends unless
there shall also be or have been declared and paid or set apart for
payment on the Cumulative Preferred Stock, like dividends for all
dividend payment periods of the Cumulative Preferred Stock ending on
or before the dividend payment date of such Parity Preferred Stock,
ratably in proportion to the respective amounts of dividends (x)
accumulated and unpaid or payable on such Parity Preferred Stock, on
the one hand, and (y) accumulated and unpaid through the dividend
payment period or periods of the Cumulative Preferred Stock next
preceding such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless full
cumulative dividends on the Cumulative Preferred Stock have been paid,
no dividends (other than in Common Stock of the Corporation) may be
paid or declared and set aside for payment or other distribution made
upon the Common Stock or on any other stock of the Corporation ranking
junior to or on a parity with the
<PAGE> 109
3
Cumulative Preferred Stock as to dividends, nor may any Common Stock
or any other stock of the Corporation ranking junior to or on a parity
with the Cumulative Preferred Stock as to dividends be redeemed,
purchased or otherwise acquired for any consideration (or any payment
be made to or available for a sinking fund for the redemption of any
shares of such stock; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred stock of
the Corporation in compliance with the provisions of such sinking fund
may thereafter be applied to the purchase or redemption of such
preferred stock in accordance with the terms of such sinking fund,
regardless of whether at the time of such application full cumulative
dividends upon shares of the Cumulative Preferred Stock outstanding to
the last dividend payment date shall have been paid or declared and
set apart for payment) by the Corporation; provided that any such
junior or parity Preferred Stock or Common Stock may be converted into
or exchanged for stock of the Corporation ranking junior to the
Cumulative Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative Preferred
----------------------
Stock shall rank, as to liquidation, dissolution or winding up of the
Corporation, prior to the shares of Common Stock and any other class
of stock of the Corporation ranking junior to the Cumulative Preferred
Stock as to rights upon liquidation, dissolution or winding up of the
Corporation, so that in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of the Cumulative Preferred Stock shall be entitled to receive
out of the assets of the Corporation available for distribution to its
stockholders, whether from capital, surplus or earnings, before any
distribution is made to holders of shares of Common Stock or any other
such junior stock, an amount equal to $200.00 per share (the
"Liquidation Preference" of a share of Cumulative Preferred Stock)
-----------------------
plus an amount equal to all dividends (whether or not earned or
declared) accrued and accumulated and unpaid on the shares of
Cumulative Preferred Stock to the date of final distribution. The
holders of the Cumulative Preferred Stock will not be entitled to
receive the Liquidation Preference until the liquidation preference of
any other class of stock of the Corporation ranking senior to the
Cumulative Preferred Stock as to rights upon liquidation, dissolution
or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. After payment of the full
amount of the Liquidation Preference and such dividends, the holders
of shares of Cumulative Preferred Stock will not be entitled to any
further participation in any distribution of assets by the
Corporation. If, upon any liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of shares of Parity Preferred Stock
shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be
distributable among such holders
<PAGE> 110
4
ratably in accordance with the respective amounts which would be
payable on such shares if all amounts payable thereon were paid in
full. For the purposes hereof, neither a consolidation or merger of
the Corporation with or into any other corporation, nor a merger of
any other corporation with or into the Corporation, nor a sale or
transfer of all or any part of the Corporation's assets for cash or
securities shall be considered a liquidation, dissolution or winding
up of the Corporation.
4. Conversion. The Cumulative Preferred Stock is not
----------
convertible into shares of any other class or series of stock of the
Corporation.
5. Voting Rights. The holders of shares of Cumulative Preferred
-------------
Stock shall have no voting rights whatsoever, except for any voting
rights to which they may be entitled under the laws of the State of
Delaware, and except as follows:
(a) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock or on any Parity Preferred
Stock with respect to payment of dividends, shall be in arrears
for an aggregate number of days equal to six calendar quarters or
more, whether or not consecutive, the holders of the outstanding
shares of Cumulative Preferred Stock shall have the right, with
holders of shares of any one or more other class or series of
stock upon which like voting rights have been conferred and are
exercisable (voting together as a class), to elect two of the
authorized number of members of the Board at the Corporation's
next annual meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have been paid or
set apart for payment, at which time such right shall terminate,
except as herein or by law expressly provided, subject to
revesting in the event of each and every subsequent default of
the character above mentioned. Upon any termination of the right
of the holders of shares of Cumulative Preferred Stock as a class
to vote for directors as herein provided, the term of office of
all directors then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate immediately.
Any director who shall have been so elected pursuant to this
paragraph may be removed at any time, either with or without
cause. Any vacancy thereby created may be filled only by the
affirmative vote of the holders of shares of Cumulative Preferred
Stock voting separately as a class (together with the holders of
shares of any other class or series of stock upon which like
voting rights have been conferred and are exercisable). If the
office of any director elected by the holders of shares of
Cumulative Preferred Stock voting as a class becomes vacant
<PAGE> 111
5
for any reason other than removal from office as aforesaid, the
remaining director elected pursuant to this paragraph may choose
a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. At elections for such
directors, each holder of shares of Cumulative Preferred Stock
shall be entitled to one vote for each share held (the holders of
shares of any other class or series of preferred stock having
like voting rights being entitled to such number of votes, if
any, for each share of such stock held as may be granted to
them).
(b) So long as any shares of Cumulative Preferred Stock
remain outstanding, the consent of the holders of at least two-
thirds of the shares of Cumulative Preferred Stock outstanding at
the time and all other classes or series of stock upon which like
voting rights have been conferred and are exercisable (voting
together as a class) given in person or by proxy, either in
writing or at any meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the
following:
(i) the issuance or increase of the authorized amount
of any class or series of shares ranking prior (as that term
is defined in paragraph 9(a) hereof) to the shares of the
Cumulative Preferred Stock; or
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions
of the Certificate of Incorporation, (including this
resolution or any provision hereof) that would materially
and adversely affect any power, preference, or special right
of the shares of Cumulative Preferred Stock or of the
holders thereof;
provided, however, that any increase in the amount of
authorized Common Stock or authorized Preferred Stock or any
increase or decrease in the number of shares of any series
of Preferred Stock or the creation and issuance of other
series of Common Stock or Preferred Stock, in each case
ranking on a parity with or junior to the shares of
Cumulative Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially
and adversely affect such powers, preferences or special
rights.
(c) The foregoing voting provisions shall not apply if, at
or prior to the time when the act with respect to which such vote
would
<PAGE> 112
6
otherwise be required shall be effected, all outstanding shares
of Cumulative Preferred Stock shall have been redeemed or called
for redemption and sufficient funds shall have been deposited in
trust to effect such redemption.
6. Redemption Shares. The shares of the Cumulative Preferred
-----------------
Stock may be redeemed at the option of the Corporation, as a whole, or
from time to time in part, at any time, upon not less than 30 days'
prior notice mailed to the holders of the shares to be redeemed at
their addresses as shown on the stock books of the Corporation;
provided, however, that shares of the Cumulative Preferred Stock shall
not be redeemable prior to February 28, 2000. Subject to the
foregoing, on or after such date, shares of the Cumulative Preferred
Stock are redeemable at $200.00 per share together with an amount
equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid to, but excluding, the date fixed for
redemption.
If full cumulative dividends on the Cumulative Preferred Stock
have not been paid, the Cumulative Preferred Stock may not be redeemed
in part and the Corporation may not purchase or acquire any shares of
the Cumulative Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders of the
Cumulative Preferred Stock. If fewer than all the outstanding shares
of Cumulative Preferred Stock are to be redeemed, the Corporation will
select those to be redeemed by lot or a substantially equivalent
method.
If a notice of redemption has been given pursuant to this
paragraph 6 and if, on or before the date fixed for redemption, the
funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in trust for the
pro rata benefit of the holders of the shares of Cumulative Preferred
Stock so called for redemption, then, notwithstanding that any
certificates for such shares have not been surrendered for
cancellation, on the redemption date dividends shall cease to accrue
on the shares to be redeemed, and at the close of business on the
redemption date the holders of such shares shall cease to be
stockholders with respect to such shares and shall have no interest in
or claims against the Corporation by virtue thereof and shall have no
voting or other rights with respect to such shares, except the right
to receive the moneys payable upon surrender (and endorsement, if
required by the Corporation) of their certificates, and the shares
evidenced thereby shall no longer be outstanding. Subject to
applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of two years from the redemption date shall
revert to the general funds of the Corporation, after which reversion
the holders of such shares so called for redemption shall look only to
the general funds of the Corporation for the
<PAGE> 113
7
payment of the amounts payable upon such redemption. Any interest
accrued on funds so deposited shall be paid to the Corporation from
time to time.
7. Authorization and Issuance of Other Securities. No consent
----------------------------------------------
of the holders of the Cumulative Preferred Stock shall be required for
(a) the creation of any indebtedness of any kind of the Corporation,
(b) the creation, or increase or decrease in the amount, of any class
or series of stock of the Corporation not ranking prior as to
dividends or upon liquidation, dissolution or winding up to the
Cumulative Preferred Stock or (c) any increase or decrease in the
amount of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
8. Amendment of Resolution. The Board and the Committee each
-----------------------
reserves the right by subsequent amendment of this resolution from
time to time to increase or decrease the number of shares that
constitute the Cumulative Preferred Stock (but not below the number of
shares thereof then outstanding) and in other respects to amend this
resolution within the limitations provided by law, this resolution and
the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any stock of
----
any class or classes of the Corporation shall be deemed to rank:
(a) prior to shares of the Cumulative Preferred Stock,
either as to dividends or upon liquidation, dissolution or
winding up, or both, if the holders of stock of such class or
classes shall be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of the Cumulative Preferred
Stock;
(b) on a parity with shares of the Cumulative Preferred
Stock, either as to dividends or upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share
thereof be different from those of the Cumulative Preferred
Stock, if the holders of stock of such class or classes shall be
entitled by the terms thereof to the receipt of dividends or of
amounts distributed upon liquidation, dissolution or winding up,
as the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority of
one over the other as between the holders of such stock and the
holders of shares of Cumulative Preferred Stock (the term "Parity
------
Preferred Stock" being used to refer to any stock on a parity
---------------
with the shares of
<PAGE> 114
8
Cumulative Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as the context
may require); and
(c) junior to shares of the Cumulative Preferred Stock,
either as to dividends or upon liquidation, dissolution or
winding up, or both, if such class shall be Common Stock or if
the holders of the Cumulative Preferred Stock shall be entitled
to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of stock of such class or
classes.
The Cumulative Preferred Stock shall rank prior, as to dividends
and upon liquidation, dissolution or winding up, to the Common Stock and on
a parity with (i) the Corporation's ESOP Convertible Preferred Stock, with
a liquidation value of $35.88 per share, (ii) the Corporation's 9.36%
Cumulative Preferred Stock, with a liquidation value of $25.00 per share,
(iii) the Corporation's 8.88% Cumulative Preferred Stock, with a
liquidation value of $200.00 per share, (iv) the Corporation's 8-3/4%
Cumulative Preferred Stock, with a liquidation value of $200.00 per share,
(v) the Corporation's 7-3/8% Cumulative Preferred Stock, with a liquidation
value of $200.00 per share, (vi) if issued, the Corporation's 7.82%
Cumulative Preferred Stock, with a liquidation value of $200.00 per share
and (vii) if issued, the Corporation's 7.80% Cumulative Preferred Stock,
with a liquidation value of $200.00 per share.
<PAGE> 115
9
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has caused this
Certificate to be made under the seal of the Corporation and signed by
Richard B. Fisher, its Chairman, and attested by Patricia A. Kurtz, its
Assistant Secretary, this 14th day of February, 1995.
MORGAN STANLEY GROUP INC.
By: /s/ Richard B. Fisher
-----------------------------------------
Name: Richard B. Fisher
Title: Chairman of the Board
[SEAL]
ATTEST:
/s/ Patricia A. Kurtz
- ----------------------------------
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 116
CERTIFICATE OF DECREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
9.00% CUMULATIVE PREFERRED STOCK
Morgan Stanley Group Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That the Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of Delaware on
September 15, 1992 and forwarded for recording in the Office of the Recorder of
Deeds for Kent County, Delaware on September 15, 1992 and a Certificate of
Designation of Preferences and Rights ("Certificate of Designation") of the
9.00% Cumulative Preferred Stock, was filed in said Office of the Secretary of
State on February 17, 1995 and forwarded for recording in the office of the
Recorder of Deeds on even date therewith.
That pursuant to authority expressly granted to and vested in
the Pricing Committee of the Board of Directors of the Corporation (the "Pricing
Committee"), by resolutions duly adopted by said Board of Directors on October
29, 1993 (the "Resolutions"), the Pricing Committee fixed certain designations,
preferences and rights of the aforesaid 9.00% Cumulative Preferred Stock as set
forth in the Certificate of Designation.
That pursuant to authority expressly granted to and vested in
the Pricing Committee by the Resolutions, the Pricing Committee by a written
unanimous consent in lieu of a meeting dated as of March 9, 1995 duly adopted a
resolution authorizing and directing a decrease in the authorized number of
shares of the 9.00% Cumulative Preferred Stock of the Corporation, from 738,763
shares to 720,900 shares and providing that the 17,863 shares of the 9.00%
Cumulative Preferred Stock designated by the Pricing Committee but not issued
and outstanding resume the status of authorized and unissued Preferred Stock,
all in accordance with the provisions of Section 151 of The General Corporation
Law of the State of Delaware and the aforesaid Restated Certificate of
Incorporation of the Corporation.
IN WITNESS WHEREOF, said Morgan Stanley Group Inc., has caused
this certificate to be signed by Richard B. Fisher, its Chairman, and attested
by Patricia A. Kurtz, its Assistant Secretary, this 13th day of March, 1995.
By /s/ Richard B. Fisher
--------------------------------
Name: Richard B. Fisher
Title: Chairman
ATTEST:
By /s/ Patricia A. Kurtz
-------------------------------
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 117
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
8.40% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
----------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
----------
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors (the "Board") of Morgan
Stanley Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), by unanimous written consent in lieu of a meeting dated as of
April 12, 1995 with certain of the designations, preferences and rights having
been fixed by the Pricing Committee of the Board (the "Committee") at a meeting
on July 27, 1995, pursuant to authority delegated to it by the Board pursuant to
the provisions of Section 141(c) of the General Corporation Law of the State of
Delaware:
RESOLVED that, pursuant to authority expressly granted to and
vested in the Committee by the Board and in the Board by provisions of
the Restated Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the issuance of a series
of Preferred Stock, without par value (the "Preferred Stock"), which
shall consist of 1,006,250 of the 30,000,000 shares of Preferred Stock
which the Corporation now has authority to issue, is authorized, and
the Board and, pursuant to the authority expressly granted to the
Committee by the Board pursuant to the provisions of Section 141(c) of
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Committee fix the powers,
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or
restrictions thereof, set
<PAGE> 118
2
forth in the Certificate of Incorporation which may be applicable
to the Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized
by this resolution shall be the 8.40% Cumulative Preferred
Stock, without par value, with a stated value of $200.00 per
share (the "Cumulative Preferred Stock"). The stated value per
share of Cumulative Preferred Stock shall not for any purpose
be considered to be a determination by the Board or the
Committee with respect to the capital and surplus of the
Corporation. The total number of shares of Cumulative
Preferred Stock shall be 1,006,250. The Cumulative Preferred
Stock is issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative
Preferred Stock will be entitled to receive, when, as and if
declared by the Board or the Committee out of assets of the
Corporation legally available for payment, cash dividends
payable quarterly at the rate of 8.40% per annum. Dividends on
the Cumulative Preferred Stock will be payable quarterly on
February 28, May 30, August 30 and November 30 (each a
"dividend payment date"). Dividends on shares of the
Cumulative Preferred Stock will be cumulative from the date of
initial issuance of such shares of Cumulative Preferred Stock.
Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Corporation on such
record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the
Board or the Committee. The amount of dividends payable for
the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day
year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock
(as defined in paragraph 9(b) below) with regard to the
payment of dividends unless there shall also be or have been
declared and paid or set apart for payment on the Cumulative
Preferred Stock, like dividends for all dividend payment
periods of the Cumulative Preferred Stock ending on or before
the dividend payment date of such Parity Preferred Stock,
ratably in proportion to the respective amounts of dividends
(x) accumulated and unpaid or payable on such Parity Preferred
Stock, on the one hand, and (y) accumulated and unpaid through
the dividend payment period or periods of the Cumulative
Preferred Stock next preceding such dividend payment date, on
the other hand.
Except as set forth in the preceding sentence, unless
full cumulative dividends on the Cumulative Preferred Stock
have been paid, no dividends (other than in Common Stock of
the Corporation) may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or on
any other stock of the Corporation ranking junior to or on a
parity with the
<PAGE> 119
3
Cumulative Preferred Stock as to dividends, nor may any Common
Stock or any other stock of the Corporation ranking junior to
or on a parity with the Cumulative Preferred Stock as to
dividends be redeemed, purchased or otherwise acquired for any
consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock;
provided, however, that any moneys theretofore deposited in
any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking
fund may thereafter be applied to the purchase or redemption
of such preferred stock in accordance with the terms of such
sinking fund, regardless of whether at the time of such
application full cumulative dividends upon shares of the
Cumulative Preferred Stock outstanding to the last dividend
payment date shall have been paid or declared and set apart
for payment) by the Corporation; provided that any such junior
or parity Preferred Stock or Common Stock may be converted
into or exchanged for stock of the Corporation ranking junior
to the Cumulative Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or
winding up of the Corporation, prior to the shares of Common
Stock and any other class of stock of the Corporation ranking
junior to the Cumulative Preferred Stock as to rights upon
liquidation, dissolution or winding up of the Corporation, so
that in the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the
holders of the Cumulative Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital,
surplus or earnings, before any distribution is made to
holders of shares of Common Stock or any other such junior
stock, an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an
amount equal to all dividends (whether or not earned or
declared) accrued and accumulated and unpaid on the shares of
Cumulative Preferred Stock to the date of final distribution.
The holders of the Cumulative Preferred Stock will not be
entitled to receive the Liquidation Preference until the
liquidation preference of any other class of stock of the
Corporation ranking senior to the Cumulative Preferred Stock
as to rights upon liquidation, dissolution or winding up shall
have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full amount
of the Liquidation Preference and such dividends, the holders
of shares of Cumulative Preferred Stock will not be entitled
to any further participation in any distribution of assets by
the Corporation. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation,
or proceeds thereof, distributable among the holders of shares
of Parity Preferred Stock shall be insufficient to pay in full
the preferential amount aforesaid, then such assets, or the
proceeds thereof, shall be distributable among such holders
<PAGE> 120
4
ratably in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were
paid in full. For the purposes hereof, neither a consolidation
or merger of the Corporation with or into any other
corporation, nor a merger of any other corporation with or
into the Corporation, nor a sale or transfer of all or any
part of the Corporation's assets for cash or securities shall
be considered a liquidation, dissolution or winding up of the
Corporation.
4. Conversion. The Cumulative Preferred Stock is
not convertible into shares of any other class or series of
stock of the Corporation.
5. Voting Rights. The holders of shares of
Cumulative Preferred Stock shall have no voting rights
whatsoever, except for any voting rights to which they may be
entitled under the laws of the State of Delaware, and
except as follows:
(a) Whenever, at any time or times,
dividends payable on the shares of Cumulative
Preferred Stock or on any Parity Preferred Stock with
respect to payment of dividends, shall be in arrears
for an aggregate number of days equal to six calendar
quarters or more, whether or not consecutive, the
holders of the outstanding shares of Cumulative
Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of
stock upon which like voting rights have been
conferred and are exercisable (voting together as a
class), to elect two of the authorized number of
members of the Board at the Corporation's next annual
meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have
been paid or set apart for payment, at which time
such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the
event of each and every subsequent default of the
character above mentioned. Upon any termination of
the right of the holders of shares of Cumulative
Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors
then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate
immediately.
Any director who shall have been so elected pursuant
to this paragraph may be removed at any time, either
with or without cause. Any vacancy thereby created
may be filled only by the affirmative vote of the
holders of shares of Cumulative Preferred Stock
voting separately as a class (together with the
holders of shares of any other class or series of
stock upon which like voting rights have been
conferred and are exercisable). If the office of any
director elected by the holders of shares of
Cumulative Preferred Stock voting as a class becomes
vacant
<PAGE> 121
5
for any reason other than removal from office as
aforesaid, the remaining director elected pursuant to
this paragraph may choose a successor who shall hold
office for the unexpired term in respect of which
such vacancy occurred. At elections for such
directors, each holder of shares of Cumulative
Preferred Stock shall be entitled to one vote for
each share held (the holders of shares of any other
class or series of preferred stock having like voting
rights being entitled to such number of votes, if
any, for each share of such stock held as may be
granted to them).
(b) So long as any shares of Cumulative
Preferred Stock remain outstanding, the consent of
the holders of at least two-thirds of the shares of
Cumulative Preferred Stock outstanding at the time
and all other classes or series of stock upon which
like voting rights have been conferred and are
exercisable (voting together as a class) given in
person or by proxy, either in writing or at any
meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the
following:
(i) the issuance or increase of the
authorized amount of any class or series of
shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the
shares of the Cumulative Preferred Stock; or
(ii) the amendment, alteration or
repeal, whether by merger, consolidation or
otherwise, of any of the provisions of the
Certificate of Incorporation, (including
this resolution or any provision hereof)
that would materially and adversely affect
any power, preference, or special right of
the shares of Cumulative Preferred Stock or
of the holders thereof; provided, however,
that any increase in the amount of
authorized Common Stock or authorized
Preferred Stock or any increase or decrease
in the number of shares of any series of
Preferred Stock or the creation and issuance
of other series of Common Stock or Preferred
Stock, in each case ranking on a parity with
or junior to the shares of Cumulative
Preferred Stock with respect to the payment
of dividends and the distribution of assets
upon liquidation, dissolution or winding up,
shall not be deemed to materially and
adversely affect such powers, preferences or
special rights.
(c) The foregoing voting provisions shall
not apply if, at or prior to the time when the act
with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of
<PAGE> 122
6
Cumulative Preferred Stock shall have been redeemed
or called for redemption and sufficient funds shall
have been deposited in trust to effect such
redemption.
6. Redemption Shares. The shares of the Cumulative
Preferred Stock may be redeemed at the option of the
Corporation, as a whole, or from time to time in part, at any
time, upon not less than 30 days' prior notice mailed to the
holders of the shares to be redeemed at their addresses as
shown on the stock books of the Corporation; provided,
however, that shares of the Cumulative Preferred Stock shall
not be redeemable prior to August 30, 2000. Subject to the
foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $200.00 per share together
with an amount equal to all dividends (whether or not earned
or declared) accrued and accumulated and unpaid to, but
excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative
Preferred Stock have not been paid, the Cumulative Preferred
Stock may not be redeemed in part and the Corporation may not
purchase or acquire any shares of the Cumulative Preferred
Stock otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Cumulative
Preferred Stock. If fewer than all the outstanding shares of
Cumulative Preferred Stock are to be redeemed, the Corporation
will select those to be redeemed by lot or a substantially
equivalent method.
If a notice of redemption has been given pursuant to
this paragraph 6 and if, on or before the date fixed for
redemption, the funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders
of the shares of Cumulative Preferred Stock so called for
redemption, then, notwithstanding that any certificates for
such shares have not been surrendered for cancellation, on the
redemption date dividends shall cease to accrue on the shares
to be redeemed, and at the close of business on the redemption
date the holders of such shares shall cease to be stockholders
with respect to such shares and shall have no interest in or
claims against the Corporation by virtue thereof and shall
have no voting or other rights with respect to such shares,
except the right to receive the moneys payable upon surrender
(and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer
be outstanding. Subject to applicable escheat laws, any moneys
so set aside by the Corporation and unclaimed at the end of
two years from the redemption date shall revert to the general
funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the
general funds of the Corporation for the payment of the
amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time
to time.
<PAGE> 123
7
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall
be required for (a) the creation of any indebtedness of any
kind of the Corporation, (b) the creation, or increase or
decrease in the amount, of any class or series of stock of the
Corporation not ranking prior as to dividends or upon
liquidation, dissolution or winding up to the Cumulative
Preferred Stock or (c) any increase or decrease in the amount
of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
8. Amendment of Resolution. The Board and the
Committee each reserves the right by subsequent amendment of
this resolution from time to time to increase or decrease the
number of shares that constitute the Cumulative Preferred
Stock (but not below the number of shares thereof then
outstanding) and in other respects to amend this resolution
within the limitations provided by law, this resolution and
the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any
stock of any class or classes of the Corporation shall be
deemed to rank:
(a) prior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
the holders of stock of such class or classes shall
be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of
shares of the Cumulative Preferred Stock;
(b) on a parity with shares of the
Cumulative Preferred Stock, either as to dividends or
upon liquidation, dissolution or winding up, or both,
whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share
thereof be different from those of the Cumulative
Preferred Stock, if the holders of stock of such
class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding
up, as the case may be, in proportion to their
respective dividend rates or liquidation prices,
without preference or priority of one over the other
as between the holders of such stock and the holders
of shares of Cumulative Preferred Stock (the term
"Parity Preferred Stock" being used to refer to any
stock on a parity with the shares of Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as
the context may require); and
<PAGE> 124
8
(c) junior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
such class shall be Common Stock or if the holders of
the Cumulative Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders
of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as
to dividends and upon liquidation, dissolution or winding up,
to the Common Stock and on a parity with (i) the Corporation's
ESOP Convertible Preferred Stock, with a liquidation value of
$35.88 per share, (ii) the Corporation's 9.36% Cumulative
Preferred Stock, with a liquidation value of $25.00 per share,
(iii) the Corporation's 8.88% Cumulative Preferred Stock, with
a liquidation value of $200.00 per share, (iv) the
Corporation's 8-3/4% Cumulative Preferred Stock, with a
liquidation value of $200.00 per share, (v) the Corporation's
7-3/8% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share, (vi) if issued, the Corporation's 7.82%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share, (vii) if issued, the Corporation's 7.80%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share and (viii) if issued, the Corporation's
9.00% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share.
<PAGE> 125
9
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has
caused this Certificate to be made under the seal of the Corporation
and signed by Richard B. Fisher, its Chairman, and attested by Patricia
A. Kurtz, its Assistant Secretary, this 27th day of July, 1995.
MORGAN STANLEY GROUP INC.
By: /s/ Richard B. Fisher
-----------------------------------
Name: Richard B. Fisher
Title: Chairman of the Board
[SEAL]
Attest:
/s/ Patricia A. Kurtz
- ----------------------------
Patricia A. Kurtz
Assistant Secretary
<PAGE> 126
CERTIFICATE OF DECREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
8.40% CUMULATIVE PREFERRED STOCK
Morgan Stanley Group Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That the Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of Delaware on
September 15, 1992 and forwarded for recording in the Office of the Recorder of
Deeds for Kent County, Delaware on September 15, 1992 and a Certificate of
Designation of Preferences and Rights ("Certificate of Designation") of the
8.40% Cumulative Preferred Stock, was filed in said Office of the Secretary of
State on July 31, 1995 and forwarded for recording in the office of the Recorder
of Deeds on even date therewith.
That pursuant to authority expressly granted to and vested in
the Pricing Committee of the Board of Directors of the Corporation (the "Pricing
Committee"), by resolutions duly adopted by said Board of Directors on April 12,
1995 (the "Resolutions"), the Pricing Committee fixed certain designations,
preferences and rights of the aforesaid 8.40% Cumulative Preferred Stock as set
forth in the Certificate of Designation.
That pursuant to authority expressly granted to and vested in the
Pricing Committee by the Resolutions, the Pricing Committee by a written
unanimous consent in lieu of a meeting dated as of September 6, 1995 duly
adopted a resolution authorizing and directing a decrease in the authorized
number of shares of the 8.40% Cumulative Preferred Stock of the Corporation,
from 1,006,250 shares to 996,776 shares and providing that the 9,474 shares of
the 8.40% Cumulative Preferred Stock designated by the Pricing Committee but not
issued and outstanding resume the status of authorized and unissued Preferred
Stock, all in accordance with the provisions of Section 151 of The General
Corporation Law of the State of Delaware and the aforesaid Restated Certificate
of Incorporation of the Corporation.
IN WITNESS WHEREOF, said Morgan Stanley Group Inc., has caused
this certificate to be signed by Richard B. Fisher, its Chairman, and attested
by Patricia A. Kurtz, its Assistant Secretary, this 6th day of September, 1995.
By /s/ Richard B. Fisher
---------------------------------
Name: Richard B. Fisher
Title: Chairman
ATTEST:
By /s/ Patricia A. Kurtz
----------------------------------
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 127
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
OF THE
8.20% CUMULATIVE PREFERRED STOCK
($200.00 Stated Value)
OF
MORGAN STANLEY GROUP INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
<PAGE> 128
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors (the "Board") of Morgan
Stanley Group Inc., a Delaware corporation (hereinafter called the
"Corporation"), by unanimous written consent in lieu of a meeting dated as of
April 12, 1995 with certain of the designations, preferences and rights having
been fixed by the Pricing Committee of the Board (the "Committee") at a meeting
on October 13, 1995, pursuant to authority delegated to it by the Board pursuant
to the provisions of Section 141(c) of the General Corporation Law of the State
of Delaware:
RESOLVED that, pursuant to authority expressly granted to and
vested in the Committee by the Board and in the Board by provisions of
the Restated Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the issuance of a series
of Preferred Stock, without par value (the "Preferred Stock"), which
shall consist of 862,500 of the 30,000,000 shares of Preferred Stock
which the Corporation now has authority to issue, is authorized, and
the Board and, pursuant to the authority expressly granted to the
Committee by the Board pursuant to the provisions of Section 141(c) of
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Committee fix the powers,
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or
restrictions thereof, set
<PAGE> 129
2
forth in the Certificate of Incorporation which may be applicable to
the Preferred Stock) as follows:
1. Designation and Amount; Fractional Shares. The
designation for such series of the Preferred Stock authorized
by this resolution shall be the 8.20% Cumulative Preferred
Stock, without par value, with a stated value of $200.00 per
share (the "Cumulative Preferred Stock"). The stated value per
share of Cumulative Preferred Stock shall not for any purpose
be considered to be a determination by the Board or the
Committee with respect to the capital and surplus of the
Corporation. The total number of shares of Cumulative
Preferred Stock shall be 862,500. The Cumulative Preferred
Stock is issuable in whole shares only.
2. Dividends. Holders of shares of Cumulative
Preferred Stock will be entitled to receive, when, as and if
declared by the Board or the Committee out of assets of the
Corporation legally available for payment, cash dividends
payable quarterly at the rate of 8.20% per annum. Dividends on
the Cumulative Preferred Stock will be payable quarterly on
February 28, May 30, August 30 and November 30 (each a
"dividend payment date"). Dividends on shares of the
Cumulative Preferred Stock will be cumulative from the date of
initial issuance of such shares of Cumulative Preferred Stock.
Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Corporation on such
record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the
Board or the Committee. The amount of dividends payable for
the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day
year of twelve 30-day months. No dividends may be declared or
paid or set apart for payment on any Parity Preferred Stock
(as defined in paragraph 9(b) below) with regard to the
payment of dividends unless there shall also be or have been
declared and paid or set apart for payment on the Cumulative
Preferred Stock, like dividends for all dividend payment
periods of the Cumulative Preferred Stock ending on or before
the dividend payment date of such Parity Preferred Stock,
ratably in proportion to the respective amounts of dividends
(x) accumulated and unpaid or payable on such Parity Preferred
Stock, on the one hand, and (y) accumulated and unpaid through
the dividend payment period or periods of the Cumulative
Preferred Stock next preceding such dividend payment date, on
the other hand.
Except as set forth in the preceding sentence, unless
full cumulative dividends on the Cumulative Preferred Stock
have been paid, no dividends (other than in Common Stock of
the Corporation) may be paid or declared and set aside for
payment or other distribution made upon the Common Stock or on
any other stock of the Corporation ranking junior to or on a
parity with the
<PAGE> 130
3
Cumulative Preferred Stock as to dividends, nor may any Common
Stock or any other stock of the Corporation ranking junior to
or on a parity with the Cumulative Preferred Stock as to
dividends be redeemed, purchased or otherwise acquired for any
consideration (or any payment be made to or available for a
sinking fund for the redemption of any shares of such stock;
provided, however, that any moneys theretofore deposited in
any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking
fund may thereafter be applied to the purchase or redemption
of such preferred stock in accordance with the terms of such
sinking fund, regardless of whether at the time of such
application full cumulative dividends upon shares of the
Cumulative Preferred Stock outstanding to the last dividend
payment date shall have been paid or declared and set apart
for payment) by the Corporation; provided that any such junior
or parity Preferred Stock or Common Stock may be converted
into or exchanged for stock of the Corporation ranking junior
to the Cumulative Preferred Stock as to dividends.
3. Liquidation Preference. The shares of Cumulative
Preferred Stock shall rank, as to liquidation, dissolution or
winding up of the Corporation, prior to the shares of Common
Stock and any other class of stock of the Corporation ranking
junior to the Cumulative Preferred Stock as to rights upon
liquidation, dissolution or winding up of the Corporation, so
that in the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the
holders of the Cumulative Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for
distribution to its stockholders, whether from capital,
surplus or earnings, before any distribution is made to
holders of shares of Common Stock or any other such junior
stock, an amount equal to $200.00 per share (the "Liquidation
Preference" of a share of Cumulative Preferred Stock) plus an
amount equal to all dividends (whether or not earned or
declared) accrued and accumulated and unpaid on the shares of
Cumulative Preferred Stock to the date of final distribution.
The holders of the Cumulative Preferred Stock will not be
entitled to receive the Liquidation Preference until the
liquidation preference of any other class of stock of the
Corporation ranking senior to the Cumulative Preferred Stock
as to rights upon liquidation, dissolution or winding up shall
have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. After payment of the full amount
of the Liquidation Preference and such dividends, the holders
of shares of Cumulative Preferred Stock will not be entitled
to any further participation in any distribution of assets by
the Corporation. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation,
or proceeds thereof, distributable among the holders of shares
of Parity Preferred Stock shall be insufficient to pay in full
the preferential amount aforesaid, then such assets, or the
proceeds thereof, shall be distributable among such holders
<PAGE> 131
4
ratably in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were
paid in full. For the purposes hereof, neither a consolidation
or merger of the Corporation with or into any other
corporation, nor a merger of any other corporation with or
into the Corporation, nor a sale or transfer of all or any
part of the Corporation's assets for cash or securities shall
be considered a liquidation, dissolution or winding up of the
Corporation.
4. Conversion. The Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock
of the Corporation.
5. Voting Rights. The holders of shares of Cumulative
Preferred Stock shall have no voting rights whatsoever, except
for any voting rights to which they may be entitled under the
laws of the State of Delaware, and except as follows:
(a) Whenever, at any time or times,
dividends payable on the shares of Cumulative
Preferred Stock or on any Parity Preferred Stock with
respect to payment of dividends, shall be in arrears
for an aggregate number of days equal to six calendar
quarters or more, whether or not consecutive, the
holders of the outstanding shares of Cumulative
Preferred Stock shall have the right, with holders of
shares of any one or more other class or series of
stock upon which like voting rights have been
conferred and are exercisable (voting together as a
class), to elect two of the authorized number of
members of the Board at the Corporation's next annual
meeting of stockholders and at each subsequent annual
meeting of stockholders until such arrearages have
been paid or set apart for payment, at which time
such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the
event of each and every subsequent default of the
character above mentioned. Upon any termination of
the right of the holders of shares of Cumulative
Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors
then in office elected by the holders of shares of
Cumulative Preferred Stock shall terminate
immediately.
Any director who shall have been so elected pursuant
to this paragraph may be removed at any time, either
with or without cause. Any vacancy thereby created
may be filled only by the affirmative vote of the
holders of shares of Cumulative Preferred Stock
voting separately as a class (together with the
holders of shares of any other class or series of
stock upon which like voting rights have been
conferred and are exercisable). If the office of any
director elected by the holders of shares of
Cumulative Preferred Stock voting as a class becomes
vacant
<PAGE> 132
5
for any reason other than removal from office as
aforesaid, the remaining director elected pursuant to
this paragraph may choose a successor who shall hold
office for the unexpired term in respect of which
such vacancy occurred. At elections for such
directors, each holder of shares of Cumulative
Preferred Stock shall be entitled to one vote for
each share held (the holders of shares of any other
class or series of preferred stock having like voting
rights being entitled to such number of votes, if
any, for each share of such stock held as may be
granted to them).
(b) So long as any shares of Cumulative
Preferred Stock remain outstanding, the consent of
the holders of at least two-thirds of the shares of
Cumulative Preferred Stock outstanding at the time
and all other classes or series of stock upon which
like voting rights have been conferred and are
exercisable (voting together as a class) given in
person or by proxy, either in writing or at any
meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the
following:
(i) the issuance or increase of the
authorized amount of any class or series of
shares ranking prior (as that term is
defined in paragraph 9(a) hereof) to the
shares of the Cumulative Preferred Stock; or
(ii) the amendment, alteration or
repeal, whether by merger, consolidation or
otherwise, of any of the provisions of the
Certificate of Incorporation, (including
this resolution or any provision hereof)
that would materially and adversely affect
any power, preference, or special right of
the shares of Cumulative Preferred Stock or
of the holders thereof; provided, however,
that any increase in the amount of
authorized Common Stock or authorized
Preferred Stock or any increase or decrease
in the number of shares of any series of
Preferred Stock or the creation and issuance
of other series of Common Stock or Preferred
Stock, in each case ranking on a parity with
or junior to the shares of Cumulative
Preferred Stock with respect to the payment
of dividends and the distribution of assets
upon liquidation, dissolution or winding up,
shall not be deemed to materially and
adversely affect such powers, preferences or
special rights.
(c) The foregoing voting provisions shall
not apply if, at or prior to the time when the act
with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of
<PAGE> 133
6
Cumulative Preferred Stock shall have been redeemed
or called for redemption and sufficient funds shall
have been deposited in trust to effect such
redemption.
6. Redemption Shares. The shares of the Cumulative
Preferred Stock may be redeemed at the option of the
Corporation, as a whole, or from time to time in part, at any
time, upon not less than 30 days' prior notice mailed to the
holders of the shares to be redeemed at their addresses as
shown on the stock books of the Corporation; provided,
however, that shares of the Cumulative Preferred Stock shall
not be redeemable prior to November 30, 2000. Subject to the
foregoing, on or after such date, shares of the Cumulative
Preferred Stock are redeemable at $200.00 per share together
with an amount equal to all dividends (whether or not earned
or declared) accrued and accumulated and unpaid to, but
excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative
Preferred Stock have not been paid, the Cumulative Preferred
Stock may not be redeemed in part and the Corporation may not
purchase or acquire any shares of the Cumulative Preferred
Stock otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Cumulative
Preferred Stock. If fewer than all the outstanding shares of
Cumulative Preferred Stock are to be redeemed, the Corporation
will select those to be redeemed by lot or a substantially
equivalent method.
If a notice of redemption has been given pursuant to
this paragraph 6 and if, on or before the date fixed for
redemption, the funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders
of the shares of Cumulative Preferred Stock so called for
redemption, then, notwithstanding that any certificates for
such shares have not been surrendered for cancellation, on the
redemption date dividends shall cease to accrue on the shares
to be redeemed, and at the close of business on the redemption
date the holders of such shares shall cease to be stockholders
with respect to such shares and shall have no interest in or
claims against the Corporation by virtue thereof and shall
have no voting or other rights with respect to such shares,
except the right to receive the moneys payable upon surrender
(and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer
be outstanding. Subject to applicable escheat laws, any moneys
so set aside by the Corporation and unclaimed at the end of
two years from the redemption date shall revert to the general
funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the
general funds of the Corporation for the payment of the
amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time
to time.
<PAGE> 134
7
7. Authorization and Issuance of Other Securities. No
consent of the holders of the Cumulative Preferred Stock shall
be required for (a) the creation of any indebtedness of any
kind of the Corporation, (b) the creation, or increase or
decrease in the amount, of any class or series of stock of the
Corporation not ranking prior as to dividends or upon
liquidation, dissolution or winding up to the Cumulative
Preferred Stock or (c) any increase or decrease in the amount
of authorized Common Stock or any increase, decrease or change
in the par value thereof or in any other terms thereof.
8. Amendment of Resolution. The Board and the
Committee each reserves the right by subsequent amendment of
this resolution from time to time to increase or decrease the
number of shares that constitute the Cumulative Preferred
Stock (but not below the number of shares thereof then
outstanding) and in other respects to amend this resolution
within the limitations provided by law, this resolution and
the Certificate of Incorporation.
9. Rank. For the purposes of this resolution, any
stock of any class or classes of the Corporation shall be
deemed to rank:
(a) prior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
the holders of stock of such class or classes shall
be entitled by the terms thereof to the receipt of
dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of
shares of the Cumulative Preferred Stock;
(b) on a parity with shares of the
Cumulative Preferred Stock, either as to dividends or
upon liquidation, dissolution or winding up, or both,
whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share
thereof be different from those of the Cumulative
Preferred Stock, if the holders of stock of such
class or classes shall be entitled by the terms
thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding
up, as the case may be, in proportion to their
respective dividend rates or liquidation prices,
without preference or priority of one over the other
as between the holders of such stock and the holders
of shares of Cumulative Preferred Stock (the term
"Parity Preferred Stock" being used to refer to any
stock on a parity with the shares of Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, as
the context may require); and
<PAGE> 135
8
(c) junior to shares of the Cumulative
Preferred Stock, either as to dividends or upon
liquidation, dissolution or winding up, or both, if
such class shall be Common Stock or if the holders of
the Cumulative Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders
of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as
to dividends and upon liquidation, dissolution or winding up,
to the Common Stock and on a parity with (i) the Corporation's
ESOP Convertible Preferred Stock, with a liquidation value of
$35.88 per share, (ii) the Corporation's 9.36% Cumulative
Preferred Stock, with a liquidation value of $25.00 per share,
(iii) the Corporation's 8.88% Cumulative Preferred Stock, with
a liquidation value of $200.00 per share, (iv) the
Corporation's 8-3/4% Cumulative Preferred Stock, with a
liquidation value of $200.00 per share, (v) the Corporation's
7-3/8% Cumulative Preferred Stock, with a liquidation value of
$200.00 per share, (vi) if issued, the Corporation's 7.82%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share, (vii) if issued, the Corporation's 7.80%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share (viii) if issued, the Corporation's 9.00%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share and (ix) if issued, the Corporation's 8.40%
Cumulative Preferred Stock, with a liquidation value of
$200.00 per share.
<PAGE> 136
9
IN WITNESS WHEREOF, Morgan Stanley Group Inc. has
caused this Certificate to be made under the seal of the Corporation
and signed by Richard B. Fisher, its Chairman, and attested by Patricia
A. Kurtz, its Assistant Secretary, this 13th day of October, 1995.
MORGAN STANLEY GROUP INC.
By /s/ Richard B. Fisher
--------------------------------
Name: Richard B. Fisher
Title: Chairman of the Board
[SEAL]
Attest:
By /s/ Patricia A. Kurtz
----------------------------------
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 137
CERTIFICATE OF DECREASE
OF
AUTHORIZED NUMBER OF SHARES
OF
8.20% CUMULATIVE PREFERRED STOCK
Morgan Stanley Group Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
That the Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of Delaware on
September 15, 1992 and forwarded for recording in the Office of the Recorder of
Deeds for Kent County, Delaware on September 15, 1992 and a Certificate of
Designation of Preferences and Rights ("Certificate of Designation") of the
8.20% Cumulative Preferred Stock, was filed in said Office of the Secretary of
State on October 17, 1995 and forwarded for recording in the office of the
Recorder of Deeds on even date therewith.
That pursuant to authority expressly granted to and vested in
the Pricing Committee of the Board of Directors of the Corporation (the "Pricing
Committee"), by resolutions duly adopted by said Board of Directors on April 12,
1995 (the "Resolutions"), the Pricing Committee fixed certain designations,
preferences and rights of the aforesaid 8.20% Cumulative Preferred Stock as set
forth in the Certificate of Designation.
That pursuant to authority expressly granted to and vested in
the Pricing Committee by the Resolutions, the Pricing Committee by a written
unanimous consent in lieu of a meeting dated as of October 27, 1995 duly adopted
a resolution authorizing and directing a decrease in the authorized number of
shares of the 8.20% Cumulative Preferred Stock of the Corporation, from 862,500
shares to 847,500 shares and providing that the 15,000 shares of the 8.20%
Cumulative Preferred Stock designated by the Pricing Committee but not issued
and outstanding resume the status of authorized and unissued Preferred Stock,
all in accordance with the provisions of Section 151 of The General Corporation
Law of the State of Delaware and the aforesaid Restated Certificate of
Incorporation of the Corporation.
IN WITNESS WHEREOF, said Morgan Stanley Group Inc., has caused
this certificate to be signed by Richard B. Fisher, its Chairman, and attested
by Patricia A. Kurtz, its Assistant Secretary, this 31st day of October, 1995.
By /s/ Richard B. Fisher
____________________________
Name: Richard B. Fisher
Title: Chairman
ATTEST:
By /s/ Patricia A. Kurtz
______________________________
Name: Patricia A. Kurtz
Title: Assistant Secretary
<PAGE> 138
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
MORGAN STANLEY GROUP INC.
MORGAN STANLEY GROUP INC., a Delaware corporation, HEREBY CERTIFIES AS
FOLLOWS:
1. The name of the Corporation is Morgan Stanley Group Inc. The date of
filing of its original Certificate of Incorporation with the Secretary of State
of the State of Delaware was July 10, 1975. The date of filing of its Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware was September 15, 1992.
2. This Certificate of Amendment sets forth amendments to the Restated
Certificate of Incorporation of the Corporation that were duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
3. Article IV, Section 1 of the Restated Certificate of Incorporation
is hereby amended in full to read as follows:
SECTION 1. Shares and Classes Authorized. The total number of
shares of all classes of capital stock which the Corporation shall have
authority to issue is 630,000,000 shares, which shall include:
(a) 30,000,000 shares of preferred stock of no par value each
(hereinafter referred to as "Preferred Stock"); and
(b) 600,000,000 shares of common stock of the par value of
$1.00 each (hereinafter referred to as "Common Stock");
such classes of Preferred Stock and Common Stock being sometimes
hereinafter collectively referred to as "capital stock".
IN WITNESS WHEREOF, MORGAN STANLEY GROUP INC. has caused this
certificate to be signed by Richard B. Fisher, its Chairman, and attested by
Jonathan M. Clark, its General Counsel and Secretary, this 16th day of April,
1996.
MORGAN STANLEY GROUP INC.
By /s/ Richard B. Fisher
---------------------------------
Name: Richard B. Fisher
Title: Chairman
ATTEST:
/s/ Jonathan M. Clark
- ---------------------------------
Name: Jonathan M. Clark
Title: General Counsel and Secretary
<PAGE> 139
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
MORGAN STANLEY GROUP INC.
MORGAN STANLEY GROUP INC., a Delaware corporation, HEREBY
CERTIFIES AS FOLLOWS:
1. The name of the Corporation is Morgan Stanley Group Inc. The
date of filing of its original Certificate of Incorporation with the Secretary
of State of the State of Delaware was July 10, 1975. The date of filing of its
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware was September 15, 1992.
2. This Certificate of Amendment sets forth amendments to the
Restated Certificate of Incorporation of the Corporation that were duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
3. Article IV, Section 1 of the Restated Certificate of
Incorporation is hereby amended in full to read as follows:
SECTION 1. Shares and Classes Authorized. The total number of
shares of all classes of capital stock which the Corporation shall have
authority to issue is 630,000,000 shares, which shall include:
(a) 30,000,000 shares of preferred stock of no par value each
(hereinafter referred to as "Preferred Stock"); and
(b) 600,000,000 shares of common stock of the par value of
$1.00 each (hereinafter referred to as "Common Stock");
such classes of Preferred Stock and Common Stock being sometimes
hereinafter collectively referred to as "capital stock".
<PAGE> 140
IN WITNESS WHEREOF, MORGAN STANLEY GROUP INC. has caused this
certificate to be signed by Richard B. Fisher, its Chairman, and attested by
Jonathan M. Clark, its General Counsel and Secretary, this 16th day of April,
1996.
MORGAN STANLEY GROUP INC.
By _________________________________
Name: Richard B. Fisher
Title: Chairman
ATTEST:
_______________________________
Name: Jonathan M. Clark
Title: General Counsel and Secretary
<PAGE> 1
MORGAN STANLEY GROUP INC. Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
1996 1995 (1) 1996 1995 (1)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY:
Common stock and common stock equivalents:
Average common shares outstanding 153,126,379 154,176,406 153,477,960 152,654,034
Average common shares issuable
under employee benefit plans 2,017,254 3,419,208 2,174,056 2,859,086
------------ ------------ ------------ ------------
Total average common and common
equivalent shares outstanding 155,143,633 157,595,614 155,652,016 155,513,120
============ ============ ============ ============
Earnings:
Net income $ 301 $ 166 $ 574 $ 213
Less: Preferred stock dividend
requirements 17 16 33 32
------------ ------------ ------------ ------------
Earnings applicable to common shares $ 284 $ 150 $ 541 $ 181
============ ============ ============ ============
Primary earnings per share $ 1.83 $ 0.95 $ 3.48 $ 1.17
============ ============ ============ ============
FULLY DILUTED:
Common stock and common stock equivalents:
Average common shares outstanding 153,126,379 154,176,406 153,477,960 152,654,034
Average common shares issuable
under employee benefit plans 2,017,254 3,974,652 2,450,073 3,556,976
Common shares issuable upon conversion
of ESOP preferred stock 7,478,600 7,577,602 7,493,963 7,586,678
------------ ------------ ------------ ------------
Total average common and common
equivalent shares outstanding 162,622,233 165,728,660 163,421,996 163,797,688
============ ============ ============ ============
Earnings:
Net income $ 301 $ 166 $ 574 $ 213
Less: Preferred stock dividend
requirements 16 16 31 31
------------ ------------ ------------ ------------
Earnings applicable to common shares $ 285 $ 150 $ 543 $ 182
============ ============ ============ ============
Fully diluted earnings per share $ 1.75 $ 0.91 $ 3.32 $ 1.11
============ ============ ============ ============
</TABLE>
(1) All share and per share amounts have been retroactively adjusted to give
effect for a two-for-one common stock split, effected in the form of a 100%
stock dividend, which became effective on January 26, 1996.
<PAGE> 1
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------- FISCAL PERIOD ENDED
MAY 31, MAY 31, MAY 31, MAY 31, NOVEMBER 30,
1996 1995 1996 1995 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Earnings:
Income before income taxes $ 456 $ 251 $ 896 $ 323 $ 883
Add: Fixed charges, net 1,875 1,667 3,745 3,410 5,538
------ ------ ------ ------ ------
Income before income taxes and
fixed charges, net $2,331 $1,918 $4,641 $3,733 $6,421
====== ====== ====== ====== ======
Fixed charges:
Total interest expense (1) $1,865 $1,670 $3,724 $3,409 $5,512
Interest factor in rents (2) 10 11 20 22 37
------ ------ ------ ------ ------
Total fixed charges $1,875 $1,681 $3,744 $3,431 $5,549
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 1.2 1.1 1.2 1.1 1.2
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Earnings:
Income before income taxes $ 456 $ 251 $ 896 $ 323 $ 883
Add: Fixed charges, net 1,875 1,667 3,745 3,410 5,538
------ ------ ------ ------ ------
Income before income taxes and
fixed charges, net $2,331 $1,918 $4,641 $3,733 $6,421
====== ====== ====== ====== ======
Fixed charges:
Total interest expense (1) $1,865 $1,670 $3,724 $3,409 $5,512
Interest factor in rents (2) 10 11 20 22 37
Preferred stock dividends (3) 25 25 51 49 80
------ ------ ------ ------ ------
Total fixed charges and preferred
stock dividends $1,900 $1,706 $3,795 $3,480 $5,629
====== ====== ====== ====== ======
Ratio of earnings to fixed charges and
preferred stock dividends 1.2 1.1 1.2 1.1 1.1
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, YEAR ENDED
-------------------------------- DECEMBER 31,
1995 1994 1993 1991
------ ------ ------ ------
<S> <C> <C> <C> <C>
RATIO OF EARNINGS TO FIXED CHARGES
Earnings:
Income before income taxes $ 594 $1,200 $ 793 $ 772
Add: Fixed charges, net 5,916 5,055 4,397 3,963
------ ------ ------ ------
Income before income taxes and
fixed charges, net $6,510 $6,255 $5,190 $4,735
====== ====== ====== ======
Fixed charges:
Total interest expense (1) $5,899 $5,020 $4,362 $3,946
Interest factor in rents (2) 41 35 35 38
------ ------ ------ ------
Total fixed charges $5,940 $5,055 $4,397 $3,984
====== ====== ====== ======
Ratio of earnings to fixed charges 1.1 1.2 1.2 1.2
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Earnings:
Income before income taxes $ 594 $1,200 $ 793 $ 772
Add: Fixed charges, net 5,916 5,055 4,397 3,963
------ ------ ------ ------
Income before income taxes and
fixed charges, net $6,510 $6,255 $5,190 $4,735
====== ====== ====== ======
Fixed charges:
Total interest expense (1) $5,899 $5,020 $4,362 $3,946
Interest factor in rents (2) 41 35 35 38
Preferred stock dividends (3) 97 85 82 47
------ ------ ------ ------
Total fixed charges and preferred
stock dividends $6,037 $5,140 $4,479 $4,031
====== ====== ====== ======
Ratio of earnings to fixed charges and
preferred stock dividends 1.1 1.2 1.2 1.2
</TABLE>
(1) Total interest expense for the three months ended May 31, 1995, the six
months ended May 31, 1995, the fiscal period ended November 30, 1995,
the fiscal year ended January 31, 1995 and the year ended December 31,
1991 includes capitalized interest.
(2) Interest factor in rents represents one-third of rent expense, which is
considered representative of the interest factor.
(3) The preferred stock dividend amounts represent pre-tax earnings
required to cover dividends on preferred stock.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at May 31, 1996
(Unaudited) and the Condensed Consolidated Statement of Income for the Six
Months Ended May 31, 1996 (Unaudited) and is qualified in its entirety by
reference to such condensed consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 6,021
<RECEIVABLES> 8,884
<SECURITIES-RESALE> 61,326
<SECURITIES-BORROWED> 37,821
<INSTRUMENTS-OWNED> 58,279
<PP&E> 1,289
<TOTAL-ASSETS> 174,727
<SHORT-TERM> 15,168
<PAYABLES> 19,658
<REPOS-SOLD> 75,442
<SECURITIES-LOANED> 9,119
<INSTRUMENTS-SOLD> 35,218
<LONG-TERM> 12,631
0
817
<COMMON> 165
<OTHER-SE> 4,335
<TOTAL-LIABILITY-AND-EQUITY> 174,727
<TRADING-REVENUE> 1,269
<INTEREST-DIVIDENDS> 3,879
<COMMISSIONS> 313
<INVESTMENT-BANKING-REVENUES> 941
<FEE-REVENUE> 265
<INTEREST-EXPENSE> 3,724
<COMPENSATION> 1,455
<INCOME-PRETAX> 896
<INCOME-PRE-EXTRAORDINARY> 896
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 574
<EPS-PRIMARY> 3.48
<EPS-DILUTED> 3.32
</TABLE>
