UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )<F1>
WATERHOUSE INVESTOR SERVICES, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class of securities)
941547 10 1
(CUSIP number)
I. Alexander Norton, Esq.
Vice President and Assistant General Counsel
The Toronto-Dominion Bank
P.O. Box 1
Toronto-Dominion Centre
King Street West and Bay Street
Toronto, Ontario M5K 1A2
Canada
(416) 944-5737
(Name, address and telephone number of person
authorized to receive notices and communications)
with a copy to:
Lee Meyerson, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
(212) 455-2000
April 9, 1996
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box /_/.
Check the following box if a fee is being paid with the statement /X/. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should
be filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
(Continued on following pages)
(Page 1 of 14 Pages)
<F1> The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of
the Act (however, see the Notes).<PAGE>
SCHEDULE 13D
CUSIP No. 941547 10 1 Page 2 of 14 Pages
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Toronto-Dominion Bank
I.R.S. Identification No. 13-5640479
_________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
(b) /_/
_________________________________________________________________________
3 SEC USE ONLY
_________________________________________________________________________
4 SOURCE OF FUNDS*
WC
_________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED TO ITEMS
2(d) or 2(e) /X/
_________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
_________________________________________________________________________
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
810,000
________________________________________________________________________
8 SHARED VOTING POWER
0
________________________________________________________________________
9 SOLE DISPOSITIVE POWER
810,000
________________________________________________________________________
10 SHARED DISPOSITIVE POWER
0
________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
810,000
________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* /_/
________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.9%
________________________________________________________________________
14 TYPE OF REPORTING PERSON*
BK
________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 14 Pages
Item 1. Security and Issuer.
This Statement on Schedule 13D (this "Statement") relates to the
Common Stock, par value $0.01 per share ("Company Common Stock"), of Waterhouse
Investor Services, Inc., a Delaware corporation (the "Company"). The principal
executive offices of the Company are located at 100 Wall Street, New York, New
York 10005.
Item 2. Identity and Background.
(a)-(c), (f) This Statement is being filed by The Toronto-Dominion
Bank, a Canadian chartered bank ("TD"). The principal business of TD is to
offer a wide range of financial services to individuals, corporate and
commercial enterprises, financial institutions and governments throughout
Canada. TD offers a broad range of credit and non-credit services to
corporations, financial institutions and governments in the United States and
conducts treasury and wholesale corporate operations in the world's major
financial centers outside North America. The address of TD's principal
business and executive offices is: P.O. Box 1, Toronto-Dominion Centre, King
Street West and Bay Street, Toronto, Ontario M5K 1A2, Canada.
The name, business address, citizenship and present principal
occupation or employment of each director and executive officer of TD and the
name and principal business and address of any corporation or other
organization in which such employment is conducted are set forth in Schedule I
hereto and are incorporated herein by reference.
(d), (e) Except as set forth in Schedule I hereto, during the last
five years, neither TD nor, to the best of TD's knowledge, any of its executive
officers or directors named in Schedule I hereto has (i) been convicted in any
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities
laws or finding any violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate purchase price for the 560,000 shares of Company Common
Stock purchased by TD through the date of this Statement, as described in Item
5, was U.S.$12,988,163. All of funds were provided from TD's working
capital. In addition, as more fully described in Items 4 and 6, in connection
with the execution and delivery of the Merger Agreement (as defined in Item 4)
the Company issued to TD, for no additional consideration, a warrant (the
"Warrant") to purchase up to 250,000 shares of Company Common Stock at a price
of U.S.$.01 per share. The Warrant is exercisable only upon the occurrence of
certain events, none of which has occurred as of the date of this Statement.
If the Warrant were to become exercisable and TD were to exercise the Warrant
in full, the aggregate exercise price would be U.S.$2,500. TD currently
anticipates that the funds to pay such exercise price would be provided from
TD's working capital.
Item 4. Purpose of Transaction.
TD, TD/Oak, Inc., a Delaware corporation and wholly-owned subsidiary
of TD ("TD/Oak"), and the Company have entered into an Agreement and Plan of
<PAGE>
Page 4 of 14 Pages
Merger, dated April 9, 1996 (the "Merger Agreement"), which provides for
the merger of the Company into TD/Oak (the "Merger"). The Merger Agreement is
filed as an Exhibit to this Statement and is incorporated herein by reference.
The description of the Merger Agreement set forth herein does not purport to be
complete and is qualified in its entirety by the provisions of the Merger
Agreement.
The Merger Agreement provides that at the effective time of the
Merger (the "Effective Time"), the Company will be merged with and into TD/Oak,
with TD/Oak being the surviving corporation of the Merger and continuing under
the name Waterhouse Investor Services, Inc. (after the Effective Time, referred
to herein as the "Surviving Corporation"). The directors of TD/Oak and the
officers of the Company in office immediately prior to the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation after
the Effective Time, until their respective successors are duly elected or
appointed, as the case may be, and qualified. The certificate of incorporation
and by-laws of TD/Oak, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation and by-laws of the Surviving
Corporation after the Effective Time until amended in accordance with
applicable law.
As a result of the Merger, each issued and outstanding share of
Company Common Stock (other than shares held by persons who exercise
dissenters' rights under Delaware law and shares held by TD, the Company or
their respective subsidiaries, which, subject to certain exceptions, will be
cancelled) will be converted into the following: (i) for each such share of
Company Common Stock with respect to which an election to receive fully paid
and nonassessable Common Shares, without par value, of TD ("TD Common Shares")
has been effectively made and not revoked, properly withdrawn or lost
("Electing Shares"), the right to receive that number of TD Common Shares with
a market value equal to U.S.$38.00 (based on the average of the daily weighted
average price of TD Common Shares on the Toronto Stock Exchange for the fifteen
consecutive business days ending at the close of business on the tenth business
day prior to the closing date of the Merger, converted into U.S. dollars on a
daily basis based on the spot exchange rate as published in The Wall Street
Journal, Eastern Edition) (the "Exchange Ratio"), provided that the Exchange
Ratio shall not be less than 1.81790 or greater than 2.45952, and (ii) for each
such share of Company Common Stock other than Electing Shares, shares held
by dissenting stockholders and shares to be cancelled in accordance with
the Merger Agreement, the right to receive U.S.$38.00 in cash; provided
that (x) no more than 65% of the shares of Company Common Stock
outstanding immediately prior to the Effective Time will be converted into
TD Common Shares and no more than 35% will be converted into cash, with
proration in the event that elections exceed either such percentage, and (y)
cash will be paid in lieu of the issuance of fractional TD Common Shares.
The obligations of the parties to consummate the Merger are subject
to certain conditions, including receipt of necessary approvals by Canadian and
American regulatory authorities, as well as approval of the Merger by the
Company's stockholders.
Concurrently with and as a condition to the execution and delivery of
the Merger Agreement, the Company entered into a warrant agreement with TD (the
"Warrant Agreement") pursuant to which the Company granted the Warrant to TD.
The Warrant will not become exercisable unless the Merger Agreement is
<PAGE>
Page 5 of 14 Pages
terminated in accordance with its terms upon the occurrence of certain events
described in Section 6.3(a) of the Merger Agreement.
The Warrant Agreement also provides that, at the request of TD at any
time commencing upon the occurrence of a Payment Event (as such term is defined
in the Merger Agreement) and ending 18 months immediately thereafter, or at the
election of the Company at any time after the Warrant becomes exercisable, the
Company shall repurchase from TD and TD shall sell to the Company (i) the
Warrant and (ii) all shares of Company Common Stock purchased by TD upon
exercise of the Warrant with respect to which TD then has beneficial ownership.
In addition to the repurchase rights mentioned above, TD, at any time
commencing 90 days after the occurrence of a Purchase Event (as such term is
defined in the Warrant Agreement), shall have the right to require the Company
to register under the Securities Act of 1933 the shares of Company Common Stock
then issuable upon exercise of the Warrant, unless the Company elects to
repurchase such portion of the Warrant as is exercisable for shares of Company
Common Stock with an aggregate Applicable Price (as such term defined in the
Warrant Agreement) equal to $3 million, in which case the Company may defer the
exercise of TD's registration rights with respect to the remaining shares of
Company Common Stock issuable upon exercise of the Warrant until such date not
more than 9 months after the date of the Payment Event as the Company shall
determine.
The Warrant Agreement is filed as an Exhibit to this Statement and is
incorporated herein by reference. The description of the Warrant Agreement set
forth herein does not purport to be complete and is qualified in its entirety
by the provisions of the Warrant Agreement.
Except as set forth in this Item 4, neither TD nor, to the best of
TD's knowledge, any of the individuals named in Schedule I hereto, has any
plans or proposals which relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a), (b) As of the date of this Statement, TD beneficially owns
560,000 shares of Company Common Stock, representing approximately 4.9% of the
shares of Company Common Stock currently outstanding, which TD has previously
acquired through open market purchases. TD has sole power to vote and to
direct the disposition of such shares of Company Common Stock.
In addition, if the Warrant were to become exercisable TD would have
the right to purchase (subject to receipt of any necessary Canadian and U.S.
regulatory approvals) up to 250,000 additional shares of Company Common Stock,
which would represent approximately 2.1% of the Company Common Stock
outstanding after giving effect to such exercise. If TD were to exercise the
Warrant it would have sole power to vote and to direct the disposition of the
shares of Company Common Stock received upon such exercise, subject to the
provisions of the Warrant Agreement described in Item 6. Because the Warrant
will not be exercisable unless and until the Merger Agreement is terminated
upon the occurrence of certain specified events, TD disclaims beneficial
ownership of any shares of Company Common Stock issuable upon exercise of the
Warrant.
To the best of TD's knowledge, none of the individuals named in
Schedule I hereto beneficially owns any shares of Company Common Stock.
<PAGE>
Page 6 of 14 Pages
(c) During the past 60 days, TD has effected the following
transactions in shares of Company Common Stock. All of these transactions
consisted of purchases of Company Common Stock in brokerage transactions on the
New York Stock Exchange:
No. of Purchase
Shares Price Per
Date Purchased Share
_________ ____________ __________
9-Feb-96 50,000 $23.96
12-Feb-96 13,900 $24.96
13-Feb-96 1,500 $25.10
14-Feb 96 34,600 $24.73
15-Feb-96 24,000 $25.10
15-Feb-96 35,000 $24.72
16-Feb-96 12,900 $24.85
16-Feb-96 1,000 $24.48
20-Feb-96 5,000 $24.35
21-Feb-96 14,600 $24.59
5-Mar-96 15,000 $23.64
6-Mar-96 25,000 $23.90
6-Mar-96 15,000 $23.61
7-Mar-96 20,800 $23.82
11-Mar-96 36,500 $22.13
12-Mar-96 5,200 $22.23
Except as set forth above, neither TD nor, to the best of TD's
knowledge, any of the individuals named in Schedule I hereto, has effected any
transaction in shares of Company Common Stock for its or their own account
during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Reference is made to Items 3 and 4 above for a description of certain
provisions of the Merger Agreement and the Warrant Agreement.
The Warrant Agreement also provides that, in the event the
stockholders of the Company are asked to consider and vote on a Transaction
Proposal or a Business Combination (as such terms are defined in the Merger
Agreement) within the 13-month period commencing on the date of termination of
the Merger Agreement, TD shall vote all shares of Company Common Stock acquired
pursuant to the Warrant with respect to which TD then has beneficial ownership
proportionately with all other outstanding shares of Company Common Stock
(other than shares of Company Common Stock held by affiliates of the Company).
Concurrently with and as a condition to the execution and delivery of
the Merger Agreement, TD and certain stockholders of the Company (each a
"Stockholder"), entered into a voting agreement (the "Voting Agreement")
<PAGE>
Page 7 of 14 Pages
whereby each Stockholder, solely in his or her capacity as a Stockholder, has
severally agreed that, among other things, during the time the Voting Agreement
is in effect, at any meeting of the stockholders of the Company, however
called, or in connection with any written consent of the stockholders of the
Company, such Stockholder shall vote (or cause to be voted) the shares of
Company Common Stock held of record and beneficially owned by such Stockholder
and the shares of Company Common Stock beneficially owned by such Stockholder
and held in the ESOP (as that term is defined in the Merger Agreement) and
allocated to such Stockholder (together with any shares of Company Common
Stock acquired by such Stockholder in any such capacities after the date of
the Voting Agreement and prior to the termination thereof, whether upon
exercise of options, conversion of convertible securities, purchase, exchange
or otherwise, the "Shares") (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
the Voting Agreement and any actions required in furtherance thereof; and (ii)
against (a) any other Business Combination, or (b) any other action which, as
its primary purpose, is intended to impede, delay, postpone, or prevent the
approval and adoption of the Merger Agreement by the stockholders of the
Company or the consummation of the transactions contemplated thereby or has,
as its primary purpose, the consummation of any other Business Combination.
Each Stockholder has also agreed, upon TD's request, to furnish TD a proxy
in form and substance reasonably satisfactory to TD to effectuate the
foregoing. As of April 15, 1996, the Stockholders have reported that they
beneficially own an aggregate of 2,372,034 shares of Company Common Stock
(representing approximately 20.7% of the outstanding shares of Company Common
Stock) which are subject to the Voting Agreement.
Pursuant to the Voting Agreement, each Stockholder has also agreed
not to, directly or indirectly: (i) except pursuant to the terms of the Merger
Agreement and the Voting Agreement, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, any or all of such Stockholder's Shares or any
interest therein, unless the transferee or pledgee of such Shares agrees in
writing to be bound by all of the provisions of the Voting Agreement with
respect to such Shares; (ii) except as contemplated by the Voting Agreement,
grant any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares; (iii) take any
action that would make any representation or warranty of such Stockholder
contained in the Voting Agreement untrue or incorrect in any material respect
or have the effect of preventing or disabling such Stockholder from performing
such Stockholder's obligations under the Voting Agreement; or (iv) solicit or
take action to facilitate the making of a Transaction Proposal by a third party.
The Voting Agreement shall terminate on the first to occur of (i) the
Effective Time and (ii) the date upon which the Merger Agreement is terminated
in accordance with its terms. The Voting Agreement is filed as an Exhibit to
this Statement and is incorporated herein by reference. The description of the
Voting Agreement set forth herein does not purport to be complete and is
qualified in its entirety by the provisions of the Voting Agreement.
Except as provided in the Merger Agreement, the Warrant Agreement and
the Voting Agreement, or as set forth herein, neither TD nor, to the best of
TD's knowledge, any of the individuals named in Schedule I hereto, has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of the Company, including, but
not limited to, transfer or voting of any securities of the Company, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss or the giving or withholding of proxies.
<PAGE>
Page 8 of 14 Pages
Item 7. Material to be Filed as Exhibits.
The following exhibits are filed herewith:
2.1 Agreement and Plan of Merger, dated April 9, 1996, among
TD, TD/Oak and the Company.
2.2 Warrant Agreement, dated as of April 9, 1996, by and between the
Company and TD.
2.3 Voting Agreement, dated as of April 9, 1996, by and among TD,
Lawrence M. Waterhouse, Jr., Lawrence M. Waterhouse, III,
Patrick R. Waterhouse, Kevin C. Waterhouse, Christine A.
Waterhouse and Jennifer A. Waterhouse.
99.1 Press Release of TD, issued April 10, 1996.
<PAGE>
Page 9 of 14 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
THE TORONTO-DOMINION BANK
By: /s/ I. Alexander Norton
- --------------------------
Name: I. Alexander Norton
Title: Vice President and Assistant General Counsel
Dated: April 19, 1996
<PAGE>
Page 10 of 14 Pages
SCHEDULE I
INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS OF
THE TORONTO-DOMINION BANK
The following is a list of the directors and executive officers of
The Toronto-Dominion Bank ("TD") as of the date of this Schedule 13D. Unless
otherwise indicated, each of the directors and executive officers is a citizen
of Canada. Unless otherwise indicated, the business address for each of the
executive officers is: The Toronto-Dominion Bank, P.O. Box 1, Toronto-Dominion
Centre, King Street West and Bay Street, Toronto, Ontario M5K 1A2, Canada.
Unless otherwise indicated, each occupation set forth opposite an executive
officer's name refers to employment with TD.
Present Principal Occupation or
Name Employment and Address
- ---- ----------------------------------
DIRECTORS
M. Norman Anderson <F2> President
Norman Anderson & Associates Ltd.
502 - 455 Granville Street
Vancouver, B.C.
V6C 1V2
A. Charles Baillie President
The Toronto-Dominion Bank
Toronto-Dominion Centre
P.O. Box 1
Toronto, Ontario
M5K 1A2
Philippe de Gaspe Chairman of the Board
Beaubien Telemedia Inc.
1010 Sherbrooke Street West
Suite 1610
Montreal, Quebec
H3A 2R7
G. Montegu Black Chairman and President
Txibanguan Limited
1969 Leslie Street
North York, Ontario
M3B 2M3
Andre Chagnon Chairman of the Board
and Chief Executive Officer
Le Groupe Videotron Ltee
300 Viger Avenue East
Montreal, Quebec
H2X 3W4
Marshall A. Cohen President and Chief Executive
Officer
The Molson Companies Limited
Scotia Plaza
40 King Street West, Suite 3600
Toronto, Ontario
M5H 3Z5
<F2> M. Norman Anderson is also a U.S. citizen.<PAGE>
Page 11 of 14 Pages
Dr. Gail Cook-Bennett Vice Chair
Bennecon Ltd.
Management Consultants
P.O. Box 59
Toronto-Dominion Centre
Toronto, Ontario
M5K 1E7
Dr. Wendy K. Dobson Professor and Director
Centre for International Business
Faculty of Management
University of Toronto
Joseph L. Rotman Centre for
Management
105 St. George Street
Toronto, Ontario
M5S 3E6
Dr. Marsha P. Hanen President and Vice Chancellor
The University of Winnipeg
515 Portage Avenue
Winnipeg, Manitoba
R3B 2E9
The Honorable E. Leo Member, Senate of Canada
Kolber c/o Claridge Inc.
1170 Peel Street
Montreal, Quebec
H3B 4P2
Brian F. MacNeill President & Chief Executive
Officer
IPL Energy Inc.
Suite 2900 Canada Trust Tower
421-7th Avenue SW
Calgary, Alberta
T2P 4K9
James A. Pattison Chairman, President and
Chief Executive Officer
The Jim Pattison Group
1055 West Hastings Street
Suite 1600
Vancouver, B.C.
V6E 2H2
Roger Phillips President and Chief Executive
Officer
IPSCO Inc.
P.O. Box 1670
Armour Road
Regina, Saskatchewan
S4P 3C7
Dr. Robert J. Richardson Company Director
215 Ross Drive
R.R. #3
North Bay, Ontario
P1B 8G4
<PAGE>
Page 12 of 14 Pages
Edward S. Rogers President & Chief Executive
Officer
Rogers Communications Inc.
P.O. Box 1007, Scotia Plaza
40 King Street West, Suite 6400
Toronto, Ontario
M5H 3Y2
William L. Sauder Chairman & Chief Executive Officer
Sauder Industries Limited
P.O. Box 49100
3500 - Four Bentall Centre
Vancouver, B.C.
V7X 1H3
Donald R. Sobey<F3> Chairman
Empire Company Limited
115 King Street
Stellarton, N.S.
B0K 1S0
Dr. Michael D. Sopko Chairman & Chief Executive Officer
Inco Limited
145 King Street West
Suite 1500
Toronto, Ontario
M5H 4B7
John M. Thompson Senior Vice President & Group
Executive
IBM Corporation
P.O. Box 100, Route 100
Somers, N.Y. 10589
Richard M. Thomson Chairman & Chief Executive Officer
The Toronto-Dominion Bank
P.O. Box 1
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
George W. Watson President & Chief Executive
Officer
TransCanada PipeLines Limited
TransCanada PipeLines Tower
111-Fifth Avenue S.W.
P.O. Box 1000, Station M
Calgary, Alberta
T2P 4K5
Adam H. Zimmerman, F.C.A. Company Director
Suite 500
One Toronto Street
Toronto, Ontario
M5C 2W4
<F3> On August 2, 1991, Donald R. Sobey, a director of TD, pled guilty to the
offence of sexually assaulting an adult male and was fined C$750 in
connection therewith. <PAGE>
Page 13 of 14 Pages
EXECUTIVE OFFICERS
G.F. Kym Anthony Executive Vice President
William T. Brock Vice Chairman
L. Arthur English Executive Vice President
Kenneth B. Foxcroft Executive Vice President
J. Duncan Gibson Executive Vice President
W. Keith Gray Executive Vice President
J. Urban Joseph Vice Chairman
Robert P. Kelly Vice Chairman
Stephen D. McDonald Executive Vice President
Sydney R. McMorran Vice Chairman
<PAGE>
Page 14 of 14 Pages
THE TORONTO-DOMINION BANK
SCHEDULE 13D
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1 Agreement and Plan of Merger, dated April
9, 1996, among The Toronto-Dominion Bank ("TD"),
TD/Oak, Inc. and Waterhouse Investor Services,
Inc. ("Waterhouse").
2.2 Warrant Agreement, dated as of April 9, 1996, by
and between Waterhouse and TD.
2.3 Voting Agreement, dated as of April 9, 1996, by
and among TD, Lawrence M. Waterhouse, Jr.,
Lawrence M. Waterhouse, III, Patrick R.
Waterhouse, Kevin C. Waterhouse, Christine A.
Waterhouse and Jennifer A. Waterhouse.
99.1 Press Release of TD, issued April 10, 1996.
Exhibit 2.1
____________________________________
AGREEMENT AND PLAN OF MERGER
among
THE TORONTO-DOMINION BANK,
TD/OAK, INC.
and
WATERHOUSE INVESTOR SERVICES, INC.
Dated April 9, 1996
____________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER . . . . . . . . . . . . . . 1
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Effective Time of the Merger . . . . . . . . . . . . . 2
SECTION 1.4 Effects of the Merger . . . . . . . . . . . . . . . . 2
SECTION 1.5 Certificate of Incorporation; By-Laws . . . . . . . . 2
SECTION 1.6 Directors and Officers . . . . . . . . . . . . . . . . 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . 2
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . . 2
(a) Common Stock of Merger Sub . . . . . . . . . . . . . . 3
(b) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock . . . . . . . . . . . . . . . . 3
(c) Conversion of Company Common Stock . . . . . . . . . . 3
(d) Shares of Dissenting Holders . . . . . . . . . . . . . 3
(e) Cancellation and Retirement of Company Common Stock . 4
SECTION 2.2 Company Common Stock Elections . . . . . . . . . . . . 4
SECTION 2.3 Proration. . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.4 Exchange Ratio Definitions . . . . . . . . . . . . . . 7
SECTION 2.5 Exchange of Certificates . . . . . . . . . . . . . . . 7
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . 7
(b) Exchange Procedures . . . . . . . . . . . . . . . . . 7
(c) Distributions with Respect to Unexchanged Shares . . . 8
(d) No Further Ownership Rights in Company Common
Stock . . . . . . . . . . . . . . . . . . . . . . . 8
(e) No Fractional Shares . . . . . . . . . . . . . . . . . 8
(f) Termination of Exchange Fund . . . . . . . . . . . . . 8
(g) No Liability . . . . . . . . . . . . . . . . . . . . . 9
(h) Investment of Exchange Fund . . . . . . . . . . . . . 9
SECTION 2.6 Treatment of Employee Options . . . . . . . . . . . . 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . 10
SECTION 3.1 Representations and Warranties of the Company. . . . . 10
(a) Organization and Qualification; Subsidiaries . . . . . 10
(b) Certificates of Incorporation and By-Laws . . . . . . 10
(c) Capitalization . . . . . . . . . . . . . . . . . . . . 11
(d) Authority Relative to Agreement . . . . . . . . . . . 11
(e) No Conflict; Required Filings and Consents . . . . . . 12
(f) Compliance . . . . . . . . . . . . . . . . . . . . . . 13
(g) Agreements with Regulators . . . . . . . . . . . . . . 15
(h) SEC Filings; Financial Statements . . . . . . . . . . 15
(i) Information Supplied . . . . . . . . . . . . . . . . . 16
(j) Absence of Certain Changes or Events . . . . . . . . . 17
<PAGE>
(k) Absence of Litigation . . . . . . . . . . . . . . . . 17
(l) Labor Matters . . . . . . . . . . . . . . . . . . . . 17
(m) Employee Benefit Plans . . . . . . . . . . . . . . . . 18
(n) Tax Matters . . . . . . . . . . . . . . . . . . . . . 19
(o) Intellectual Property . . . . . . . . . . . . . . . . 20
(p) Title to Properties; Liens and Encumbrances . . . . . 20
(q) Certain Contracts and Agreements . . . . . . . . . . . 21
(r) Transactions with Affiliates . . . . . . . . . . . . . 22
(s) Opinion of Financial Advisor . . . . . . . . . . . . . 22
(t) Brokers . . . . . . . . . . . . . . . . . . . . . . . 22
(u) Scope of Representations . . . . . . . . . . . . . . . 22
SECTION 3.2 Representations and Warranties of Parent and
Merger Sub . . . . . . . . . . . . . . . . . . . . . 22
(a) Corporate Organization . . . . . . . . . . . . . . . . 22
(b) Charter and By-Laws . . . . . . . . . . . . . . . . . 22
(c) Capitalization . . . . . . . . . . . . . . . . . . . . 23
(d) Authority Relative to Agreement . . . . . . . . . . . 23
(e) No Conflict; Required Filings and Consents . . . . . . 23
(f) Compliance . . . . . . . . . . . . . . . . . . . . . . 24
(g) Agreements with Regulators . . . . . . . . . . . . . . 24
(h) Securities Documents . . . . . . . . . . . . . . . . . 25
(i) Information Supplied . . . . . . . . . . . . . . . . . 25
(j) Absence of Certain Changes or Events . . . . . . . . . 25
(k) Absence of Litigation . . . . . . . . . . . . . . . . 26
(l) Brokers . . . . . . . . . . . . . . . . . . . . . . . 26
(m) Ownership of Company Common Stock . . . . . . . . . . 26
(n) Scope of Representations . . . . . . . . . . . . . . . 26
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS . . . 26
SECTION 4.1 Conduct of Business of the Company Pending the Merger 26
SECTION 4.2 Conduct of Business of Merger Sub . . . . . . . . . . 29
SECTION 4.3 Stockholders' Meeting . . . . . . . . . . . . . . . . 29
SECTION 4.4 Preparation of Form F-4 and the Proxy
Statement/Prospectus . . . . . . . . . . . . . . . . 29
SECTION 4.5 Access to Information; Confidentiality . . . . . . . . 30
SECTION 4.6 Affiliates . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.7 Stock Exchange Listing . . . . . . . . . . . . . . . . 30
SECTION 4.8 No Solicitation . . . . . . . . . . . . . . . . . . . 30
SECTION 4.9 Employee Benefits Matters . . . . . . . . . . . . . . 32
SECTION 4.10 Directors' and Officers' Indemnification and Insurance 32
SECTION 4.11 Further Action; Reasonable Best Efforts . . . . . . . 33
SECTION 4.12 Notification of Certain Matters . . . . . . . . . . . 33
SECTION 4.13 Public Announcements . . . . . . . . . . . . . . . . . 34
SECTION 4.14 Tax Free Reorganization Treatment . . . . . . . . . . 34
SECTION 4.15 Convertible Notes. . . . . . . . . . . . . . . . . . . 34
SECTION 4.16 Transfer of Subsidiary. . . . . . . . . . . . . . . . 34
SECTION 4.17 Rule 144 Information . . . . . . . . . . . . . . . . . 34
ARTICLE V
CONDITIONS OF MERGER . . . . . . . . . . . . 34
SECTION 5.1 Conditions to Obligation of Each Party to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
(a) Stockholder Approval . . . . . . . . . . . . . . . . . 34
(b) Listing . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Other Approvals . . . . . . . . . . . . . . . . . . . 35
(d) No Injunctions or Restraints; Illegality . . . . . . . 35
(e) Form F-4 . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.2 Conditions to Obligations of Parent and Merger Sub . . 35
(a) Representations and Warranties . . . . . . . . . . . . 35
(b) Performance of Obligations of the Company . . . . . . 35
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . 36
(d) Burdensome Condition . . . . . . . . . . . . . . . . . 36
(e) Dissenters' Rights . . . . . . . . . . . . . . . . . . 36
(f) Affiliate Letters . . . . . . . . . . . . . . . . . . 36
(g) Employment Agreement . . . . . . . . . . . . . . . . . 36
SECTION 5.3 Conditions to Obligations of the Company . . . . . . . 36
(a) Representations and Warranties . . . . . . . . . . . . 36
(b) Performance of Obligations of Parent and Merger
Sub . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . 36
(d) Supplemental Indenture . . . . . . . . . . . . . . . . 37
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . 37
SECTION 6.1 Termination . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.2 Effect of Termination . . . . . . . . . . . . . . . . 39
SECTION 6.3 Fees and Expenses . . . . . . . . . . . . . . . . . . 39
SECTION 6.4 Amendment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
GENERAL PROVISIONS . . . . . . . . . . . . 41
SECTION 7.1 Non-Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.3 Certain Definitions . . . . . . . . . . . . . . . . . 42
SECTION 7.4 Severability . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.5 Entire Agreement; Assignment . . . . . . . . . . . . . 43
SECTION 7.6 Parties in Interest . . . . . . . . . . . . . . . . . 44
SECTION 7.7 Governing Law . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.8 Consent to Jurisdiction . . . . . . . . . . . . . . . 44
SECTION 7.9 Headings . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.10 Counterparts . . . . . . . . . . . . . . . . . . . . . 44
Exhibit A-1 Stockholders of the Company to Execute and Deliver Stockholders
Agreements
Exhibit A-2 Form of Stockholders Agreement
Exhibit B-1 Stockholders of the Company to Execute and Deliver Voting
Agreement
Exhibit B-2 Form of Voting Agreement
Exhibit C Form of Warrant Agreement
Exhibit D Form of Affiliates Letter
Exhibit E-1 Form of Employment Agreement and Letter Agreement for Lawrence M.
Waterhouse, Jr.
Exhibit E-2 Form of Agreement Relating to Certain Senior Executives
Exhibit F Form of Purchase Agreement Relating to L.M. Waterhouse & Co., Inc.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated April 9, 1996 (this "Agreement"),
among The Toronto-Dominion Bank, a Canadian chartered bank (the "Parent"),
TD/Oak, Inc., a Delaware corporation and a direct wholly owned subsidiary of
Parent ("Merger Sub"), and Waterhouse Investor Services, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of the Company, Parent and Merger
Sub have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination transaction
provided for herein in which the Company will merge with and into Merger Sub
(the "Merger") with Merger Sub being the surviving corporation in the Merger;
WHEREAS, as a condition of and inducement to their willingness to
enter into this Agreement and to consummate the transactions contemplated
hereby, Parent and Merger Sub have required that each of the stockholders
listed on Exhibit A-1 hereto execute and deliver, simultaneously with the
execution of this Agreement, a Stockholders Agreement (the "Stockholders
Agreement") in the form set forth in Exhibit A-2 hereto and that each of the
stockholders of the Company listed on Exhibit B-1 hereto execute and deliver,
simultaneously with the execution of this Agreement, a Voting Agreement (the
"Voting Agreement") in the form set forth in Exhibit B-2 hereto;
WHEREAS, simultaneously with the execution of this Agreement, the
Company and Parent have entered into a Warrant Agreement, dated as of the date
hereof, in the form of Exhibit C hereto (the "Warrant Agreement") providing for
the purchase by the holder of the Warrant described therein (the "Warrant") of
shares of Company Common Stock (as defined herein) under the circumstances set
forth therein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, mutual covenants and agreements herein contained
and intending to be legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time
(as defined in Section 1.3 below), the Company shall be merged with and into
Merger Sub. Upon the Effective Time, the separate corporate existence of the
<PAGE>
Company shall cease, and Merger Sub shall continue as the surviving corporation
of the Merger (the "Surviving Corporation") under the name "Waterhouse Investor
Services, Inc."
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 6.1, and subject to the satisfaction or waiver of the
conditions set forth in Article V, the closing of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within two
business days) following satisfaction or waiver of the conditions set forth in
Article V, other than those conditions which by their terms are to be satisfied
at the Closing (the "Closing Date"), at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017, unless another date,
time or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time of the Merger. As soon as practicable
after the satisfaction or waiver of the conditions set forth in Article V, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger") with the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Sections 259, 260 and 261 of the DGCL.
SECTION 1.5 Certificate of Incorporation; By-Laws. (a) At the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, except that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "The name of this Corporation is 'Waterhouse
Investor Services, Inc.'".
(b) At the Effective Time the By-Laws of the Surviving Corporation
shall be the By-Laws of Merger Sub, as in effect immediately prior to the
Effective Time, until thereafter amended or repealed in accordance with their
terms and the Certificate of Incorporation of the Surviving Corporation and as
provided by law.
SECTION 1.6 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and By-Laws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed, as the case may be, and qualified.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
<PAGE>
shares of Common Stock, par value $.01 per share, of the Company (the "Company
Common Stock"), or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall remain issued, outstanding and unchanged as validly
issued, fully paid and nonassessable shares of Common Stock of the Surviving
Corporation, which shall be all of the issued and outstanding capital stock of
the Surviving Corporation as of the Effective Time.
(b) Cancellation of Treasury Stock and Parent-Owned Company Common
Stock. Each share of Company Common Stock that is owned by the Company or by
any subsidiary of the Company (other than shares held in trust, custodial,
nominee or similar accounts for the benefit of third parties, shares held by
mutual funds for which the Company or any of its subsidiaries acts as
investment advisor and shares acquired in respect of debts previously
contracted), and each share of Company Common Stock that is owned by Parent,
Merger Sub or any other subsidiary of Parent (other than shares held in trust,
custodial, nominee or similar accounts for the benefit of third parties, shares
held by mutual funds for which Parent or any of its subsidiaries acts as
investment advisor and shares acquired in respect of debts previously
contracted) shall automatically be cancelled and retired and shall cease to
exist, and no other consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of Company Common Stock. Except as otherwise
provided herein and subject to Section 2.1(d), each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in accordance
with Section 2.1(b)) shall be converted into the following (the "Merger
Consideration"):
(i) for each such share of Company Common Stock with respect to
which an election to receive fully paid and nonassessable Common
Shares, without par value, of Parent ("Parent Common Shares") has
been effectively made and not revoked, properly withdrawn or lost,
pursuant to Sections 2.2(c), (d) and (e) ("Electing Shares"), the
right to receive from Parent that number of Parent Common Shares
equal to the Exchange Ratio (as defined in Section 2.4);
(ii) for each such share of Company Common Stock other than
Electing Shares and shares to be cancelled in accordance with Section
2.1(b) ("Non-Electing Shares"), the right to receive cash from Parent
in an amount equal to $38.00, payable to the holder thereof, without
interest thereon (the "Cash Price").
As used in this Agreement, references to "dollars" and "$" are to the lawful
currency of the United States of America, unless otherwise indicated.
(d) Shares of Dissenting Holders. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time held by holders (if any)
who have not voted in favor of the Merger or consented thereto in writing and
who have demanded appraisal rights with respect thereto in accordance with
Section 262 of the DGCL and, as of the Effective Time, shall not have failed to
perfect or shall not have effectively withdrawn or lost their rights to
appraisal and payment under Section 262 of the DGCL (the "Dissenting Shares")
shall not be converted into the right to receive the Merger Consideration as
<PAGE>
described in Section 2.1(c), but holders of such shares shall be entitled to
receive payment of the appraised value of such Dissenting Shares in accordance
with the provisions of such Section 262, except that any Dissenting Shares held
by a holder which shall have failed to perfect or shall have effectively
withdrawn or lost its right to appraisal and payment under Section 262 of the
DGCL shall thereupon be deemed to have been converted into the right to receive
the Merger Consideration as described in Section 2.1(c). The Company shall
give Parent (i) prompt notice of any written demands for appraisal of any
shares, attempted withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by the Company relating to stockholders' rights
of appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make
any payment with respect to any demands for appraisals of capital stock of the
Company, offer to settle or settle any such demands or approve any withdrawal
of any such demands.
(e) Cancellation and Retirement of Company Common Stock. As of the
Effective Time, all shares of Company Common Stock (in each case, other than
shares referred to in Section 2.1(b) and Dissenting Shares) issued and
outstanding immediately prior to the Effective Time, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the applicable Merger Consideration and any cash in lieu of
fractional Parent Common Shares to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.5.
SECTION 2.2 Company Common Stock Elections. (a) Each person who,
on or prior to the Election Date referred to in (c) below, is a record holder
of shares of Company Common Stock will be entitled, with respect to all or any
portion of his shares, to make an unconditional election (an "Election") on or
prior to such Election Date to receive Parent Common Shares in exchange for
such holder's shares of Company Common Stock, on the basis hereinafter set
forth.
(b) Prior to the mailing of the Proxy Statement/Prospectus (as
defined in Section 3.1(e)(ii)), Parent shall appoint a bank or trust company
located in the United States (which may not be an affiliate of Parent) to act
as exchange agent (the "Exchange Agent") for the payment of the Merger
Consideration.
(c) Parent shall prepare and mail a form of election (the "Form of
Election") with the Proxy Statement/Prospectus to the record holders of Company
Common Stock as of the record date for the Stockholders' Meeting (as defined in
Section 4.3), which Form of Election shall be used by each record holder of
shares of Company Common Stock who wishes to elect to receive Parent Common
Shares for any or all shares of Company Common Stock held by such holder. The
Company will use its best efforts to make the Form of Election and the Proxy
Statement/Prospectus available to all persons who become holders of Company
Common Stock during the period between such record date and the Election Date
referred to below. Any such holder's election to receive Parent Common Shares
shall have been properly made only if the Exchange Agent shall have received at
its designated office, by 5:00 p.m., New York City time, on the business day
(the "Election Date") next preceding the date of the Stockholders Meeting, a
Form of Election properly completed and signed and accompanied by certificates
for the shares of Company Common Stock to which such Form of Election relates,
<PAGE>
duly endorsed in blank or otherwise in form acceptable for transfer on the
books of the Company (or by an appropriate guarantee of delivery of such
certificates as set forth in such Form of Election from a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States, provided such
certificates are in fact delivered to the Exchange Agent within five New York
Stock Exchange trading days after the date of execution of such guarantee of
delivery).
(d) Any Form of Election may be revoked by the stockholder
submitting it to the Exchange Agent only by written notice received by the
Exchange Agent prior to 5:00 p.m, New York City time, on the Election Date. In
addition, all Forms of Election shall automatically be revoked if the Exchange
Agent is notified in writing by Parent and the Company that the Merger has been
abandoned pursuant to Section 6.1. If a Form of Election is revoked, the
certificate or certificates (or guarantees of delivery, as appropriate) for the
shares of Company Common Stock to which such Form of Election relates shall be
promptly returned to the stockholder submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent shall be binding as to
whether or not elections to receive Parent Common Shares have been properly
made or revoked pursuant to this Section 2.2 with respect to shares of Company
Common Stock and when elections and revocations were received by it. If the
Exchange Agent determines that any election to receive Parent Common Shares was
not properly made with respect to shares of Company Common Stock, such shares
shall be treated by the Exchange Agent as shares which were Non-Electing Shares
at the Effective Time, and such shares shall be exchanged in the Merger for
cash pursuant to Section 2.1(c)(ii). The Exchange Agent shall also make all
computations as to the allocation and the proration contemplated by Section
2.3, and any such computation shall be conclusive and binding on the holders of
shares of Company Common Stock. The Exchange Agent may, with the mutual
agreement of Parent and the Company, make such rules as are consistent with
this Section 2.2 for the implementation of the elections provided for herein.
SECTION 2.3 Proration.
(a) (i) Notwithstanding anything in this Agreement to the contrary,
the number of shares of Company Common Stock to be converted into the
right to receive Parent Common Shares at the Effective Time (the "Parent
Common Shares Election Number") shall be no greater than 65% of the number
of shares of Company Common Stock outstanding immediately prior to the
Effective Time (excluding for this purpose any shares of Company Common
Stock to be cancelled pursuant to Section 2.1(b)).
(ii) If the number of Electing Shares exceeds the Parent Common
Shares Election Number, then such Electing Shares shall be converted into
the right to receive Parent Common Shares or the Cash Price in accordance
with the terms of Section 2.1(c) in the following manner:
(A) A Parent Common Shares proration factor (the "Parent Common
Shares Proration Factor") shall be determined by dividing the Parent
Common Shares Election Number by the total number of Electing Shares.
(B) The number of Electing Shares covered by each Election to
be converted into Parent Common Shares shall be determined by
<PAGE>
multiplying the Parent Common Shares Proration Factor by the total
number of Electing Shares covered by such Election.
(C) All Electing Shares, other than those shares converted into
the right to receive Parent Common Shares in accordance with Section
2.3(a)(ii)(B), shall be converted into cash as if such shares of
Company Common Stock were Non-Electing Shares in accordance with the
terms of Section 2.1(c)(ii).
(iii) If the number of Electing Shares is less than or equal to
the Parent Common Shares Election Number, then all Electing Shares shall
be converted into the right to receive Parent Common Shares in accordance
with the terms of Section 2.1(c)(i), and, except as provided in Section
2.3(b), all other shares of Company Common Stock other than Electing
Shares shall be converted into the right to receive cash in accordance
with Section 2.1(c)(ii).
(b) (i) Notwithstanding anything in this Agreement to the contrary,
the number of shares of Company Common Stock to be converted into the
right to receive cash at the Effective Time (the "Cash Number") shall be
no greater than (A) 35% of the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (excluding for this
purpose any shares of Company Common Stock to be cancelled pursuant to
Section 2.1(b)) less (B) the sum of (1) the number of Dissenting Shares
with respect to which, at the Effective Time, demands for or rights of
appraisal have not been withdrawn or lost and (2) the number of shares
equal to the number of record holders of Company Common Stock immediately
prior to the Effective Time.
(ii) If the number of Non-Electing Shares exceeds the Cash
Number, then such Non-Electing Shares shall be converted into the right to
receive the Cash Price or Parent Common Shares in accordance with the
terms of Section 2.1(c) in the following manner:
(A) A cash proration factor (the "Cash Proration Factor") shall
be determined by dividing the Cash Number by the total number of Non-
Electing Shares.
(B) The number of a holder's Non-Electing Shares to be
converted into the right to receive the Cash Price shall be
determined by multiplying the Cash Proration Factor by the total
number of such holder's Non-Electing Shares.
(C) All Non-Electing Shares, other than those shares converted
into the right to receive the Cash Price in accordance with Section
2.3(b)(ii)(B), shall be converted into Parent Common Shares as if
such shares of Company Common Stock were Electing Shares in
accordance with the terms of Section 2.1(c)(i).
(iii) If the number of Non-Electing Shares is less than or
equal to the Cash Number, then all Non-Electing Shares shall be converted
into the right to receive the Cash Price in accordance with the terms of
Section 2.1(c)(ii), and, except as provided in Section 2.3(a), all other
shares of Company Common Stock other than Non-Electing Shares (and subject
to Section 2.1(d)) shall be converted into the right to receive Parent
Common Shares in accordance with Section 2.1(c)(i).
<PAGE>
SECTION 2.4 Exchange Ratio Definitions.
(a) "Exchange Ratio" is the Cash Price divided by the Parent Common
Share Price, rounded to the nearest 1/100,000; provided that the Exchange Ratio
shall not be less than 1.81790 or greater than 2.45952 (unless increased as
provided in Section 6.1(i)).
(b) "Parent Common Share Price" is equal to the daily weighted
average price of Parent Common Shares on The Toronto Stock Exchange (the "TSE")
(rounded to the nearest one thousandth and converted into United States dollars
using the spot exchange rate reported in The Wall Street Journal, Eastern
Edition (or such other publication as may be mutually agreed to by Parent and
the Company) on the next business day) for the fifteen (15) consecutive
business days in which such shares are traded on the TSE ending at the close of
business on the tenth business day prior to the Closing Date.
SECTION 2.5 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Parent shall
deposit with the Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, the
Merger Consideration.
(b) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented shares of Company Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and acceptance thereof by
the Exchange Agent, be entitled to a certificate or certificates representing
the number of full Parent Common Shares and the amount of cash, if any, into
which the aggregate number of shares of Company Common Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to this Agreement. The Exchange Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose in order to effect an orderly exchange thereof in
accordance with normal exchange practices. After the Effective Time, there
shall be no further transfer on the records of the Company or its transfer
agent of certificates representing shares of Company Common Stock and if such
certificates are presented to the Company for transfer, they shall be cancelled
against delivery of certificates for Parent Common Shares and cash as
hereinabove provided. If any certificate for such Parent Common Shares is to
be issued in, or if cash is to be remitted to, a person other than the
registered holder of the certificate for Company Common Stock surrendered for
exchange, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to Parent or the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Shares in a name
other than that of, or the payment of cash to a person other than, the
registered holder of the certificate surrendered, or establish to the
satisfaction of Parent or the Exchange Agent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.5(b), each
certificate for shares of Company Common Stock shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 2.1. No interest
will be paid or will accrue on any cash payable as Merger Consideration or in
lieu of any fractional Parent Common Shares.
<PAGE>
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Parent Common Shares with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate for shares of Company Common Stock with respect to the Parent
Common Shares issuable in respect thereof and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.5(e)
until the surrender of such certificate in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the holder of the certificate representing
whole Parent Common Shares issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of any cash payable in lieu of a
fractional Parent Common Share to which such holder is entitled pursuant to
Section 2.5(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
Parent Common Shares, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole Parent Common Shares.
(d) No Further Ownership Rights in Company Common Stock. All Parent
Common Shares issued and cash paid upon the surrender for exchange of
certificates representing shares of Company Common Stock in accordance with the
terms of this Article II (including any cash paid pursuant to Section 2.5(e))
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore represented
by such certificates, subject, however, to the Surviving Corporation's
obligation, with respect to shares of Company Common Stock outstanding
immediately prior to the Effective Time, to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time.
(e) No Fractional Shares. (i) Notwithstanding any other provision
of this Agreement, no certificates or scrip representing fractional Parent
Common Shares shall be issued upon the surrender for exchange of certificates
representing shares of Company Common Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Parent.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a Parent Common
Share (after taking into account all shares of Company Common Stock held by
such holder at the Effective Time) shall receive, in lieu thereof, an amount
in cash (payable in dollars, without interest) equal to the product obtained by
multiplying (a) the fractional share interest to which such holder (after
taking into account all shares of Company Common Stock held at the Effective
Time by such holder) would otherwise be entitled by (b) the daily weighted
average price for a Parent Common Share on the TSE on the last business day
immediately preceding the Closing Date (converted into United States dollars
using the spot exchange rate reported in The Wall Street Journal, Eastern
Edition (or such other publication as may be mutually agreed to by Parent and
the Company) on the last business day immediately preceding the Closing Date).
(f) Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 2.5
<PAGE>
(the "Exchange Fund") which remains undistributed to the holders of the
certificates representing shares of Company Common Stock for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders
of shares of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent and only as general creditors
thereof for payment of their claim for cash, Parent Common Shares, any cash in
lieu of fractional Parent Common Shares and any dividends or distributions with
respect to Parent Common Shares to which such holders may be entitled.
(g) No Liability. None of Parent, Merger Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any Parent Common
Shares (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock shall not have been surrendered prior to five
years after the Effective Time (or immediately prior to such earlier date on
which any cash, Parent Common Shares, any cash in lieu of fractional Parent
Common Shares or any dividends or distributions with respect to Parent Common
Shares in respect of such certificate would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 3.1(e))), any such
shares, cash, dividends or distributions in respect of such certificates shall,
to the extent permitted by applicable law, become the property of Parent, free
and clear of all claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Parent.
SECTION 2.6 Treatment of Employee Options. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any Committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary to provide for the cancellation, effective at the Effective Time, of
all the outstanding stock options, stock appreciation rights, limited stock
appreciation rights and performance units (the "Options") heretofore granted
under any stock option, performance unit or similar plan of the Company (the
"Stock Plans"). Immediately prior to the Effective Time, (i) each Option,
whether or not then vested or exercisable, shall no longer be exercisable but
shall entitle each holder thereof, in cancellation and settlement therefor, to
payments in cash (subject to any applicable withholding taxes, the "Cash
Payment"), at the Effective Time, equal to the product of (x) the total number
of shares of Common Stock subject or related to such Option, whether or not
then vested or exercisable, and (y) the excess of the Cash Price over the
exercise price per share of Common Stock subject or related to such Option,
each such Cash Payment to be paid to each holder of an outstanding Option at
the Effective Time; provided, however, that with respect to any person subject
to Section 16 of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act, and (ii) each share of Common
Stock previously issued in the form of grants of restricted stock or grants of
contingent shares shall fully vest. As provided herein, the Stock Plans and
any other plan, program or arrangement (except the Waterhouse Investor
Services, Inc. Employee Stock Ownership Plan and Trust (the "ESOP")) providing
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary (collectively with the Stock Plans, referred
to as the "Stock Incentive Plans") shall terminate as of the Effective Time and
the Company shall ensure that following the Effective Time no holder of an
<PAGE>
Option or any participant in any Stock Incentive Plans shall have any right
thereunder to acquire capital stock of the Company, Parent or the Merger Sub,
except as provided in the proviso to clause (i) of this Section 2.6. The
Company will take all reasonable steps to ensure that, as of the Effective
Time, none of the Parent, the Company or any of their respective subsidiaries
is or will be bound by any Options, other options, warrants, rights or
agreements which would entitle any person, other than Parent or its affiliates,
to own any capital stock of the Company, Merger Sub or any of their respective
subsidiaries or to receive any payment in respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to Parent and Merger Sub as follows:
(a) Organization and Qualification; Subsidiaries. The Company is a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). Waterhouse National Bank ("WNB") is a wholly owned
subsidiary of the Company and a national banking association organized under
the laws of the United States. Each of the Company and each of its subsidiaries
is a corporation (or in the case of WNB, a banking association) duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power,
authority and governmental approvals could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as defined
below) on the Company. The Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. The Company does not engage, either directly or through subsidiaries,
in any activity or business, or hold any investment, which is not permissible
for bank holding companies under the BHC Act.
When used with respect to the Company or any of its subsidiaries, the
term "Material Adverse Effect" means any material adverse change in or effect
on (i) the business, results of operations or condition (financial or other) of
the Company and its subsidiaries taken as a whole or (ii) the ability of the
Company to consummate any of the transactions contemplated hereby.
(b) Certificates of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Certificate
of Incorporation and the By-Laws of the Company and the equivalent
organizational documents of each subsidiary of the Company as currently in
effect. Neither the Company nor any subsidiary thereof is in violation of any
of the provisions of its Certificate of Incorporation or By-Laws or equivalent
organizational document.
<PAGE>
(c) Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 1,000,000 shares of
Preferred Stock, $.01 par value per share (the "Company Preferred Stock"). As
of April 4, 1996, (i) 11,466,044 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
were not issued in violation of the preemptive (or similar) rights of any
stockholder of the Company, (ii) 250,002 shares of Company Common Stock were
held in the treasury of the Company, (iii) 2,071,923 shares of Company Common
Stock were reserved for issuance and issuable upon conversion of the Company's
6% Convertible Subordinated Notes Due 2003 (the "Convertible Notes") and (iv)
an aggregate of 1,046,131 shares of Company Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding Options issued pursuant to the Stock Plans. Since
April 4, 1996, no options to purchase shares of Company Common Stock have been
granted and no shares of Company Common Stock have been issued except for
shares issued pursuant to the exercise of Options or upon the conversion of
Convertible Notes outstanding as of April 4, 1996. As of the date hereof, no
shares of Company Preferred Stock are issued and outstanding. Except as set
forth above and except as a result of the exercise of Options or conversion of
Convertible Notes outstanding as of April 4, 1996, there are outstanding (i) no
shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of the Company and (iii) no
options, calls, warrants or other rights to acquire from the Company or any
subsidiary, and no obligation of the Company or any subsidiary to issue, any
capital stock, voting securities or securities convertible into or exchangeable
or exercisable for capital stock or other voting securities of the Company or
any subsidiary (collectively, "Company Securities"). There are no outstanding
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities or to provide funds to or make any
investment (in the form of a loan, capital contribution, guarantee or
otherwise) in any such subsidiary or any other entity other than to any direct
or indirect wholly owned subsidiary of the Company. All of the outstanding
shares of capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable (except, in
the case of WNB, as provided in 12 U.S.C. Section 55) and are owned by the
Company or a wholly owned subsidiary of the Company free and clear of all
security interests, liens, claims, pledges, agreements, limitations on voting
rights, charges or other encumbrances of any nature whatsoever. Except as set
forth in Section 3.1(c) of the disclosure schedule furnished by the Company to
Parent simultaneously with the execution and delivery of this Agreement (the
"Disclosure Schedule"), the Company does not own any equity securities of any
corporation, partnership, trust, company or other corporate entity, other than
(i) the subsidiaries listed in Exhibit 21 to its Annual Report on Form 10-K for
the fiscal year ended August 31, 1995, and (ii) securities acquired in the
normal course of its brokerage business and representing less than 5% of the
outstanding voting securities of the respective issuer.
(d) Authority Relative to Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval and adoption of the Merger and this
<PAGE>
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock). This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by the
other parties hereto, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The only
vote of the holders of any class or series of outstanding securities of the
Company required for approval of this Agreement and the Merger is the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock. Prior to the execution and delivery of this Agreement by
the Company, the Board of Directors of the Company has approved, by the
affirmative vote of at least two-thirds (2/3) of the Disinterested Directors
(within the meaning of Article Fifteenth of the Company's Certificate of
Incorporation), this Agreement, the Voting Agreement and the transactions
contemplated hereby and thereby, and accordingly the provisions of Section 203
of the DGCL and Article Fifteenth of the Company's Certificate of Incorporation
do not and will not apply to this Agreement, the Voting Agreement or the
transactions contemplated hereby or thereby.
(e) No Conflict; Required Filings and Consents. (i) The execution,
delivery and performance of this Agreement by the Company does not and will
not: (A) conflict with or violate the Certificate of Incorporation or By-Laws
of the Company or the equivalent organizational documents of any of its
subsidiaries; (B) assuming that all consents, approvals and authorizations
contemplated by subsection (ii) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are
bound or affected; or (C) except as disclosed in Section 3.1(e) of the
Disclosure Schedule, result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) or result in the loss of a benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, investment
management or advisory agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except, in the case of clauses (B) and (C), for any such conflicts,
violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(ii) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby by the
Company do not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any United States
federal, state or local court, administrative agency or commission, or entity
created by rule, regulation or order of any United States federal, state or
local commission or other governmental agency, authority or instrumentality (a
"Governmental Entity"), except for: (A) the approval of the Merger by the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under the
BHC Act; (B) the filing with the SEC of (1) a registration statement on Form F-
4 under the Securities Act of 1933, as amended (the "Securities Act") in
connection with the issuance of Parent Common Shares in the Merger (the "Form
F-4"), including therein a combined proxy statement and prospectus relating to
the Stockholders' Meeting referred to in Section 4.3 (such combined proxy
<PAGE>
statement and prospectus as amended or supplemented from time to time, the
"Proxy Statement/Prospectus") and (2) such other filings under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the Voting Agreement and the transactions
contemplated hereby and thereby and the obtaining from the SEC of such orders
as may be required in connection therewith; (C) consents, authorizations,
approvals or filings pursuant to the applicable provisions of federal and state
securities laws relating to the regulation of broker-dealers, investment
companies and investment advisors and the rules and regulations of the SEC and
the applicable state securities commissioners thereunder and of any applicable
industry self-regulatory organizations (including, without limitation, the
National Association of Securities Dealers, Inc. (the "NASD"), the New York
Stock Exchange Inc. (the "NYSE") and any other securities exchange or similar
organization of which the Company or any of its subsidiaries may be a member;
(D) applicable filings under state anti-takeover laws, if any; (E) the filing
and recordation of the Certificate of Merger as required by the DGCL; and (F)
such other consents, approvals and authorizations of Governmental Entities as
shall have been specified by Company to Parent in writing prior to the date of
this Agreement. Neither the Company nor any of its subsidiaries conduct
business in, or are otherwise subject to the laws of, any jurisdiction outside
the United States as it relates to this Agreement and the consummation of the
Merger and the other transactions contemplated hereby and the Company makes no
representation or warranty with respect to any consent, approval, authorization
or permit of, action by, filing with or notification to any non-United States
Governmental Entity that may be required in connection with the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby.
(f) Compliance. (i) The Company and its subsidiaries hold, and are
in compliance with, all permits, licenses, exemptions, orders and approvals of
all Governmental Entities necessary for the operation of the businesses of the
Company and each subsidiary, except to the extent the failure to so hold or
comply will not have, individually or in the aggregate, a Material Adverse
Effect on the Company, and to the best knowledge of the Company there are no
proceedings pending, threatened or contemplated by any Governmental Entity
seeking to terminate, revoke or materially limit any such permit, license,
exemption, order or approval. Neither the Company nor any of its subsidiaries
nor the conduct of their business is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties are bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected, except for any such
conflicts, defaults or violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. Except for routine examinations by Federal or state Governmental
Entities charged with the supervision or regulation of banks or bank holding
companies or engaged in the insurance of bank deposits, or charged with the
supervision or regulation of broker-dealers or investment advisors
(collectively, "Regulators"), as of the date of this Agreement, no
investigation by any Governmental Entity with respect to the Company or any of
its subsidiaries is pending or, to the best knowledge of the Company,
threatened, other than, in each case, those the outcome of which, individually
or in the aggregate, will not have a Material Adverse Effect on the Company.
<PAGE>
(ii) As of the date of this Agreement, except as disclosed on SEC
Forms ADV and BD which have been filed by the Company or its subsidiaries with
the SEC and copies of which have been made available to Parent prior to the
date of this Agreement, neither the Company nor any of its subsidiaries, nor
any of their respective executive officers, directors or employees has been the
subject of any disciplinary proceedings or orders of any Governmental Entity
arising under applicable securities laws which would be required to be
disclosed on SEC Forms ADV or BD, and to the best knowledge of the Company, no
such disciplinary proceeding or order is pending or threatened; and neither the
Company nor any of its subsidiaries, nor any of their respective Affiliated
Persons (as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")), nor any of the respective executive officers,
directors or employees of any of the foregoing, has been permanently enjoined
by the order, judgment or decree of any court or other Governmental Entity from
engaging in or continuing any conduct or practice in connection with any
activity or in connection with the purchase or sale of any security. Neither
the Company nor any of its subsidiaries, nor any of their respective officers,
directors or, to the best of the Company's knowledge, employees, is or has
been: (1) ineligible to serve as, or subject to any disqualification which
would be the basis for any denial, suspension or revocation of the registration
of or for any limitation on the activities of the Company or any of its
subsidiaries as, an investment adviser under the provisions of the Investment
Advisers Act of 1940, as amended (the "Advisers Act") or as a broker-dealer
under the Exchange Act; or (2) ineligible to serve in, or subject to any
disqualification which would be the basis for any limitation on serving in, any
of the capacities specified in Section 9(a) or 9(b) of the Investment Company
Act.
(iii) Section 3.1(f)(iii) of the Disclosure Schedule sets forth a
complete and accurate list of the subsidiaries of the Company which are duly
registered or licensed as a broker-dealer under the Exchange Act or under any
state, federal or foreign broker-dealer or similar laws pursuant to which each
such subsidiary is required to be so registered, together with a listing of
such registrations and an indication as to whether such subsidiary is a member
in good standing of the NASD or other foreign or domestic broker-dealer
associations. No other subsidiary of the Company is required by the nature of
its activities to be so registered under the Exchange Act or under the laws of
any state or other jurisdiction or to be a member in good standing of the NASD
or other broker-dealer associations under any other applicable law. The
Company has made available to Parent a true and complete copy of each such
subsidiary's currently effective Form BD as filed with the SEC, all state,
federal and foreign registration forms, all prior Form BD filings and all
material reports filed by any such subsidiary with the SEC under the Exchange
Act and the rules promulgated thereunder or otherwise and under similar state,
federal and foreign statutes within the last two years and will make available
to Parent such material forms and reports as are filed from and after the date
hereof and prior to the Closing Date. The information contained in such forms
and reports was (or will be, as the case may be) true and complete in all
material respects as of the time of filing.
(iv) Section 3.1(f)(iv) of the Disclosure Schedule sets forth a
complete and accurate list of the subsidiaries of the Company which are duly
registered or licensed as an investment adviser under the Advisers Act or under
any state, federal or foreign investment adviser or similar laws pursuant to
which any such subsidiary is required to be so registered, together with a
listing of such registrations. No other subsidiary of the Company is required
by the nature of its activities to be so registered under the Advisers Act or
<PAGE>
under the laws of any state or other jurisdiction. The Company has made
available to Parent a true and complete copy of each such subsidiary's
currently effective Form ADV as filed with the SEC, all federal and foreign
registration forms, all prior Form ADV filings and all material reports filed
by any such subsidiary with the SEC under the Advisers Act and the rules
promulgated thereunder or otherwise and under similar state, federal and
foreign statutes within the last three years and will make available to Parent
such material forms and reports as are filed from and after the date hereof and
prior to the Closing Date. The information contained in such forms and reports
was (or will be, as the case may be) true and complete in all material respects
as of the time of filing.
(v) Section 3.1(f)(v) of the Disclosure Schedule sets forth a
complete and accurate list of each of the Company's and its subsidiaries'
memberships in commodities exchanges, boards of trade, clearing organizations
and trade associations, and a description of the type of membership and the
type of registered holder thereof. All such memberships and similar privileges
of each of the Company and its subsidiaries are in good standing, except for
such failures to be in good standing as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(g) Agreements with Regulators. Except as disclosed on its Forms
ADV and BD as filed with the SEC prior to the date of this Agreement, neither
the Company nor any of its subsidiaries is a party to any written agreement or
memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any enforcement order or directive by,
or is a recipient of any extraordinary supervisory letter from, or has adopted
any board resolutions at the request of, any Regulator or any other
Governmental Entity which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit policies or its
management, nor has the Company or any of its subsidiaries been advised by any
Regulator or other Governmental Entity that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such enforcement order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission, or
any such board resolutions.
(h) SEC Filings; Financial Statements. (i) The Company and each of
its subsidiaries have filed all forms, reports, statements and documents
required to be filed with the SEC since January 1, 1995 pursuant to Sections
12(b), 12(g), 13, 14 or 15(d) of the Exchange Act (collectively, the "SEC
Reports"), each of which complied in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, as in effect on the date so filed. The Company has delivered to
Parent, in the form filed with the SEC (including any amendments thereto),
copies of (A) its Annual Reports on Form 10-K for each of the three fiscal
years ended August 31, 1993, 1994 and 1995, and the Quarterly Report on Form
10-Q for the quarter ended November 30, 1995 (the "November 1995 10-Q") (B) all
definitive proxy statements relating to the Company's meetings of stockholders
(whether annual or special) held since January 1, 1993, and (C) all other SEC
Reports or registration statements filed by the Company and its subsidiaries
with the SEC since January 1, 1993. None of such forms, reports or documents
(including any financial statements or schedules included or incorporated by
reference therein) filed by the Company and its then or current subsidiaries
contained, when filed (in the case of documents filed pursuant to the Exchange
Act) or when declared effective by the SEC (in the case of registration
<PAGE>
statements filed under the Securities Act), any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) Each of the audited and unaudited consolidated financial
statements of the Company (including, in each case, any related notes thereto)
included in its SEC Reports complied as to form when filed in all material
respects with the rules and regulations of the SEC with respect thereto, has
been prepared in accordance with U.S. generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly presents the consolidated financial
position of the Company and its subsidiaries at the respective dates thereof
and the consolidated results of its operations and changes in cash flows for
the periods indicated (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(iii) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries at August 31, 1995, including
the notes thereto, included in Company's Annual Report on Form 10-K for the
year ended August 31, 1995, neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet or in the notes thereto prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred in the
ordinary course of business or as otherwise permitted by the terms of this
Agreement since August 31, 1995 which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(iv) Since October 13, 1994, the Company and its subsidiaries have
filed all reports of condition and other required reports and registration
statements with the Federal Reserve, the Office of the Comptroller of the
Currency (the "OCC") and other applicable Bank Regulators. Each of such
reports complied in all material respects, as of the date of filing thereof,
with the requirements of the applicable regulatory authority and the
information set forth therein is true, complete and correct in all material
respects.
(i) Information Supplied. None of the information supplied or to be
supplied by the Company in writing or otherwise approved by the Company for
inclusion or incorporation by reference in (i) the Form F-4 will, at the time
the Form F-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Proxy Statement/Prospectus will, at the date it is first mailed to the
Company's stockholders or at the time of the Stockholders' Meeting, contain any
statement which, in the light of the circumstances under which such statement
is made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting or any amendment or supplement thereto. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect
to statements made or incorporated by reference therein based on information
<PAGE>
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
the Proxy Statement/Prospectus.
(j) Absence of Certain Changes or Events. Since August 31, 1995,
except as disclosed in the SEC Reports filed since that date and prior to the
date of this Agreement, the Company and its subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any change, event or
development in or affecting the Company that constitutes or would reasonably be
expected to have either individually or in the aggregate a Material Adverse
Effect on the Company (provided that for the purposes of this clause (i)
changes caused by changes in stock market conditions in the United States that
generally affect companies in the discount brokerage business shall not be
deemed to constitute a Material Adverse Effect), (ii) any change by the Company
in its accounting methods, principles or practices, except as required by
changes in generally accepted accounting principles or as recommended by the
Company's independent accountants and consented to in writing by Parent (which
consent shall not be unreasonably withheld) prior to such change, (iii) any
declaration, setting aside or payment of any dividends or distributions in
respect of any series of capital stock of the Company, other than regular
annual cash dividends on the outstanding shares of Company Common Stock in an
amount not in excess of $0.22 per annum, (iv) any increase in or establishment
of any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including without limitation the granting of
stock options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any present or former directors, officers above the rank of Vice
President of the Company or any of its subsidiaries, except for increases in
base compensation and annual cash bonuses, in each case in the ordinary course
of business and consistent with past practice, and the implementation of a
Company matching program under the Waterhouse Investor Services, Inc. 401(k)
Plan or (v) any other action which, if it had been taken after the date hereof,
would have required the consent of Parent under Section 4.1 hereof.
(k) Absence of Litigation. Except as disclosed in the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 1995, and in
Section 3.1(k) of the Disclosure Schedule, there are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or other Governmental Entity, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
the Company or to delay or prevent the consummation of the transactions
contemplated hereby beyond December 31, 1996. Neither the Company nor any of
its subsidiaries nor any of their respective properties is or are subject to
any order, writ, judgment, injunction, decree, determination or award having,
or which could reasonably be expected to have, a Material Adverse Effect on the
Company or which could prevent or delay the consummation of the transactions
contemplated hereby beyond December 31, 1996.
(l) Labor Matters. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement. Since January 1, 1993,
neither the Company nor any of its subsidiaries has (i) had any employees
strikes, work stoppages, slowdowns or lockouts, (ii) received any requests for
certifications of bargaining units or any other requests for collective
<PAGE>
bargaining, or (iii) become aware of any efforts to organize employees of the
Company or any of its subsidiaries into a collective bargaining unit.
(m) Employee Benefit Plans. (i) Section 3.1(m)(i) of the
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, without limitation,
multiemployer plans within the meaning of ERISA section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA (including any funding mechanism therefor now
in effect or required in the future as a result of the transactions
contemplated by this Agreement), whether formal or informal, legally binding or
not under which any employee or former employee of the Company has any present
or future right to benefits or under which the Company has any present or
future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans".
(ii) With respect to each Company Plan, the Company has delivered,
or made available, to the Parent a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof and, to the
extent applicable, (A) any related trust agreement, annuity contract or other
funding instrument; (B) the most recent determination letter; (C) any summary
plan description and other written communications (or a description of any oral
communications) by the Company to its employees concerning the extent of the
benefits provided under a Company Plan; and (D) for the three most recent years
(I) the Form 5500 and attached schedules; (II) audited financial statements;
(III) actuarial valuation reports; and (IV) attorney's response to an auditor's
request for information.
(iii) (A) Each Company Plan has been established and administered in
all material respects in accordance with its terms, and in all material
respects compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations; (B) each Company Plan which is intended
to be qualified within the meaning of Code section 401(a) has received a
favorable determination letter or has filed a timely request for a
determination letter as to its qualification and, to the knowledge of the
Company, nothing has occurred, whether by action or failure to act, which would
cause the loss of such qualification; (C) with respect to any Company Plan, no
actions, suits or claims (other than routine claims for benefits in the
ordinary course) are pending or threatened, no facts or circumstances exist
which, to the knowledge of the Company, could give rise to any such actions,
suits or claims, except for such actions, suits or claims the affects of which
could not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect on the Company, and the Company will promptly
notify Parent of any pending or threatened claims arising between the date
hereof and the Closing Date; (D) neither the Company nor to the knowledge of
the Company any other party has engaged in a prohibited transaction, as such
term is defined under Code section 4975 or ERISA section 406, which would
subject the Company or Parent to any taxes, penalties or other liabilities
under Code section 4975 or ERISA sections 409 or 502(i) that is reasonably
likely to result in material liability; (E) no event has occurred and no
condition exists that would subject the Company, either directly or by reason
of its affiliation with any member of its Controlled Group (defined as any
organization which is a member of a controlled group of organizations within
the meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine or
<PAGE>
penalty imposed by ERISA, the Code or other applicable laws, rules and
regulations including, but not limited to, the taxes imposed by Code sections
4971, 4972, 4977, 4979, 4980B, 4976(a) or the fine imposed by ERISA section
502(c) that is reasonably likely to result in a material liability to the
Company; (F) all insurance premiums required to be paid with respect to Company
Plans as of the Closing Date have been or will be paid prior thereto (G) all
contributions required to be made prior to the Closing Date under the terms of
any Company Plan, the Code, ERISA or other applicable laws, rules and
regulations have been or will be made (H) no Company Plan provides for an
increase in benefits on or after the Closing Date; and (I) except as noted in
Section 3.1(m)(i) of the Disclosure Schedule each Company Plan may be amended
or terminated without obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a trust or other
funding vehicle or reserved for on the Company's balance sheet as of
November 30, 1995 included in the November 1995 10-Q).
(iv) No Company Plan is, or has ever been, subject to Title IV of
ERISA and, except as set forth in Section 3.1(m)(i) of the Disclosure Schedule,
there are no unfunded Company Plans under which benefits are payable presently,
or in the future, to present or former employees of the Company.
(v) Each Company Plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements in all material respects; and the Company has received
a favorable determination from the Internal Revenue Service with respect to any
trust intended to be qualified within the meaning of Code section 501(c)(9).
(vi) Except as set forth on Section 3.1(m)(i) of the Disclosure
Schedule, no Company Plan exists which could result in the payment to any
Company employee of any money or other property or rights or accelerate or
provide any other rights or benefits to any Company employee as a result of the
transactions contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G.
(n) Tax Matters. (i) Except as set forth in the SEC Reports filed
prior to the date of this Agreement, (A) the Company and its subsidiaries have
filed, been included in or sent, all returns, declarations and reports and
information returns and statements required to be filed or sent by any of them
relating to any Taxes (as defined below) with respect to any income, properties
or operations of the Company or any of its subsidiaries (collectively,
"Returns"); (B) as of the time of filing, the Returns were correct in all
material respects; (C) the Company and its subsidiaries have timely paid or
made provision for all Taxes that have been shown as due and payable on the
Returns that have been filed; (D) the Company and its subsidiaries have made or
will make provision for all Taxes payable for any periods that end before the
Effective Time for which no Returns have yet been filed and for any periods
that begin before the Effective Time and end after the Effective Time to the
extent such Taxes are attributable to the portion of any such period ending at
the Effective Time; (E) the charges, accruals and reserves for Taxes reflected
on the books of the Company and its subsidiaries are adequate under generally
accepted accounting principles to cover the Tax liabilities accruing or payable
by the Company and its subsidiaries in respect of periods prior to the date
hereof; (F) neither the Company nor any of its subsidiaries is delinquent in
the payment of any Taxes or has requested any extension of time within which to
file or send any Return (other than extensions granted to the Company for the
filing of its Returns as set forth in Section 3.1(n) of the Disclosure
Schedule), which Return has not since been filed or sent; (G) no deficiency for
<PAGE>
any Taxes has been proposed, asserted or assessed, in writing, against the
Company or any of its subsidiaries (or any member of any affiliated or combined
group of which the Company or any of its subsidiaries is or has been a member
for which either the Company or any of its subsidiaries could be liable) other
than those Taxes being contested in good faith by appropriate proceedings and
set forth in Section 3.1(n) of the Disclosure Schedule (which shall set forth
the nature of the proceeding, the type of return, the deficiencies proposed,
asserted or assessed and the amount thereof, and the taxable year in question);
(H) neither the Company nor any of its subsidiaries has granted any extension
of the limitation period applicable to any Tax claims other than those Taxes
being contested in good faith by appropriate proceedings; (I) neither the
Company nor any of its subsidiaries is subject to liability for Taxes of any
person (other than the Company or its subsidiaries), including, without
limitation, liability arising from the application of U.S. Treasury Regulation
section 1.1502-6 or any analogous provision of state, local or foreign law;
(J) neither the Company nor any of its subsidiaries is or has been a party to
any tax sharing agreement with any corporation which is not currently a member
of the affiliated group of which the Company is currently a member; and (K)
neither the Company nor any of its subsidiaries is or has been a party to any
nexus or allocation agreements with any State of the United States.
(ii) "Tax" means with respect to any person (A) any net income,
gross income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, value-added, windfall profits, custom duty or
other tax, capital stock, social security (or similar), unemployment,
disability, transfer, alternative or add-on minimum, estimated or other like
governmental assessment or charge of any kind whatsoever, together with any
interest and any penalty, addition to tax or additional amount imposed by any
taxing authority (domestic or foreign) on such person and (B) any liability of
the Company or any subsidiary for the payment of any amount of the type
described in clause (A) as a result of being a member of an affiliated or
combined group.
(o) Intellectual Property. (a) The Company and each of its
subsidiaries owns, or is licensed to use (in each case, free and clear of any
liens or encumbrances of any kind), the trademarks, service marks, brand names
and other intellectual property and proprietary rights (collectively,
"Intellectual Property"), listed in Section 3.1(o) of the Disclosure Schedule,
and such Intellectual Property, including without limitation the right to use
the name "Waterhouse", constitutes all of the material Intellectual Property
used in or necessary for the conduct of its business as currently conducted;
(b) the Company and its subsidiaries have not licensed or otherwise granted to
others any rights to use any such Intellectual Property except as contemplated
by this Agreement or as set forth in Section 3.1(o) of the Disclosure Schedule;
(c) to the best of the Company's knowledge the use of such Intellectual
Property by the Company and its subsidiaries does not infringe on or otherwise
violate the rights of any person and is in accordance with any applicable
license pursuant to which the Company or any subsidiary acquired the right to
use such Intellectual Property; and (d) to the knowledge of the Company, no
person is challenging, infringing on or otherwise violating any right of the
Company or any of its subsidiaries with respect to such Intellectual Property.
(p) Title to Properties; Liens and Encumbrances. Section 3.1(p) of
the Disclosure Schedule sets forth a complete and accurate list of all real
properties leased by the Company and its subsidiaries. Except as set forth in
Section 3.1(p) of the Disclosure Schedule and except for such defects in title
<PAGE>
as would not, either individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company, the Company and its
subsidiaries have valid leasehold interests in their respective real properties
and have valid title to all of their respective other properties and assets
(except for leased properties and assets, in which case the lessee has a valid
leasehold interest therein), subject only to (i) statutory liens arising or
incurred in the ordinary course of business with respect to which the
underlying obligations are not delinquent or the validity of which is being
contested in good faith by appropriate proceedings, (ii) liens for taxes not
yet delinquent or the validity of which is being contested in good faith by
appropriate proceedings, and (iii) liens securing indebtedness of the Company
or any of its subsidiaries which is created substantially simultaneously with
the purchase of the relevant properties or assets and which do not encumber
property other than such property or assets. Except as set forth in Section
3.1(p) of the Disclosure Schedule, neither the Company nor any of its
subsidiaries owns any real property in fee.
(q) Certain Contracts and Agreements. (i) There have been made
available to Parent copies of each of the following agreements to which the
Company or any of its subsidiaries is a party or by which it is bound: (A) any
lease (whether of real or personal property) providing for annual rentals of $1
million or more; (B) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets providing for annual payments of
$1,000,000 or more; (C) any sales, distribution or similar agreement providing
for the sale by the Company or any of its subsidiaries of services or other
assets providing for annual payments of $1,000,000 or more (except for
agreements made in the ordinary course of business and involving investment
banking, brokerage, or investment management services); (D) any joint venture
or strategic alliance agreement providing for annual payments of $1,000,000 or
more or involving an investment by the Company or its subsidiaries of
$1,000,000 or more; (E) any agreement relating to the disposition or sale of
any business (whether by merger, sale of stock, sale of assets or otherwise);
(F) any agreement relating to borrowings or the deferred purchase price of
property involving an aggregate principal amount of $1,000,000 or more; (G) any
license, franchise or similar agreement providing for annual payments of
$1,000,000 or more; (H) any agency, dealer, sales representative, marketing or
other similar agreement providing for annual payments of $1,000,000 or more and
(I) any other agreement which involves annual payments in excess of $1,000,000
or is not terminable without penalty by the Company or one of its subsidiaries
within six months (each such contract described in the foregoing clauses (A)
through (I), a "Specified Contract") and a complete and correct list of all
such Specified Contracts is set forth in Section 3.1(q)(i) of the Disclosure
Schedule. Neither the Company nor any of its subsidiaries is in default in the
performance of any of its material obligations under any Specified Contract.
No event has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute a default of
any of its material obligations by the Company or any of its subsidiaries under
any Specified Contract or, to the Company's knowledge, by any other party
thereto.
(ii) Except as set forth in Section 3.1(q)(ii) of the Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
contract containing non-competition clauses, restrictive covenants or similar
provisions that would limit Parent's, the Company's or any subsidiary's ability
after the Closing to engage in any line of business in any geographic area or
to compete against any person.
<PAGE>
(r) Transactions with Affiliates. Except as set forth in Section
3.1(r) of the Disclosure Schedule or as disclosed in the SEC Reports filed
prior to the date of this Agreement, there are no contracts, agreements,
arrangements or understandings of any kind between any affiliate of the
Company, on the one hand, and the Company or any subsidiary of the Company, on
the other hand, other than any such contracts, agreements, arrangements and
understandings that either individually or in the aggregate are de minimis in
nature.
(s) Opinion of Financial Advisor. The Company has received the
opinion of Bear, Stearns & Co. Inc. to the effect that the Merger is fair to
the holders of the Company Common Stock from a financial point of view.
(t) Brokers. No broker, finder or investment banker (other than
Bear, Stearns & Co. Inc. and A.J. Pace & Co., Inc.) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Bear,
Stearns & Co. Inc. and A.J. Pace & Co., Inc. pursuant to which such firms would
be entitled to any payment relating to the transactions contemplated by this
Agreement.
(u) Scope of Representations. Anything to the contrary in this
Section 3.1 notwithstanding, no representation or warranty made by the Company
in this Agreement shall be deemed to be untrue or incorrect at the date hereof
if the failure of such representation or warranty to be true and correct as of
such date (or as of any other specified date) does not have, individually or in
the aggregate, a Material Adverse Effect on the Company at the date hereof.
SECTION 3.2 Representations and Warranties of Parent and Merger Sub.
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Company as follows:
(a) Corporate Organization. Parent is validly existing as a bank
under the laws of Canada and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and each of Parent and Merger Sub has the requisite corporate power and
authority and any necessary governmental authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
When used with respect to Parent or Merger Sub, the term "Material
Adverse Effect" means any material adverse change in or effect on (i) the
business, results of operations or condition (financial or other) of Parent and
its subsidiaries taken as a whole or (ii) the ability of Parent or Merger Sub
to consummate any of the transactions contemplated hereby.
(b) Charter and By-Laws. Parent has heretofore furnished to the
Company a complete and correct copy of the By-Laws of Parent as currently in
effect and of the Certificate of Incorporation and By-Laws of Merger Sub as
currently in effect. The charter of Parent is the Bank Act of Canada. Neither
Parent nor Merger Sub is in violation of any of the provisions of its
<PAGE>
respective charter or Certificate of Incorporation (as the case may be) or By-
Laws.
(c) Capitalization. The authorized capital stock of Parent consists
of an unlimited number of authorized Parent Common Shares and an unlimited
number of authorized Class A First Preferred Shares, without par value
(hereinafter referred to as "Parent Class A Preferred Shares"). As of March
31, 1996, (i) 301,473,416 Parent Common Shares were issued and outstanding, and
(ii) a total of 16,000,075 Parent Class A Preferred Shares (Series G, H and Y)
were issued and outstanding. All of the Parent Common Shares issuable in
exchange for Company Common Stock at the Effective Time in accordance with the
terms of this Agreement or pursuant to any supplemental indenture for the
Convertible Notes referred to in Section 4.15 have been duly authorized and,
when so issued, will be validly issued, fully paid and nonassessable and not
issued in violation of the preemptive rights of any shareholder of Parent.
(d) Authority Relative to Agreement. Each of Parent and Merger Sub
has all necessary corporate power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Parent and Merger Sub and the consummation by each of Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent or Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate such transactions. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub
and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub enforceable against them in accordance with its terms.
(e) No Conflict; Required Filings and Consents. (i) The execution,
delivery and performance of this Agreement by Parent and Merger Sub do not and
will not: (A) conflict with or violate the charter or By-Laws of Parent or the
Certificate of Incorporation or By-Laws of Merger Sub; (B) assuming that all
consents, approvals and authorizations contemplated by subsection (ii) below
have been obtained and all filings described in such subsection have been made,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or Merger Sub or by which either of them or their
respective properties are bound or affected; or (C) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material
benefit under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of Parent or Merger Sub pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Merger
Sub is a party or by which Parent or Merger Sub or any of their respective
properties are bound or affected, except, in the case of clauses (B) and (C),
for any such conflicts, violations, breaches, defaults or other occurrences
which could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Parent.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub and the consummation of the transactions contemplated
hereby by Parent and Merger Sub do not and will not require any consent,
approval, authorization or permit of, action by, filing with or notification
to, any Canadian federal or provincial or United States federal, state or local
<PAGE>
Governmental Entity, except for: (A) the approval of the Merger by the Federal
Reserve under the BHC Act; (B) the filing with the SEC of the Form F-4 and the
obtaining from the SEC of such orders as may be required in connection
therewith; (C) consents, authorizations, approvals or filings pursuant to the
applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers, investment companies and investment advisors and
the rules and regulations of the SEC and the applicable state securities
commissioners thereunder and of any applicable industry self-regulatory
organizations (including without limitation the NASD, the NYSE and any other
securities exchange or similar organization of which the Company or any of its
subsidiaries may be a member; (D) the approval of the Merger and the issuance
of Parent Common Shares in connection therewith by the Canadian Minister of
Finance and the Superintendent of Financial Institutions of Canada,
respectively; (E) the filing of a prospectus relating to the Parent Common
Shares to be issued in the Merger with the Ontario Securities Commission and
other applicable provincial securities authorities and the obtaining of a final
receipt for such prospectus from such authorities; (F) filings with the TSE and
such other exchanges on which the Parent Common Shares are currently listed;
(G) the filing and recordation of the Certificate of Merger as required by the
DGCL; (H) applicable filings under state anti-takeover laws, if any; and
(I) such other consents, approvals and authorizations of Governmental Entities
as shall have been specified by Parent to the Company in writing prior to the
date of this Agreement.
(f) Compliance. (i) Parent and its subsidiaries hold, and are in
compliance with, all permits, licenses, exemptions, orders and approvals of all
Governmental Entities necessary for the operation of the businesses of Parent
and each subsidiary, except to the extent the failure to so hold or comply will
not have, individually or in the aggregate, a Material Adverse Effect on
Parent, and to the best knowledge of Parent there are no proceedings pending,
threatened or contemplated by any Governmental Entity seeking to terminate,
revoke or materially limit any such permit, license, exemption, order or
approval. Neither Parent nor any of its subsidiaries nor the conduct of their
business is in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties are bound or
affected, except for any such conflicts, defaults or violations which could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. As of the date of this Agreement, no
investigation by any Canadian or United States Governmental Entity with respect
to Parent is pending, or to best knowledge of Parent, threatened, other than,
in each case, those the outcome of which, individually or in the aggregate,
will not have a Material Adverse Effect on Parent.
(g) Agreements with Regulators. Except as otherwise specified by
Parent to the Company in writing prior to the date of this Agreement, Parent is
not a party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject to any
enforcement order or directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the request
of, any Canadian or United States Regulator or any other Canadian or United
States Governmental Entity which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit policies
<PAGE>
or its management, nor has Parent been advised by any such Regulator or other
such Governmental Entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such enforcement
order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, or any such board
resolutions.
(h) Securities Documents. Parent has filed all required documents
with the provincial and territorial securities regulatory authorities in Canada
(the "Canadian Securities Authorities") since October 31, 1994 (the "Parent
Securities Documents"). As of their respective dates, the Parent Securities
Documents complied in all material respects with the requirements of the
Canadian Securities Authorities and none of the Parent Securities Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included or incorporated by
reference into the Parent Securities Documents complied as to form in all
material respects as of their respective dates of filing with the applicable
accounting requirements and the published rules and regulations of the
Superintendent of Financial Institutions of Canada with respect thereto, have
been prepared in accordance with Canadian generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and present fairly the
consolidated financial position of Parent and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and
statements of cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(i) Information Supplied. None of the information supplied or to be
supplied by Parent or Merger Sub in writing or otherwise approved by Parent for
inclusion or incorporation by reference in (i) the Form F-4 will, at the time
it becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii)
the Proxy Statement/Prospectus will, at the date the Proxy Statement/Prospectus
is first mailed to the Company's stockholders or at the time of the
Stockholders' Meeting, contain any statement which, in the light of the
circumstances under which such statement is made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meeting or any amendment or
supplement thereto. The Form F-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder, except that no representation or warranty
is made by Parent or Merger Sub with respect to statements made or incorporated
by reference therein based on information supplied by the Company for inclusion
or incorporation by reference in the Form F-4.
(j) Absence of Certain Changes or Events. Except as disclosed in
the Parent Securities Documents filed with the Canadian Securities Authorities
prior to the date of this Agreement, since October 31, 1995, there has not been
any change, event or development in or affecting Parent that constitutes or
would reasonably be expected to have a Material Adverse Effect on Parent or to
delay or prevent the consummation of the transactions contemplated hereby
beyond December 31, 1996.
<PAGE>
(k) Absence of Litigation. Except as disclosed in the Parent
Securities Documents filed with the Canadian Securities Authorities prior to
the date of this Agreement, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries, or any properties or rights of Parent or any
of its subsidiaries, before any court, arbitrator or other Governmental Entity,
domestic or foreign, that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on the Parent. Neither Parent
nor any of its subsidiaries nor any of their respective properties is or are
subject to any order, writ, judgment, injunction, decree, determination or
award having, or which could reasonably be expected to have, a Material Adverse
Effect on the Parent or to delay or prevent the consummation of the
transactions contemplated hereby beyond December 31, 1996.
(l) Brokers. No broker, finder or investment banker (other than
Merrill Lynch & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Merger Sub.
(m) Ownership of Company Common Stock. As of the date of this
Agreement, Parent and its subsidiaries beneficially own shares of Company
Common Stock (exclusive of shares of Company Common Stock held in trust,
custodial, nominee or similar accounts for the benefit of third parties and any
shares of Company Common Stock issuable upon exercise of the Warrant, as to
which no representation is made by Parent) representing less than 5% of the
outstanding shares of Company Common Stock.
(n) Scope of Representations. Anything to the contrary in this
Section 3.2 notwithstanding, no representation or warranty made by Parent in
this Agreement shall be deemed to be untrue or incorrect at the date hereof if
the failure of such representation or warranty to be true and correct as of
such date (or as of any other specified date) does not have, individually
or in the aggregate, a Material Adverse Effect on Parent at the date hereof.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS
SECTION 4.1 Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date hereof
to the Effective Time, except as otherwise required by the terms of this
Agreement or unless Parent shall otherwise agree in writing, the businesses of
the Company and its subsidiaries shall be conducted only in, and the Company
and its subsidiaries shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice and in compliance
with applicable laws; and the Company and its subsidiaries shall each use its
reasonable best efforts to preserve intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
their customers, suppliers and other persons with whom the Company or any of
its subsidiaries has significant business relations. By way of amplification
and not limitation of the foregoing, neither the Company nor any of its
subsidiaries shall, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose or commit to do, any of the following
without the prior written consent of Parent:
<PAGE>
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock (except for
(A) dividends and distributions by a wholly owned subsidiary of the
Company to its parent, and (B) regular annual cash dividends on the
Company Common Stock in an amount not in excess of $0.22 per share, in
each case with usual record and payment dates in accordance with the
Company's past practice), (ii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its capital
stock, or (iii) purchase, redeem or otherwise acquire or agree to acquire
any shares of capital stock of the Company or any of its subsidiaries or
any other securities convertible into shares of capital stock or any
rights, warrants or options to acquire any such shares or convertible
securities;
(b) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock
or the capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or any other securities or equity equivalents (including
without limitation stock appreciation rights), other than (A) sales of
capital stock of any wholly owned subsidiary of the Company to the Company
or another wholly owned subsidiary of the Company, and (B) the issuance of
shares of Company Common Stock upon conversion of the Convertible Notes or
upon exercise of Options that were issued and outstanding on the date of
this Agreement;
(c) except to the extent required under existing Company Plans as in
effect on the date of this Agreement, or as required with respect to the
implementation of a 401(k) matching contribution (the "Matching
Contribution") under the Waterhouse Investor Services, Inc. 401(k) Plan,
or as disclosed in Section 4.1(c) of the Disclosure Schedule, (i) increase
the compensation or fringe benefits of any of its directors, officers or
employees, except for increases in compensation of employees and officers
of the Company or its subsidiaries in the ordinary course of business in
accordance with past practice, or (ii) grant any severance or termination
pay not currently required to be paid under existing Company Plans, except
on an individual basis in the ordinary course of business and consistent
with past practice, or (iii) establish, adopt, enter into or amend or
terminate any Company Plan or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any directors, officers or employees
except as required by law or as provided in this Agreement; provided that
the provisions of this Section 4.1 shall not prohibit the Company and its
subsidiaries from hiring personnel from time to time in the ordinary
course of their business, consistent with past practice;
(d) except as set forth in Section 4.1(d) of the Disclosure
Schedule, amend its Certificate of Incorporation, By-Laws or other
comparable charter or organizational documents or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of the Company or any subsidiary of the
Company;
<PAGE>
(e) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or
(ii) any assets (not otherwise subject to paragraph (h) below) other than
in the ordinary course of business consistent with past practice and in an
aggregate amount not to exceed $10.0 million within any 9 month period;
(f) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets other
than in the ordinary course of business consistent with past practice and
in amounts that are not, individually or in the aggregate, material to the
Company and its subsidiaries taken as a whole;
(g) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person (other than guarantees by the Company
in favor of any of its wholly owned subsidiaries or by any of its
subsidiaries in favor of the Company or endorsements of negotiable
instruments and similar guarantees in the ordinary course of business
consistent with past practice), issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain the financial
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
(including deposits) incurred in the ordinary course of business
consistent with past practice, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person, other than (A) to
any direct or indirect wholly owned subsidiary of the Company, or (B)
margin loans to brokerage customers in the ordinary course of business
consistent with past practice, or (C) residential mortgage, credit card,
home equity and similar consumer loans (including pre-approved overdrafts)
to retail customers of WNB in the ordinary course of its banking business,
or (D) loans to employees of the Company and its subsidiaries not to
exceed $1 million in total outstandings from the date hereof through
December 31, 1996;
(h) expend, or commit to expend, funds for capital expenditures
other than in accordance with the Company's current capital expenditure
plans (which plans shall have been disclosed in writing to Parent on or
prior to the date of this Agreement);
(i) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(j) recognize any labor union (unless legally required to do so) or
enter into any collective bargaining agreement;
(k) except as may be required as a result of a change in generally
accepted accounting principles or as recommended by the Company's
independent accountants and consented to in writing by Parent (which
consent shall not be unreasonably withheld) prior to such change, change
any of the accounting methods, practices or principles used by the Company
or any of its subsidiaries;
<PAGE>
(l) make any Tax election or settle or compromise any income Tax
liability in excess of $1,000,000 or file any federal income tax return
prior to the last day prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, without
the prior consent of Parent, which consent shall not be unreasonably
withheld;
(m) settle or compromise any litigation in which the Company or any
subsidiary is a defendant (whether or not commenced prior to the date of
this Agreement) or settle, pay or compromise any claims not required to be
paid, which payments are individually or in the aggregate in an amount in
excess of $1,000,000;
(n) enter into any new line of business or open any new offices
except substantially in accordance with the Company's current business
plan as disclosed to Parent in writing prior to the date of this
Agreement; or
(o) authorize any of, or commit or agree to take any of, the
foregoing actions or any action which would make any of the
representations or warranties of the Company contained in this Agreement
untrue and incorrect as of the date when made if such action had then been
taken.
SECTION 4.2 Conduct of Business of Merger Sub. Merger Sub has not
engaged, and during the period from the date of this Agreement to the Effective
Time, Merger Sub shall not engage, in any activities of any nature except as
provided in, or in connection with the transactions contemplated by, this
Agreement.
SECTION 4.3 Stockholders' Meeting. The Company will take all action
necessary in accordance with and subject to applicable law and its Certificate
of Incorporation and By-Laws to convene a meeting of its stockholders (the
"Stockholders' Meeting") as soon as practicable after the date of this
Agreement to consider and vote upon the adoption and approval of this
Agreement. Subject to the next succeeding sentence, the Company, through its
Board of Directors, shall recommend to its stockholders approval of the
foregoing matters, and such recommendation, together with a copy of the opinion
referred to in Section 3.1(s), shall be included in the Proxy
Statement/Prospectus. The Board of Directors of the Company may fail to make
such recommendation, or withdraw, modify or change such recommendation, if and
only if the Board, after advice of outside counsel, determines in good faith
that the making of such recommendation, or the failure to so withdraw, modify
or change such recommendation, could reasonably be deemed to constitute a
breach of its fiduciary duties under applicable law.
SECTION 4.4 Preparation of Form F-4 and the Proxy
Statement/Prospectus. Promptly following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy
Statement/Prospectus, and Parent shall prepare and file with the SEC the Form
F-4, in which the Proxy Statement/Prospectus will be included as a prospectus.
Each of the Company and Parent shall use its reasonable best efforts to have
the Form F-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use its reasonable best
efforts to cause the Proxy Statement/Prospectus to be mailed to the Company's
stockholders as promptly as practicable after the Form F-4 is declared
<PAGE>
effective under the Securities Act. Parent shall also use its reasonable best
efforts to take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Shares in the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock as may be
reasonably requested in connection with any such action. The information
provided and to be provided by Parent, Merger Sub and the Company,
respectively, for use in the Form F-4 shall, at the time the Form F-4 becomes
effective and on the date of the Stockholders' Meeting referred to above, be
true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not misleading, and the Company, Parent and Merger Sub each agree
to correct any information provided by it for use in the Form F-4 which shall
have become false or misleading.
SECTION 4.5 Access to Information; Confidentiality. (a) From the
date hereof to the Effective Time, the Company (i) shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, auditors and other agents of Parent, reasonable access at
all reasonable times (during normal business hours so as not to unduly or
unreasonably interfere with the business of the Company and its subsidiaries)
to its senior officers, agents, properties, offices and other facilities and to
all books and records, and shall furnish Parent and such other persons with all
financial, operating and other data and information as Parent, through its
officers, may from time to time reasonably request, and (ii) shall make
available its senior officers and the senior officers of its subsidiaries, upon
reasonable prior notice and during normal business hours, to confer on a
regular basis with the appropriate officers of Parent regarding the ongoing
operations of the Company and its subsidiaries, the implementation of the
transactions contemplated hereby and other matters related hereto. No
investigation pursuant to this Section 4.5 shall affect any representations or
warranties of the parties herein or the conditions to the obligations of the
parties hereto.
(b) Each of Parent and Merger Sub will hold information it receives
pursuant to Section 4.5(a)(i) which is nonpublic in confidence to the extent
required by, and in accordance with, the provisions of the letter dated March
13, 1996 between Parent and the Company (the "Confidentiality Agreement").
SECTION 4.6 Affiliates. Prior to the Closing Date, the Company
shall deliver to Parent a letter identifying all persons who are, at the time
this Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit D hereto.
SECTION 4.7 Stock Exchange Listing. Parent shall use its best
efforts to cause the Parent Common Shares to be issued in the Merger to be
approved or accepted for listing on the TSE and the NYSE, subject to official
notice of issuance, prior to the Closing Date.
SECTION 4.8 No Solicitation. Subject to the proviso below, neither
the Company nor any of its affiliates shall, nor shall the Company or any of
its affiliates authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
<PAGE>
representative (collectively, "Representatives") retained by it or any of its
affiliates to, solicit, initiate, encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Transaction Proposal (as defined below), or enter into
or maintain or continue discussions or negotiate with any person in furtherance
of such inquiries or to obtain a Transaction Proposal, or agree to or endorse
any Transaction Proposal, and the Company shall notify Parent orally (as
promptly as practicable, and in any event within two business days) as to any
Transaction Proposals which it or any of its affiliates or any of their
respective representatives or agents may receive, specifying in reasonable
detail the material terms thereof and, if requested by Parent, the Company
shall furnish a written summary of such material terms (other than the identity
of the party making such Transaction Proposal). Nothing contained in this
Section 4.8 or this Agreement to the contrary shall restrict the Board of
Directors of the Company from (a) (i) furnishing information to any person or
entity who makes an unsolicited inquiry concerning a possible Transaction
Proposal, or (ii) entering into negotiations or discussions with any person or
entity that makes an unsolicited Transaction Proposal regarding that
Transaction Proposal, or (iii) entering into an unsolicited Transaction
Proposal, if, in the case of either of clauses (ii) or (iii), the Board of
Directors of the Company determines in good faith, after advice of counsel,
that the failure to do so could reasonably be deemed a breach of its fiduciary
duties under applicable law or (b) failing to make, withdrawing, modifying or
changing a recommendation to the Company's stockholders with respect to the
approval and adoption of this Agreement if the Board of Directors of the
Company determines in good faith, after advice of counsel, that making such
recommendation, or the failure to withdraw, modify or change such
recommendation, could reasonably be deemed a breach of its fiduciary duties
under applicable law. The Company shall provide such information to Parent
regarding any inquiry, negotiation, discussion or proposal under clause (a) as
is necessary, in the reasonable judgment of the Board of Directors of the
Company, to achieve a level playing field so that Parent shall not be at a
disadvantage, provided that the name of any such other person need not be
disclosed to Parent. The Company shall obtain a confidentiality agreement from
the person making such inquiries or proposals containing substantially the same
terms and provisions as that obtained from Parent, provided that to the extent
such confidentiality agreement with such third party contains provisions that
are more favorable to such third party than the comparable provisions in the
Confidentiality Agreement with Parent, such provisions in Parent's
Confidentiality Agreement shall be amended correspondingly. As used herein,
the term "Transaction Proposal" means (x) any acquisition or purchase of a
substantial amount of assets, or 10% or more of any class of equity securities,
of the Company or any of its subsidiaries or any tender offer (including a self
tender offer) or exchange offer to acquire 10% or more of any class of equity
securities of the Company or any of its subsidiaries or any merger,
consolidation, sale of substantially all assets, creation of a joint venture,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries (other than the transactions contemplated
hereby) or (y) any proposal, plan, agreement or intention to do any of the
foregoing. The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. This section shall not
prohibit accurate disclosure by the Company in any document that is required to
be filed by the Company with the SEC, including without limitation any filings
made in compliance with Rule 14e-2 promulgated under the Exchange Act.
<PAGE>
SECTION 4.9 Employee Benefits Matters. (a) Except as otherwise
provided in this Section 4.9, on and after the Effective Time, Parent shall, or
shall cause Merger Sub to, maintain the Company Plans set forth in Section
3.1(m) of the Disclosure Schedule (other than the Stock Plans) for the benefit
of employees of the Company as such Company Plans are in effect immediately
prior to the Effective Time; provided that Parent or Merger Sub may replace any
Company Plan with a substitute plan which provides benefits that are no less
favorable than the benefits that were provided under the Company Plan being
replaced.
(b) Except as otherwise provided in this Section 4.9, on and after
the Effective Time, Parent shall, or shall cause Merger Sub to (i) maintain
base salaries for Company employees, as in effect on the date of this
Agreement, subject to increases in accordance with Company policy and (ii)
provide annual cash bonus opportunities to Company employees that are
comparable to the annual cash bonus opportunities available to employees on the
date of this Agreement.
(c) As soon as practicable after the Effective Time, Parent shall,
or shall cause Merger Sub to, establish or implement a qualified retirement
plan to replace the ESOP, which shall be frozen or terminated on or about the
Effective Time, provided, however, that such replacement plan shall not be
required to provide for the acquisition of, or contributions in the form of,
stock of Parent, Merger Sub or the Company. Such replacement plan shall
provide, subject to the limits imposed by Section 415 of the Code, ESOP
participants with a level of contributions (when taken together with the
Matching Contribution) no less favorable than contributions to the ESOP
consistent with the Company's prior practices.
(d) On and after the Effective Time, Company employees shall be
entitled to participate in the equity compensation plans of Parent for U.S.
employees of Parent on the same basis as similarly situated U.S. employees of
Parent.
(e) The base salary, annual bonus opportunity and other compensation
and benefits described in Sections 4.9 (a) through (d) hereof may be altered by
the Company consistent with the Company's past practices, to remain competitive
or in accordance with industry practice; provided that the aggregate
compensation and benefits provided to Company employees shall be no less
favorable than the compensation and benefits provided to Company employees
immediately prior to the Effective Time and may be reduced only in the event of
a material adverse change in the business of the Company.
(f) Prior to the Effective Time the Company shall enter into
employment agreements with (i) Lawrence M. Waterhouse, Jr. ("Mr. Waterhouse")
and (ii) the individuals set forth in Section 4.9(f) of the Disclosure
Schedule, substantially in the form of Exhibits E-1 and E-2 hereto,
respectively.
SECTION 4.10 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in the Certificate of Incorporation of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at the Effective Time were directors, officers,
agents or employees of the Company or otherwise entitled to indemnification
<PAGE>
pursuant to the Company's Certificate of Incorporation. In the event that the
Surviving Corporation transfers all or substantially all of its operations to
another corporation or other entity, proper provision shall be made so that the
successor or transferee thereof shall assume any remaining obligations of the
Surviving Corporation set forth in this Section 4.10(a). From and after the
Effective Time, Parent agrees to guarantee all obligations of the Surviving
Corporation, as set forth in the Company's Certificate of Incorporation, to
indemnify and hold harmless individuals who at the Effective Time were
directors or officers of the Company for acts or omissions taken in their
capacities as directors or officers of the Company, as the case may be, and
directly or indirectly arising from or related to the Merger and the other
transactions contemplated hereby.
(b) Parent shall cause to be maintained in effect for three years
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company on the date of this Agreement (or
policies of comparable coverage containing terms and conditions which are not
materially less advantageous to the insured parties, including Parent's
existing policies if they meet the foregoing standard) with respect to matters
occurring prior to the Effective Time to the extent available; provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend more than an amount per year equal to 250% of the last annual premium
paid by the Company prior to the date of this Agreement to maintain or procure
insurance coverage pursuant hereto and provided, further, that Parent may at
its option satisfy obligations under this Section 4.10(b) through its program
of self-insurance as long as Parent's senior debt ratings are not reduced by
Standard & Poor's Corporation and Moody's Investors Service, Inc. than one full
rating category below the ratings in effect on the date of this Agreement.
SECTION 4.11 Further Action; Reasonable Best Efforts. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to (i) cooperating in the preparation and filing of the Proxy
Statement/Prospectus and Form F-4, and any amendments to any thereof and (ii)
using its reasonable best efforts to make all required regulatory filings and
applications and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with the Company and its subsidiaries as are necessary for the
consummation of the transactions contemplated by this Agreement and to fulfill
the conditions to the Merger. To the extent practicable in the circumstances
and subject to applicable laws, each party shall provide the other with the
opportunity to review any information relating to the other party, or any of
its subsidiaries, which appears in any filing made with, or written materials
submitted to, any Governmental Entity in connection with obtaining the
necessary regulatory approvals for the consummation of the transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such necessary action.
SECTION 4.12 Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
<PAGE>
contained in this Agreement to be untrue or inaccurate in any material respect,
and (ii) any failure of the Company, Parent or Merger Sub, as the case may be,
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.12 shall not limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
SECTION 4.13 Public Announcements. Each party shall consult with
the other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with its securities exchange or
quotation system.
SECTION 4.14 Tax Free Reorganization Treatment. None of Parent,
Merger Sub, the Company or any of their respective affiliates shall take or
cause to be taken any action, whether before or after the Effective Time, which
would disqualify the Merger as a tax-free reorganization within the meaning of
Section 368 of the Code.
SECTION 4.15 Convertible Notes. Parent agrees to execute and
deliver, and cause to be executed and delivered by or on behalf of Merger Sub,
at or prior to the Effective Time, such supplemental indentures and other
instruments as may be reasonably required for the due assumption by the
Surviving Corporation of the Convertible Notes, and by Parent with respect to
the issuance of the Merger Consideration upon conversion of the Convertible
Notes, in accordance with and to the extent required by the terms of such
securities.
SECTION 4.16 Transfer of Subsidiary. Prior to the Effective Time,
the Company may sell all of the outstanding shares of capital stock of its
wholly-owned subsidiary L.M. Waterhouse & Co. Inc. to Mr. Waterhouse pursuant
to the terms of a Purchase Agreement between the Company and Mr. Waterhouse in
the form of Exhibit F hereto.
SECTION 4.17 Rule 144 Information. Parent hereby agrees that from
the Effective Time until the third anniversary of the Effective Time, if Parent
is not subject to Section 13 or 15(d) of the Exchange Act it will ensure that
there is publicly available the information specified in Rule 144(c)(2) under
the Securities Act.
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon.
<PAGE>
(b) Listing. The Parent Common Shares issuable to the Company's
stockholders pursuant to this Agreement shall have been approved or accepted
for listing on the NYSE and the TSE, in each case subject to official notice of
issuance.
(c) Other Approvals. Other than the filing contemplated by Section
1.3, all consents, approvals, authorizations or permits of, actions by, or
filings with or notifications to, and all expirations of waiting periods
imposed by, any Governmental Entity (all the foregoing, "Consents") which are
necessary for the consummation of the Merger, other than immaterial Consents
the failure to obtain which would have no material adverse effect on the
consummation of the Merger or the business of the Surviving Corporation, shall
have been filed, occurred or been obtained (all such permits, approvals,
filings and consents and the lapse of all such waiting periods being referred
to as the " Requisite Regulatory Approvals"), all conditions, if any, to such
Requisite Regulatory Approvals shall have been satisfied and all such Requisite
Regulatory Approvals shall be in full force and effect.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding by any Governmental Entity seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
(e) Form F-4. The Form F-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any "blue sky" and other state securities laws
applicable to the issuance of Parent Common Shares in the Merger shall have
been complied with.
SECTION 5.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of the following conditions unless waived by Parent and Merger
Sub:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except to the extent such representations and
warranties speak as of an earlier date, with such exceptions as, either
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a Material Adverse Effect on the Company (provided that for
purposes of this paragraph, changes caused by changes in stock market
conditions in the United States that generally affect companies in the discount
brokerage business shall not be deemed to constitute a Material Adverse Effect
on the Company), and Parent shall have received a certificate signed on behalf
of the Company by the Chairman of the Board and Chief Executive Officer of the
Company and by the Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date with such exceptions as, either
individually or in the aggregate, do not have, and would not reasonably be
<PAGE>
expected to have, a Material Adverse Effect on the Company (provided that for
purposes of this paragraph, changes caused by changes in stock market
conditions in the United States that generally affect companies in the discount
brokerage business shall not be deemed to constitute a Material Adverse Effect
on the Company), and Parent shall have received a certificate signed on behalf
of the Company by the Chairman of the Board and Chief Executive Officer of the
Company and by the Chief Financial Officer of the Company to such effect.
(c) Tax Opinion. The opinion, based on appropriate representations
of the Company, Parent and others, of Simpson Thacher & Bartlett, counsel to
Parent, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
dated on or about the date of and referred to in the Proxy Statement/Prospectus
as first mailed to stockholders of the Company, shall not have been withdrawn
or modified in any material respect.
(d) Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any federal or state Governmental Entity which, in
connection with the grant of a Requisite Regulatory Approval, would be
reasonably likely to result in a Material Adverse Effect with respect to the
Surviving Corporation.
(e) Dissenters' Rights. No more than 7.5% of the shares of Company
Common Stock shall be, or have the right to become, Dissenting Shares.
(f) Affiliate Letters. Parent shall have received the agreements
referred to in Section 4.6.
(g) Employment Agreement. Mr. Waterhouse shall have executed the
employment agreement contemplated by Section 4.9(f).
SECTION 5.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
of the following unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent such
representations and warranties speak as of an earlier date, with such
exceptions as, either individually or in the aggregate, do not have, and would
not reasonably be expected to have, a Material Adverse Effect on Parent, and
the Company shall have received a certificate signed on behalf of Parent by the
Chief Financial Officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub shall have performed all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, with such exceptions
as, either individually or in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect on Parent, and the
Company shall have received a certificate signed on behalf of Parent by the
Chief Financial Officer of Parent to such effect.
(c) Tax Opinion. The opinion, based on appropriate representations
of the Company, Parent and others, of Latham & Watkins, counsel to the Company,
to the effect that the Merger will be treated for Federal income tax purposes
<PAGE>
as a reorganization within the meaning of Section 368(a) of the Code, dated on
or about the date of and referred to in the Proxy Statement/Prospectus as first
mailed to stockholders of the Company, shall not have been withdrawn or
modified in any material respect.
(d) Supplemental Indenture. Parent, Merger Sub, the Company and the
trustee under the indenture pursuant to which the Convertible Notes were issued
shall have executed and delivered the supplemental indenture and other
instruments referred to in Section 4.15 in form and substance reasonably
satisfactory to the Company and such trustee.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent, upon any breach of any representation, warranty,
covenant or agreement of the Company set forth in this Agreement that, either
individually or in the aggregate, would constitute grounds for Parent to elect
not to consummate the Merger pursuant to Section 5.2(a) or (b), if either (A)
such breach cannot be cured prior to the Closing Date, or (B) has not been
cured within 45 days after the date on which written notice of such breach is
given by Parent to the Company, specifying in reasonable detail the nature of
such breach;
(c) by the Company, upon any breach of any representation, warranty,
covenant or agreement of Parent set forth in this Agreement that, either
individually or in the aggregate, would constitute grounds for the Company to
elect not to consummate the Merger pursuant to Section 5.3(a) or (b), if either
(A) such breach cannot be cured prior to the Closing Date, or (B) has not been
cured within 45 days after the date on which written notice of such breach is
given by the Company to Parent, specifying in reasonable detail the nature of
such breach;
(d) by either Parent or the Company, if any permanent injunction or
action by any Governmental Entity preventing the consummation of the Merger
shall have become final and nonappealable; provided that such right of
termination shall not be available to any party if such party shall have failed
to make reasonable efforts to prevent or contest the imposition of such
injunction or action and such failure materially contributed to such
imposition;
(e) by either Parent or the Company if (other than due to the
willful failure of the party seeking to terminate this Agreement to perform its
obligations hereunder which are required to be performed at or prior to the
Effective Time) the Merger shall not have been consummated on or prior to
December 31, 1996;
(f) by Parent or the Company, if the approval of the stockholders of
the Company of this Agreement and the Merger required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain the
<PAGE>
required vote at a duly held meeting of stockholders or at any adjournment
thereof;
(g) by Parent, if (i) the Board of Directors of the Company shall
have withdrawn, modified or changed its approval or recommendation of this
Agreement or the Merger in any manner which is adverse to Parent or Merger Sub,
or shall have adopted a resolution to do the foregoing; or (ii) the Board of
Directors of the Company shall have approved or have recommended to the
stockholders of the Company a Transaction Proposal or shall have resolved to do
the foregoing; or (iii) a tender offer or exchange offer for 25% or more of the
outstanding shares of the Company Common Stock is commenced (other than by
Parent or any of its subsidiaries or affiliates), and the Board of Directors of
the Company recommends that the stockholders of the Company tender their shares
in such tender or exchange offer or otherwise fails to recommend that such
stockholders reject such tender offer or exchange offer within ten business
days of the commencement thereof; or
(h) by the Company prior to the Stockholders' Meeting, if the Board
of Directors of the Company (i) shall fail to make or shall withdraw or modify
its recommendation of this Agreement or the Merger and there shall exist at
such time a tender offer or exchange offer for not less than a majority of the
outstanding voting stock of the Company or a written, bona fide proposal by a
third party to acquire not less than a majority of the outstanding voting stock
of the Company pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, in either
case at a price per share (whether payable in cash or securities) of Company
Common Stock that is higher than the Merger Consideration, or (ii) recommends
to the Company's stockholders approval or acceptance of any such transaction,
in each case if, and only to the extent that, the Board of Directors of the
Company, after advice of independent legal counsel, determines in good faith
that failure to take such action could reasonably be deemed to constitute a
breach of the Board's fiduciary duties under applicable law.
(i) By the Company, if its Board of Directors so elects, at any time
during the five-day period commencing on the first business day following the
Determination Date (as defined below), if the Exchange Ratio that would have
been in effect on the Determination Date pursuant to Section 2.4(a) hereto in
the absence of the proviso to such Section would be greater than 2.45952;
subject, however, to the following four sentences. If the Company elects to
exercise its termination right pursuant to the immediately preceding sentence,
it shall give prompt written notice of such election to Parent. During the
three-day period commencing with its receipt of such notice, Parent shall have
the option to elect to increase the Exchange Ratio to a number equal to a
quotient (rounded to the nearest 1/100,000), the numerator of which is the Cash
Price and the denominator of which is the Parent Common Share Price on the
Determination Date. If Parent makes the election contemplated by the preceding
sentence within such three-day period, it shall give prompt written notice to
the Company of such election and the revised Exchange Ratio, whereupon no
termination shall have occurred pursuant to this Section 6.1(i) and the Merger
shall remain in effect in accordance with its terms (except as the Exchange
Ratio shall have been so modified), and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 6.1(i).
For purposes of this Section 6.1(i), "Determination Date" shall mean
the tenth business day prior to the Closing Date.
<PAGE>
If Parent declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination of shares or similar transaction
between the date of this Agreement and the Determination Date, the prices for
Parent Common Shares set forth herein shall be appropriately adjusted for the
purposes of applying this Section 6.1(i).
SECTION 6.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except as set forth in Section 4.5(b), Section 6.3 and Section 7.1; provided,
however, that nothing herein shall relieve any party from liability for any
willful and material breach hereof; provided further, however that the
recommendation of another transaction by the Company's Board of Directors in
accordance with Section 4.8 shall not constitute a willful and material breach
of this Agreement by the Company.
SECTION 6.3 Fees and Expenses. (a) The Company agrees that if this
Agreement shall be terminated pursuant to:
(i) Section 6.1(b) and (x) such termination is the result of wilful
breach by the Company of any material covenant, agreement, representation
or warranty contained herein and (y) at any time during the period
commencing on the date hereof and ending twelve months after the date of
termination of this Agreement, a Business Combination (as defined in
Section 6.3(e) below) involving the Company shall have occurred or the
Company shall have entered into a definitive agreement providing for such
a Business Combination;
(ii) Section 6.1(e) and (x) at the time of such termination there
shall exist a Transaction Proposal with respect to the Company, and (y) at
any time during the period commencing on the date hereof and ending twelve
months after the date of termination of this Agreement, a Business
Combination involving the Company shall have occurred or the Company shall
have entered into a definitive agreement providing for a Business
Combination;
(iii) Section 6.1(f) because the Agreement and the Merger shall fail
to receive the requisite vote for approval and adoption by the
stockholders of the Company at a meeting of stockholders of the Company
called to vote thereon and at the time of such meeting (x) there shall
exist a Transaction Proposal with respect to the Company or (y) any person
(including the Company or any of its subsidiaries or affiliates, but
excluding Mr. Waterhouse) or group (other than Parent or any of its
subsidiaries or affiliates) shall have become the beneficial owner of 25%
or more of the outstanding shares of the Company Common Stock;
(iv) Section 6.1(g)(i) and at the time of the withdrawal,
modification or change (or resolution to do so) of its recommendation by
the Board of Directors of the Company, there shall exist a Transaction
Proposal with respect to the Company or any person (including the Company
or any of its subsidiaries or affiliates, but excluding Mr. Waterhouse) or
group (other than Parent or any of its subsidiaries or affiliates) shall
have become the beneficial owner of 25% or more of the outstanding shares
of the Company Common Stock; or
(v) Sections 6.1(g)(ii) or (iii), or Section 6.1(h);
<PAGE>
then in any such case (A) the Warrant shall thereupon become exercisable
in accordance with its terms, and (B) concurrently with the occurrence of
a Payment Event, the Company shall pay to Parent an amount equal to the
difference between (x) $16 million, and (y) the Current Market Value of
the Warrant.
(b) Any cash payment required to be made pursuant to Section 6.3(a)
shall be made contemporaneously with the occurrence of the Payment Event by
wire transfer of immediately available funds to an account designated by
Parent, and termination of the Company's obligations under Section 6.3(a) shall
not occur until such payment shall have been made pursuant hereto. The Company
covenants and agrees that it will not enter into a definitive agreement
relating to a Business Combination that would, if consummated, require the
payment of any amounts by the Company pursuant to Section 6.3(a) unless the
other party or parties thereto agree unconditionally in writing (a copy of
which shall be furnished to Parent as soon as practicable after the public
announcement of such proposed Business Combination) to assume, undertake and
perform all of the Company's payment obligations under this Section 6.3 and the
Company's obligations under the Warrant, and to pay any legal expenses incurred
by Parent in connection with the enforcement thereof. Any payment made
pursuant to Section 6.3(a) shall not preclude Parent from seeking monetary
damages from the Company as described in Section 6.2 for any willful and
material breach of the terms hereof to the extent stated therein.
(c) For purposes of this Section 6.3:
(i) the term "Business Combination" shall mean (A) the acquisition
by any person (other than Parent or any of its subsidiaries) of beneficial
ownership (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) of, or the right to acquire beneficial ownership of, or the
formation of any group (as such term is defined for purposes of Rule 13d-5
under the Exchange Act) which beneficially owns or has the right to
acquire beneficial ownership of, 50% or more of the total voting power of
all then outstanding Voting Stock of the Company; (B) the consolidation or
merger of the Company with or into any person (other than Parent or any of
its subsidiaries) in a transaction in which the Company shall not be the
surviving or continuing corporation; (C) the merger or consolidation of
any person (other than Parent or any of its subsidiaries) with or into the
Company in a transaction in which the Company is the surviving or
continuing corporation but in which the shares of Voting Stock outstanding
immediately prior to such transaction shall represent less than 50% of the
total voting power of all Voting Stock of the surviving or continuing
corporation outstanding immediately after such merger or consolidation; or
(D) any sale or other transfer (including by way of dividend or
distribution of assets to the Company's stockholders), in one transaction
or in a series of related transactions, of all or a substantial portion of
the Company's consolidated assets or business to any person (other than
Parent or any of its subsidiaries) or group;
(ii) the term "Payment Event" shall mean (A) in the case of Sections
6.3(a)(i) and (ii) above, the consummation of the Business Combination
referred to therein, and (B) in the case of Sections 6.3(a)(iii), (iv) and
(v) above, the consummation of a Business Combination pursuant to a
definitive agreement entered into by the Company within twelve months
after the date on which this Agreement was terminated;
<PAGE>
(iii) the term "Current Market Value of the Warrant " shall mean the
aggregate consideration payable in the Business Combination for the number
of shares of Company Common Stock that were issuable upon exercise of the
Warrant at the date of its issuance (without regard to whether the Warrant
was by its terms exercisable at such time), as subsequently adjusted in
accordance with the terms thereof (whether or not previously exercised, in
whole or in part); provided that if such consideration includes securities
(in whole or in part), then such securities shall be valued (A) if traded
on a national securities exchange or the Nasdaq National Market, at the
closing price for such securities on the principal national securities
exchange on which they are traded (or on the Nasdaq National Market) on
the last business day immediately preceding the date on which a Payment
Event occurs or (B) if not so traded, then as determined by an independent
nationally recognized investment banking firm selected by the Company for
this purpose and reasonably acceptable to Parent; and provided further,
however, that if the Warrant has been repurchased prior to the occurrence
of a Payment Event by the Company at the Company's election pursuant to
Section 7 of the Warrant Agreement, the term "Current Market Value of the
Warrant" shall mean the Repurchase Consideration (as defined in the
Warrant Agreement) actually paid by the Company to Parent upon such
repurchase; and
(iv) the term "Voting Stock" means all outstanding stock and other
securities of the Company entitled (without regard to the occurrence of
any contingency) to vote in the election of directors of the Company.
(d) Except as specifically provided in Section 6.2 and this Section
6.3, each party shall bear its own expenses in connection with this Agreement
and the transactions contemplated hereby.
SECTION 6.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of Parent and the respective Boards of
Directors of Merger Sub and the Company at any time prior to the Effective
Time; provided, however, that, after approval of the Merger by the stockholders
of the Company, no amendment may be made which would reduce the amount or
change the type of consideration into which each share of Company Stock shall
be converted upon consummation of the Merger. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 6.5 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 6.1, except that those set forth in Section 4.5(b), Section
<PAGE>
4.9, Section 4.10, Section 4.17, Section 6.3 and this Article VII shall survive
termination indefinitely (or to such earlier date as shall be specified by the
terms of such provisions).
SECTION 7.2 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Merger Sub:
The Toronto-Dominion Bank
Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Attention: I. Alexander Norton
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Lee Meyerson
if to the Company:
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Attention: Lawrence M. Waterhouse, Jr.
with a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attention: Roger H. Kimmel
SECTION 7.3 Certain Definitions. For purposes of this Agreement,
the term:
(a) "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 mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of
such shares of Company Common Stock (i) which such person or any of its
affiliates or associates beneficially owns, directly or indirectly, (ii)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
<PAGE>
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii)
which are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares; provided, however, that for purposes of this
Agreement (other than Article VI) Mr. Waterhouse shall not be deemed to be
the beneficial owner of any Company Common Stock beneficially owned by any
of his children or Mrs. Marjorie J. McGahran.
(c) "business day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or Toronto,
Ontario are required or permitted to be closed;
(d) "control" (including the terms "controlled by" and " under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" means knowledge after reasonable inquiry of, in the
case of the Company, Mr. Waterhouse, Mr. Frank J. Petrilli, Mr. Peter A.
Wigger, Mr. John H. Chapel, Mr. Richard H. Neiman or Mr. Frank E. Conti
and in the case of Parent, any Executive Vice President or more senior
officer of Parent.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Parent or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holder of which is generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
SECTION 7.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 7.5 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
<PAGE>
subject matter hereof other than the Confidentiality Agreement, which shall
remain in full force and effect except for the provisions set forth in the
second paragraph on page four thereof, which are hereby terminated. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Merger Sub may assign all or any of their respective rights and
obligations hereunder to any other direct subsidiary or subsidiaries of Parent,
provided that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 7.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 7.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 7.8 Consent to Jurisdiction. Each of the parties hereto by
execution hereof (i) hereby irrevocably submits to the jurisdiction of the
federal and state courts of the State of New York for the purpose of any
action, suit or proceeding arising out of or based upon this Agreement or the
subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that it is
immune from extraterritorial injunctive relief or other injunctive relief, that
its property is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, is
reasonably calculated to give actual notice and waives and agrees not to assert
by way of motion, as a defense or otherwise, in any such action, suit or
proceeding, any claim that service of process made in accordance with this
Section 7.8 does not constitute good and sufficient service of process. The
provisions of this Section 7.8 shall not restrict the ability of any party to
enforce in any court any judgment obtained in a federal or state court of the
State of New York.
SECTION 7.9 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 7.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date written above.
THE TORONTO-DOMINION BANK
By: /s/ W. Keith Gray
Name: W. Keith Gray
Title: Executive Vice President
TD/OAK, INC.
By: /s/ W. Keith Gray
Name: W. Keith Gray
Title: President
WATERHOUSE INVESTOR SERVICES, INC.
By: /s/ Lawrence M. Waterhouse, Jr.
Name: Lawrence M. Waterhouse, Jr.
Title: Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A-1
Stockholders of the Company to Execute and
Deliver Stockholders Agreements
Lawrence M. Waterhouse, Jr.
Jerome Belson
Maxine Belson
<PAGE>
EXHIBIT A-2
Stockholders Agreements
<PAGE>
EXHIBIT A-2
April 9, 1996
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
The Toronto-Dominion Bank
P.O. Box 1, Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Dear Sirs:
In connection with the Merger described in the Agreement and Plan of
Merger by and between The Toronto-Dominion Bank (the "Parent"), TD/Oak, Inc.
("Merger Sub") and Waterhouse Investor Services, Inc. (the "Company") dated
April 9, 1996 (the "Agreement"), I hereby make the following representations.
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Agreement.
1. I have no present plan or intention to sell, exchange, or
otherwise dispose of the Parent Common Shares I receive in the Merger.
2. I in fact will not on or prior to the second anniversary of the
date of the Merger, directly or indirectly, offer, sell, transfer, tender,
pledge or encumber (except on a recourse basis), assign or otherwise dispose
of, or enter into any contract, option or other arrangement with respect to, or
consent to the sale, transfer, pledge or encumbrance (except on a recourse
basis), assignment or other disposition of any interest in a number of Parent
Common Shares equal to 50% of the number of Parent Common Shares that I
individually receive in the Merger (the "Restricted Shares"). Notwithstanding
the immediately preceding sentence, the Restricted Shares shall not be subject
to the representation set forth in the immediately preceding sentence and I
shall have the right to dispose of said shares if (i) I die, (ii) I become
disabled, (iii) a change occurs in my marital status, (iv) my spouse dies or
becomes disabled, (v) I am subject to a claim of creditors that requires
immediate payment to avoid default under the obligation, (vi) a decline in
value of Parent Common Shares occurs after the Effective Time and such decline
is in excess of 25% of the value of Parent Common Shares as of the Effective
Time or (vii) another unforeseen change of circumstances occurs provided that
in the case of clause (vii), I obtain and deliver to Parent an opinion of
Latham and Watkins or another independent and nationally recognized tax counsel
acceptable to Parent to the effect that such proposed disposition shall not
cause the Merger to become a taxable event. I represent and warrant that as of
the date hereof I have no expectation that any of the events described in the
<PAGE>
foregoing clauses (i) through (vii) will occur prior to the second anniversary
of the date of the Merger.
3. I understand that the representations set forth in 1 and 2 above
are being expressly relied upon by Simpson Thacher & Bartlett and Latham &
Watkins in connection with the rendering of their respective opinions
concerning certain Federal income tax consequences of the Merger and by Parent
and Merger Sub as an inducement to enter into the Agreement and in determining
the Federal income tax consequences of the Merger, and that the delivery of
such opinion is a condition precedent to the consummation of the Merger.
4. The foregoing representations will be true and accurate as of
the Effective Time of the Merger. I agree promptly to notify Simpson Thacher &
Bartlett, Latham & Watkins and Parent to the extent that I have or obtain
knowledge or information indicating that any of the foregoing representations
ceases to be true and accurate.
Sincerely,
Lawrence M. Waterhouse, Jr.
<PAGE>
EXHIBIT A-2
April 9, 1996
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
The Toronto-Dominion Bank
P.O. Box 1, Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Dear Sirs:
In connection with the Merger described in the Agreement and Plan of
Merger by and between The Toronto-Dominion Bank (the "Parent"), TD/Oak, Inc.
("Merger Sub") and Waterhouse Investor Services, Inc. (the "Company") dated
April 9, 1996 (the "Agreement"), we hereby make the following representations.
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Agreement.
1. We have no present plan or intention to sell, exchange, or
otherwise dispose of the Parent Common Shares we receive in the Merger.
2. We in fact will not on or prior to the second anniversary of the
date of the Merger, directly or indirectly, offer, sell, transfer, tender,
pledge or encumber (except on a recourse basis), assign or otherwise dispose
of, or enter into any contract, option or other arrangement with respect to, or
consent to the sale, transfer, pledge or encumbrance (except on a recourse
basis), assignment or other disposition of any interest in a number of Parent
Common Shares equal to 50% of the number of Parent Common Shares that we
individually receive in the Merger (the "Restricted Shares"). Notwithstanding
the immediately preceding sentence, the Restricted Shares shall not be subject
to the representation set forth in the immediately preceding sentence and we
shall have the right to dispose of said shares if (i) either of us dies, (ii)
either of us becomes disabled, (iii) a change occurs in our marital status,
(iv) either of us is subject to a claim of creditors that requires immediate
payment to avoid default under the obligation, (v) a decline in value of Parent
Common Shares occurs after the Effective Time and such decline is in excess of
25% of the value of Parent Common Shares as of the Effective Time, (vi) another
unforeseen change of circumstances occurs provided that in the case of clause
(vi), we obtain and deliver to Parent an opinion of Latham & Watkins or another
independent and nationally recognized tax counsel acceptable to Parent to the
effect that such proposed disposition shall not cause the Merger to become a
taxable event. We represent and warrant that as of the date hereof we have no
expectation that any of the events described in the foregoing clauses
(i) through (vi) will occur prior to the second anniversary of the date of the
Merger.
<PAGE>
3. We understand that the representations set forth in 1 and 2
above are being expressly relied upon by Simpson Thacher & Bartlett and Latham
& Watkins in connection with the rendering of their respective opinions
concerning certain Federal income tax consequences of the Merger and by Parent
and Merger Sub as an inducement to enter into the Agreement and in determining
the Federal income tax consequences of the Merger, and that the delivery of
such opinion is a condition precedent to the consummation of the Merger.
4. The foregoing representations will be true and accurate as of
the Effective Time of the Merger. We agree promptly to notify Simpson Thacher
& Bartlett, Latham & Watkins and Parent to the extent that either of us have or
obtain knowledge or information indicating that any of the foregoing
representations ceases to be true and accurate.
Sincerely,
----------------------------
Jerome Belson
----------------------------
Maxine Belson
<PAGE>
EXHIBIT B-1
Stockholders of the Company to Execute and
Deliver Voting Agreement
Lawrence M. Waterhouse, Jr.
Lawrence M. Waterhouse, III
Patrick R. Waterhouse
Kevin C. Waterhouse
Christine A. Waterhouse
Jennifer A. Waterhouse
<PAGE>
EXHIBIT B-2
Voting Agreement
<PAGE>
EXHIBIT B-2
VOTING AGREEMENT
----------------
AGREEMENT dated as of April 9, 1996 by and among The
Toronto-Dominion Bank ("Parent") and each of the other parties signatory
hereto (each a "Stockholder").
RECITALS
--------
Concurrently herewith, Parent, a Canadian chartered bank,
TD/Oak, Inc., a Delaware corporation and a direct wholly-owned subsidiary of
Parent ("Merger Sub"), and Waterhouse Investor Services, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of
Merger of even date herewith (as such agreement may be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement) pursuant to which
the Company will be merged with and into Merger Sub (the "Merger"), and each
share of common stock, par value $.01 per share, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective Time
will, except as otherwise provided in the Merger Agreement, be converted into
the Merger Consideration.
As a condition to Parent and Merger Sub entering into the
Merger Agreement, Parent and Merger Sub require that each Stockholder enter
into, and each such Stockholder has agreed to enter into, this Agreement.
AGREEMENT
---------
To implement the foregoing and in consideration of the
mutual agreements contained herein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder
hereby severally represents and warrants to Parent as follows:
(a) Ownership of Shares. (1) Such Stockholder is the
record holder and beneficial owner of the number of shares of Company Common
Stock as set forth opposite such Stockholder's name on Schedule 1 hereto, and
in addition is the beneficial owner of the number of shares of Company Common
Stock held in the ESOP and allocated to him or her which is set forth
opposite his or her name on Schedule 1 hereto (the "Existing Shares", and
together with any shares of Company Common Stock acquired by such Stockholder
in any such capacities after the date hereof and prior to the termination
hereof, whether upon exercise of options, conversion of convertible
securities, purchase, exchange or otherwise, the "Shares").
(2) On the date hereof, (A) the Existing Shares set forth
opposite such Stockholder's name on Schedule 1 constitute all of the
shares of Company Common Stock owned of record or beneficially by
such Stockholder, and (B) Mr. Lawrence M. Waterhouse, Jr. ("Mr.
Waterhouse") holds a power of attorney, a copy of which is attached
hereto, allowing Mr. Waterhouse to vote the Shares held by the other
<PAGE>
Stockholders to the extent described in such power of attorney (the
"Power of Attorney").
(3) Subject to the Power of Attorney in the case of all
Stockholders other than Mr. Waterhouse, such Stockholder has sole
voting and dispositive power with respect to the Shares beneficially
owned by such Stockholder.
(b) Power; Binding Agreement. Such Stockholder has the
legal capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by such Stockholder and constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms. If such Stockholder is married and
such Stockholder's Shares constitute community property, this Agreement has
been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, such Stockholder's spouse, enforceable against such
person in accordance with its terms.
(c) No Conflicts. Neither the execution and delivery of
this Agreement by such Stockholder nor the consummation by such Stockholder
of the transactions contemplated hereby nor compliance by such Stockholder
with any of the provisions hereof will (x) conflict with or result in any
breach of any agreement to which such Stockholder is a party, or (y) violate
as at the date hereof any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder.
(d) Such Stockholder during the term hereof shall hold
his or her Shares and the certificates representing such Shares free of any
agreements, understandings or arrangements with respect to the voting of such
Shares that would breach the provisions of, or otherwise would be
inconsistent with, this Agreement.
(e) Such Stockholder understands and acknowledges that
Parent and Merger Sub are entering into the Merger Agreement in reliance upon
such Stockholder's execution and delivery of this Agreement.
2. Agreement to Vote. Each Stockholder hereby severally
agrees that, during the time this Agreement is in effect, at any meeting of
the stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, such Stockholder shall
vote (or cause to be voted) the Shares held of record or beneficially by such
Stockholder (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and this
Agreement and any actions required in furtherance hereof and thereof; and
(ii) against (a) any other Business Combination, or (b) any other action
which, as its primary purpose, is intended to impede, delay, postpone, or
prevent the approval and adoption of the Merger Agreement by the stockholders
of the Company or the consummation of the transactions contemplated thereby
or has, as its primary purpose, the consummation of any other Business
Combination. Each Stockholder hereby agrees, upon Parent's request, to
furnish Parent a proxy in form and substance reasonably satisfactory to
Parent to effectuate the foregoing.
<PAGE>
3. Certain Covenants of Stockholders. Except in accordance
with the terms of this Agreement, each Stockholder hereby severally covenants
and agrees as follows:
3.1 No Solicitation. Such Stockholder shall not, solely
in his or her capacity as such, take any action which is prohibited by, or
fail to take any action which is required by, Section 4.8 of the Merger
Agreement (without regard to the proviso thereto) as it applies to
Representatives of the Company (whether or not such Stockholder would be
deemed to be such a Representative for purposes of Section 4.8 of the Merger
Agreement) provided however, it shall be presumed that discussions or
negotiations of Lawrence M. Waterhouse, Jr. in connection with any inquiry or
Transaction Proposal are in his capacity as director, officer or employee of
the Company.
3.2 Restriction on Transfer, Proxies and Non-
Interference. Such Stockholder shall not, directly or indirectly: (i)
except pursuant to the terms of the Merger Agreement and this Agreement,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, any
or all of such Stockholder's Shares or any interest therein, unless the
transferee or pledgee of such Shares agrees in writing (with a copy furnished
to Parent) to be bound by all of the provisions of this Agreement with
respect to such Shares; (ii) except as contemplated hereby, grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares; or (iii) take any action that
would make any representation or warranty of such Stockholder contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement.
3.3 Additional Shares. The Stockholder hereby agrees,
while this Agreement is in effect, to promptly notify the Parent of the
number of any new Shares of Company Common Stock acquired by the Stockholder,
if any, after the date hereof.
4. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by
this Agreement.
5. Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law
or otherwise, including without limitation such Stockholder's heirs,
guardians, administrators or successors.
6. Termination. This Agreement and the covenants and
agreements contained herein with respect to the Company Common Stock shall
terminate on the first to occur of (a) the Effective Time, and (b) the
"Termination Date" which, as used herein, means the date upon which the
Merger Agreement is terminated in accordance with its terms.
7. Stockholder Capacity. No person executing this
Agreement who is or becomes during the term hereof a director, officer or
<PAGE>
employee of the Company makes any agreement or understanding herein in his or
her capacity as such director, officer or employee and nothing contained in
this Agreement shall in any way limit or restrict the ability of any such
person to vote or otherwise act, in his or her capacity as a director,
officer or employee of the Company, as required by his or her fiduciary
duties to the stockholders of the Company or his or her responsibilities in
such capacity as an officer or employee. Each Stockholder signs solely in
his or her capacity as the record and beneficial owner of such Stockholder's
Shares or, in the case of Mr. Waterhouse, as holder of the Power of Attorney
with respect to the Shares held by the other Stockholders.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement
(i) constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) shall not be assigned by operation of law
or otherwise without the prior written consent of the other parties hereto.
8.2 Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such as
Federal Express, providing proof of delivery. All communications hereunder
shall be delivered to the respective parties at the following addresses:
If to Stockholders: At their respective addresses set forth
on Schedule 1 hereto;
copies to: Saterlee Stephens Burke & Burke
230 Park Avenue
New York, New York 10169
Attn: James F. Rittinger, Esq.
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attn: Roger H. Kimmel, Esq.
If to Parent: The Toronto-Dominion Bank
Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Attn: I. Alexander Norton, Esq.
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attn: Lee Meyerson, Esq.
<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
8.5 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in the event of
any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
8.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but both
of which shall constitute one and the same Agreement.
8.7 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
8.8 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
8.9 Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. Without duplicative counting of the same securities by the
same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person
would constitute a "group" as described in Section 13(d)(3) of the Exchange
Act.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization
or other entity.
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and each Stockholder
have caused this Agreement to be duly executed as of the day and year first
above written.
THE TORONTO-DOMINION BANK
By:______________________
Name:
Title:
_________________________
Name:
_________________________
Name:
_________________________
Name:
________________________
Name:
_________________________
Name:
__________________________
Name:
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
<S> <C>
Number of Shares of Company
Common Stock Owned by
Name and Address Stockholder (1) or held by ESOP
of Stockholder and allocated to Stockholder (2)
- ---------------- --------------------------------
Lawrence M. Waterhouse, Jr. 1,152,499 (1)
c/o Waterhouse Investor Services, 85,131 (2)
Inc.
100 Wall Street
New York, New York 10005
Lawrence M. Waterhouse, III 220,312 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Patrick R. Waterhouse 219,368 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Kevin C. Waterhouse 220,425 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Christine A. Waterhouse 221,660 (1)
c/o Waterhouse Investor Services, 16,552 (2)
Inc.
100 Wall Street
New York, New York 10005
Jennifer A. Waterhouse 222,160 (1)
c/o Waterhouse Investor Services, 562 (2)
Inc.
100 Wall Street
New York, New York 10005
</TABLE>
<PAGE>
EXHIBIT C
Warrant Agreement
<PAGE>
EXHIBIT C
THE WARRANT GRANTED BY THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON
ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE TRANSFER OF SUCH WARRANT AND THE SECURITIES ISSUABLE UPON ITS
EXERCISE ARE SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND PURSUANT TO THE TERMS OF THIS WARRANT AGREEMENT.
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of April 9, 1996 (the "Agreement"), by and
between WATERHOUSE INVESTOR SERVICES, INC., a Delaware corporation (the
"Company"), and THE TORONTO-DOMINION BANK, a Canadian chartered bank
("Parent").
WHEREAS, the Company, Parent and TD/Oak, Inc., a Delaware corporation and
a direct wholly owned subsidiary of Parent ("Merger Sub"), are concurrently
herewith entering into an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement"; capitalized terms not defined herein shall have
the meanings set forth in the Merger Agreement), providing for, among other
things, the merger of the Company with and into Merger Sub with Merger Sub as
the surviving corporation; and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Merger Agreement, Parent has requested that the Company agree, and the
Company has agreed, to issue to Parent the Warrant (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and Parent agree as follows:
1. Issuance of Warrant. Subject to the terms and conditions set forth
herein, the Company hereby issues to Parent a warrant (the "Warrant")
representing the right to purchase from time to time (subject to the provisions
of Section 2) up to 250,000 shares (the "Shares") of Common Stock, par value
$0.01 per share, of the Company ("Company Common Stock") at a purchase price of
$0.01 per Share (the "Purchase Price").
2. Exercise of Warrant. (a) Parent may exercise the Warrant, in whole
or in part, at any time and from time to time following the termination of the
Merger Agreement at the time specified in clause (A) of the last paragraph of
Section 6.3(a) of the Merger Agreement, subject to and upon the occurrence of
any of the events described in Section 6.3(a) of the Merger Agreement (each, a
"Purchase Event"); provided that, this Agreement and the Warrant shall
terminate and be of no further force and effect upon the earliest to occur of
(i) the Effective Time, (ii) termination of the Merger Agreement prior to the
occurrence of a Purchase Event or (iii) except as provided in the last sentence
of this Section 2(a), the tenth anniversary of the date of this Agreement; and,
provided, further, that any purchase of Shares upon exercise of the Warrant
shall be subject to compliance with applicable law, including the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Notwithstanding the
termination of the Warrant pursuant to clause (iii) above, Parent shall be
<PAGE>
entitled to purchase those Shares with respect to which it has exercised the
Warrant in accordance with the terms hereof prior to the termination of the
Warrant, subject to the Company's right to repurchase such Shares pursuant to
the provisions of Section 7 hereof. The termination of the Warrant shall not
affect any rights hereunder which by their terms extend beyond the date of such
termination.
(b) In the event Parent elects to exercise the Warrant, it shall
send to the Company a written notice (the date on which such notice is given
being herein referred to as the "Notice Date") specifying (i) the total number
of Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than five business days nor later than 20 business days from
the Notice Date for the closing of such purchase (the "Closing Date"); provided
that if the closing of the purchase and sale pursuant to the Warrant (the
"Closing") cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided, further, without
limiting the foregoing, that if prior notification to or approval of the
Federal Reserve or any other regulatory authority is required in connection
with such purchase, Parent shall promptly file the required notice or
application for approval and shall expeditiously process the same (and the
Company shall cooperate with Parent in the filing of any such notice or
application and the obtaining of any such approval), and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained, and in
either event, any requisite waiting period has passed; and provided further,
that the Company shall have the right to repurchase (in accordance with the
provisions of Section 7 hereof) on the Closing Date that portion of the Warrant
which Parent proposes to exercise.
3. Payment and Delivery of Certificates. (a) On each Closing
Date, Parent shall pay to the Company in immediately available funds by wire
transfer to a bank account designated by the Company an amount equal to the
Purchase Price multiplied by the number of Shares to be purchased on such
Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), (i) the Company shall
deliver to Parent (A) a certificate or certificates representing the Shares to
be purchased at such Closing, which Shares shall be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever, and (B) if the
Warrant is being exercised in part only, an executed new Warrant Agreement with
the same terms as this Agreement evidencing the right to purchase the balance
of the shares of Company Common Stock purchasable hereunder, and (ii) Parent
shall deliver to the Company a letter agreeing that Parent shall not offer to
sell or otherwise dispose of such Shares in violation of applicable federal or
state securities laws or the provisions of this Agreement.
(c) Certificates for the Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE TRANSFER OF SUCH
SECURITIES IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A WARRANT AGREEMENT
<PAGE>
DATED AS OF APRIL 9, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Parent shall have delivered
to the Company a copy of a letter from the staff of the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to the Company and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
(d) Upon the giving by Parent to the Company of the written notice of
exercise of the Warrant provided for under Section 2(a), the tender of the
applicable Purchase Price in immediately available funds, the tender of this
Agreement to the Company, and the receipt of all necessary regulatory approvals
(if any), Parent shall be deemed to be the holder of record of the shares of
Company Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Company Common Stock shall not then be actually
delivered to Parent. The Company shall pay all expenses, and any and all
United States federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 3(d) in the name of Parent; if such stock
certificates are to be in the name of an assignee, transferee, or designee of
Parent, the Company shall pay all transfer charges (but not United States
federal, state and local taxes) in respect thereof.
(e) The Company agrees (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Company Common Stock so that the Warrant may be exercised without additional
authorization of Company Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Company Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, (iii) promptly to take all reasonable action as may from time to
time be required (including (A) complying with all premerger notification,
reporting and waiting period requirements and (B) in the event prior approval
of or notice to any Governmental Entity is necessary before the Warrant may be
exercised, cooperating fully with Parent in preparing such applications or
notices and providing such information to such Governmental Entity as it may
require) in order to permit Parent to exercise the Warrant and the Company duly
and effectively to issue shares of Company Common Stock pursuant thereto, and
(iv) promptly to take all action provided herein to protect the rights of
Parent against dilution.
(f) Parent agrees that, in the event the stockholders of the Company
are asked to consider and vote on a Transaction Proposal or a Business
Combination within the 13-month period commencing on the date of termination of
the Merger Agreement, Parent shall vote all shares of Company Common Stock
<PAGE>
acquired pursuant to the Warrant with respect to which Parent then has
beneficial ownership proportionately with all other shares of Company Common
Stock other than shares of Company Common Stock held by affiliates of the
Company.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent as follows:
(a) Due Authorization. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject
to any approvals referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms.
(b) Authorized Stock. The Company has taken all necessary
corporate and other action to authorize and reserve and, subject to
obtaining the governmental and other approvals and consents referred to
herein, to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Company Common Stock upon the exercise
of the Warrant terminates, will have reserved for issuance, upon
exercise of the Warrant, shares of Company Common Stock necessary for
Parent to exercise the Warrant, and the Company will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Company Common Stock or other securities which may be issued
pursuant to Section 6 upon exercise of the Warrant. The shares of
Company Common Stock to be issued upon due exercise of the Warrant,
including all additional shares of Company Common Stock or other
securities which may be issuable upon exercise of the Warrant pursuant
to Section 6, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including any preemptive rights of any stockholder
of the Company.
(c) No Conflicts. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of, any provision of the Certificate of Incorporation or By-laws of
the Company or any subsidiary of the Company or, subject to obtaining
any approvals or consents contemplated hereby, result in any violation
of or default under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any
subsidiary of the Company or their respective properties or assets
which conflict, violation or default would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(d) Board Action. The Board of Directors of the Company
having approved this Agreement and the Merger Agreement and the
<PAGE>
consummation of the transactions contemplated hereby and thereby, the
provisions of Article Fifteenth of the Company's Certificate of
Incorporation and Section 203 of the Delaware General Corporation Law
do not and will not apply to this Agreement or the purchase of shares
of Company Common Stock pursuant to this Agreement.
5. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company that:
(a) Due Authorization. Parent has all requisite corporate
power and authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent. This Agreement has been duly executed and delivered by
Parent and constitutes a valid and binding obligation of Parent,
enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of, any provision of the Charter or By-laws of Parent or any subsidiary
of Parent or, subject to obtaining any approvals or consents
contemplated hereby, result in any violation of or default under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any subsidiary of Parent or their
respective properties or assets which conflict, violation or default
would, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent.
(c) Purchase Not for Distribution. The Warrant is not, and
any Shares or other securities acquired by Parent upon exercise of the
Warrant will not be, taken with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except in
a transaction registered or exempt from registration under the
Securities Act.
6. Adjustment upon Changes in Capitalization, etc. (a) In the
event of any change in, or distributions in respect of, Company Common Stock by
reason of a stock dividend, split-up, recapitalization, merger, combination,
exchange of shares, distribution to all stockholders of warrants or other
convertible securities or similar transaction, the type and number of shares or
securities subject to the Warrant, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so as to fully and equitably preserve the economic
benefits intended to be provided to Parent pursuant to this Agreement.
(b) In the event that the Company shall enter into an agreement to
effect a Business Combination, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Warrant
shall, upon the consummation of any such transaction, entitle Parent to receive
upon exercise of the Warrant the number and class of shares or other securities
or property that Parent would have received in respect of Company Common Stock
if the Warrant had been exercised immediately prior to such event or the record
date therefor, as applicable.
<PAGE>
(c) The Company shall not enter into any definitive agreement
relating to a Business Combination unless the other party or parties thereto
agree unconditionally in writing (a copy of which shall be furnished to Parent
as promptly as practicable after the execution and public announcement thereof)
to assume all the obligations of the Company hereunder and take all other
actions that may be necessary so that the provisions of this Section 6 are
given full force and effect.
7. Repurchase of Warrant. (a) At the request of Parent at any time
commencing upon the occurrence of a Payment Event and ending 18 months
immediately thereafter, or at the election of the Company at any time after the
Warrant becomes exercisable, the Company (or any successor entity thereof)
shall repurchase from Parent and Parent shall sell to the Company (or any
successor entity thereof) (I) the Warrant and (II) all shares of Company Common
Stock purchased by Parent pursuant hereto with respect to which Parent then has
beneficial ownership. The date on which Parent gives notice to the Company, or
the Company gives notice to Parent, of its election to exercise its rights
under this Section 7 is referred to as the "Election Date". Such repurchase
shall be at an aggregate price (the "Repurchase Consideration") equal to:
(A) the aggregate Purchase Price paid by Parent for any
shares of Company Common Stock acquired pursuant to the Warrant with
respect to which Parent then has beneficial ownership; plus
(B) the excess, if any, of (x) the Applicable Price (as
defined below) as of the Election Date for a share of Company Common
Stock over (y) the Purchase Price (subject to adjustment pursuant to
Section 6(a)), multiplied by the number of shares of Company Common
Stock with respect to which the Warrant has not been exercised; plus
(C) the excess, if any, of the Applicable Price as of the
Election Date over the Purchase Price paid (or, in the case of Shares
with respect to which the Warrant has been exercised but the Closing
Date has not occurred, payable (subject to adjustment pursuant to
Section 6(a))) by Parent for each share of Company Common Stock with
respect to which the Warrant has been exercised and with respect to
which Parent then has beneficial ownership, multiplied by the number of
such shares.
(b) If either Parent or the Company elect to exercise their
respective rights under this Section 7, the Company shall, within 10 business
days after the Election Date, pay the Repurchase Consideration to Parent in
immediately available funds, and Parent shall surrender to the Company the
Warrant and the certificates evidencing the shares of Company Common Stock
purchased hereunder with respect to which Parent then has beneficial ownership,
and Parent shall warrant that it has sole record and beneficial ownership of
such Shares and that the same are then free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval of the Federal
Reserve or other regulatory authority is required in connection with the
payment of all or any portion of the Repurchase Consideration, the Company
shall deliver from time to time that portion of the Repurchase Consideration
that it is not then so prohibited from paying and shall promptly provide the
required notice or application for approval and shall expeditiously process the
same (and Parent shall cooperate with the Company in the filing of any such
notice or application and the obtaining of any such approval), and the period
of time that otherwise would run pursuant to the preceding sentence for the
<PAGE>
payment of the portion of the Repurchase Consideration requiring such
notification or approval shall run instead from the date on which, as the case
may be, (i) any required notification period has expired or been terminated or
(ii) such approval has been obtained and, in either event, any requisite
waiting period shall have passed. If the Federal Reserve or any other
regulatory authority disapproves of any part of the Company's proposed
repurchase pursuant to this Section 7, the Company shall promptly give notice
of such fact to Parent and redeliver to Parent the Shares it is then prohibited
from repurchasing, and Parent shall have the right to exercise the Warrant as
to the number of Shares for which the Warrant was exercisable at the Election
Date less the number of shares as to which payment has been made pursuant to
Section 7(a)(B); provided that if the Warrant shall have terminated prior to
the date of such notice or shall be scheduled to terminate at any time before
the expiration of a period ending on the thirtieth business day after such
date, Parent shall nonetheless have the right so to exercise the Warrant or
exercise its rights under Section 7 until the expiration of such period of 30
business days.
(c) For purposes of this Agreement, the "Applicable Price," as of
any date, means the average of the closing sales price per share of Company
Common Stock quoted on the NYSE (or if Company Common Stock is not quoted on
the NYSE, the highest bid price per share as quoted on the National Association
of Securities Dealers Automated Quotations System or, if the shares of Company
Common Stock are not quoted thereon, on the principal trading market on which
such shares are traded as reported by a recognized source) for the 15
consecutive trading business days ending on the third business day prior to
such date; provided, however, that in the event that the Warrant is being
repurchased at the election of the Company, the "Applicable Price" shall be no
less than the closing sale price per share of Company Common Stock on the NYSE
on the date of this Agreement. If as a result of the Payment Event the Company
Common Stock has been converted into or exchanged for securities of another
company, cash or other property, the determination of Applicable Price shall be
adjusted accordingly. If the securities being valued are not traded in any
public market, then the Applicable Price of such securities shall be the value
determined by an independent nationally recognized investment banking firm
selected by the Company (or its successor) and reasonably acceptable to Parent.
8. Registration Rights. (a) The Company shall, if requested by
Parent at any time commencing 90 days after the occurrence of a Purchase Event
(but subject to Section 8(b) below), as expeditiously as possible prepare and
file a registration statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all of the
securities that have been acquired by or are issuable to Parent upon exercise
of the Warrant in accordance with the intended method of sale or other
disposition stated by Parent, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and the Company
shall use its best efforts to qualify such shares or other securities under any
applicable state securities laws; provided that the Company shall have no
registration or other obligations under this Section 8 if it has given or gives
notice to Parent of its election to purchase the securities proposed to be
registered pursuant to Section 7 of this Agreement. The Company shall use all
reasonable efforts to cause such registration statement to become effective, to
obtain all consents or waivers of other parties which are required therefor
(provided that the Company shall not be required to make any payments to any
non-governmental parties in order to obtain such consents or waivers) and to
keep such registration statement effective for such period as may be reasonably
necessary to effect such sale or other disposition. The obligations of the
<PAGE>
Company hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding 90
days in the aggregate if the Board of Directors of the Company shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would require disclosure of nonpublic information that would
materially and adversely affect the Company. Any registration statement
prepared and filed under this Section 8, and any sale covered thereby, shall be
at the Company's expense except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Parent's counsel related
thereto. Parent shall provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. If
the Company at any time during the term of the Warrant proposes to register any
shares of Company Common Stock under the Securities Act in connection with an
underwritten public offering of such Company Common Stock, the Company will
promptly give written notice to Parent of its intention to do so and, upon the
written request of Parent given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Company Common Stock
intended to be included in such underwritten public offering by Parent), the
Company will cause all such shares for which Parent requests participation in
such registration to be so registered and included in such underwritten public
offering; provided that, if the managing underwriters of such offering advise
the Company in writing that in their opinion the inclusion of the full number
of shares of Company Common Stock requested to be included in such registration
may materially adversely affect such offering, the Company shall include the
shares requested to be included therein by Parent pro rata with the shares
intended to be included therein by the Company; and provided further, that if
the Company offers to include all of the shares of Company Common Stock then
held by Parent in a registered offering of the Company's securities, then
Parent shall no longer be entitled to request that the Company file a
registration statement as provided above, and the Company shall have no such
obligation. In connection with any registration pursuant to this Section 8,
the Company and Parent shall provide each other and any underwriter of the
offering with customary representations, warranties, covenants, indemnification
and contribution in connection with such registration.
(b) Upon the request of Parent to exercise the registration rights set
forth in Section 8(a) above, the Company may at its option, exercised within
five days after receipt of such request from Parent, elect to either (i) comply
with such registration request, or (ii) repurchase such portion of the Warrant
as is exercisable for shares of Company Common Stock with an aggregate
Applicable Price equal to $3 million, and defer the exercise of Parent's
registration rights with respect to the remaining shares of Company Common
Stock issuable upon exercise of the Warrant until such date, not more than nine
months after the date of the Payment Event as the Company shall determine, at
which time the Company shall perform its obligations under Section 8(a) as set
forth therein.
9. Listing. If Company Common Stock or any other securities to be
acquired upon exercise of the Warrant are then listed on the NYSE, the Company,
upon the request of Parent at the time such securities are registered pursuant
to Section 8, will promptly file an application to list the shares of Company
Common Stock or other securities to be acquired upon exercise of the Warrant on
the NYSE and will use its best efforts to obtain approval of such listing as
soon as practicable.
10. Division of Warrant. This Agreement (and the Warrant granted
hereby) are exchangeable, without expense, at the option of Parent, upon
<PAGE>
presentation and surrender of this Agreement at the principal office of the
Company for other Agreements providing for Warrants of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Company Common Stock purchasable hereunder. The terms "Agreement"
and "Warrant" as used herein include any other Agreements and related Warrants
for which this Agreement (and the Warrant granted hereby) may be exchanged.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, the Company
will execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
11. Miscellaneous. (a) Expenses. Except as otherwise provided in
Section 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
This Agreement (including the Merger Agreement and the other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Warrant
does not permit Parent to acquire, or does not require the Company to
repurchase, the full number of shares of Company Common Stock as provided in
Sections 2 and 7 (as adjusted pursuant to Section 6), it is the express
intention of the Company to allow Parent to acquire or to require the Company
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
<PAGE>
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Parent to:
The Toronto-Dominion Bank
Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Attention: I. Alexander Norton
Telecopier No.: (416) 982-6166
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Lee Meyerson
Telecopier No.: (212) 455-2502
If to the Company to:
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Attention: Lawrence M. Waterhouse, Jr.
Telecopier No.: (212) 509-8099
with a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attention: Roger H. Kimmel
Telecopier No.: (212) 751-4864
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Prior to the occurrence of a Purchase Event,
neither this Agreement nor any of the rights, interests or obligations
hereunder or under the Warrant shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, except that Parent may assign this Agreement to a wholly owned
subsidiary of Parent. From and after the termination of the Merger Agreement
upon the occurrence of a Purchase Event, Parent may assign all or part of its
rights hereunder to any person. It shall be a condition precedent to such
assignment that the assignee shall agree to be bound by all the obligations of
assignor under this Agreement, including, without limitation, the provisions of
Section 7 hereof. Subject to the preceding sentences, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
<PAGE>
(i) Further Assurances. In the event of any exercise of the
Warrant by Parent or repurchase of the Warrant by the Company, the Company and
Parent shall execute and deliver all other documents and instruments and take
all other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise or repurchase.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company and Parent have caused this Warrant
Agreement to be signed by their respective officers thereunto duly authorized
as of the day and year first written above.
WATERHOUSE INVESTOR SERVICES, INC.
By: ______________________________________
Name:
Title:
THE TORONTO-DOMINION BANK
By: ______________________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of Company Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value $.01
per share ("Company Stock"), of Waterhouse Investor Services, Inc., a Delaware
corporation (the "Company"), may be entitled to receive in connection with the
merger (the "Merger") of the Company with TD/Oak, Inc., a Delaware corporation,
securities (the "Parent Securities") of The Toronto-Dominion Bank, a Canadian
chartered bank ("Parent"). The undersigned acknowledges that the undersigned
may be deemed an "affiliate" of the Company within the meaning of Rule 145
("Rule 145") promulgated under the Securities Act of 1933 (the "Act"), although
nothing contained herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer any Parent Securities
received by the undersigned in exchange for any shares of Company Stock
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company
that the undersigned will not sell, assign or transfer any of Parent Securities
received by the undersigned in exchange for shares of Company Stock pursuant to
the Merger except (i) pursuant to an effective registration statement under the
Act, (ii) in conformity with the volume and other limitations of Rule 145 or
(iii) in a transaction which, in the opinion of independent counsel reasonably
satisfactory to Parent or as described in a "no-action" or interpretive letter
from the Staff of the Securities and Exchange Commission (the "SEC"), is not
required to be registered under the Act.
In the event of a sale or other disposition by the undersigned of
Parent Securities pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent Securities disposed of by
the undersigned, but that upon receipt of such evidence of compliance the
transfer agent shall effectuate the transfer of Parent Securities sold as
indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will
be placed on certificates representing Parent Securities received by the
undersigned in the Merger or held by a transferee thereof, which legends will
be removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Parent from independent counsel
reasonably satisfactory to Parent to the effect that such legends are no longer
required for purposes of the Act.
<PAGE>
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Securities and (ii) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
<PAGE>
ANNEX I
TO EXHIBIT D
[Name] [Date]
On __________________ the undersigned sold the securities
("Securities") of The Toronto-Dominion Bank (the "Company") described below in
the space provided for that purpose (the "Securities"). The Securities were
received by the undersigned in connection with the merger of Waterhouse
Investor Services, Inc. with and into TD/Oak, Inc.
Based upon the most recent report or statement filed by the Company
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph (e)
of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
<PAGE>
EXHIBIT E-1
Form of Employment Agreement for Lawrence M. Waterhouse, Jr.
<PAGE>
EXHIBIT E-1
EMPLOYMENT AGREEMENT
AGREEMENT, made _______ __ ,1996 by and between WATERHOUSE INVESTOR
SERVICES, INC. a Delaware corporation (the "Company") and LAWRENCE M.
WATERHOUSE, JR. ("Executive").
RECITALS
In order to induce Executive to serve as the Chairman and Chief
Executive Officer of the Company, the Company desires to provide Executive with
compensation and other benefits on the terms and conditions set forth in this
Agreement.
Executive is willing to accept such employment and perform services
for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the term hereof as its Chairman and
Chief Executive Officer. In his capacity as the Chairman and Chief Executive
Officer of the Company, Executive shall report to the Board of Directors of the
Company (the "Board") and Mr. W. Keith Gray, Executive Vice President of The
Toronto-Dominion Bank, or any successors to Mr. Gray (any subsequent reference
herein to Mr. Gray shall also refer to any such successors) and shall have the
customary powers, responsibilities and authorities of chairmen and chief
executive officers of corporations of the size, type and nature of the Company,
as it exists from time to time and as are assigned by the Board or Mr. Gray,
including, without limitation, the determination and execution of an orderly
process of succession (including the transfer of duties from the Executive to
<PAGE>
other officers of the Company, in contemplation of Executive's retirement upon
the expiration of the term hereof).
1.2 Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment as the Chairman and Chief Executive Officer of the
Company commencing as of _________ __, 1996, and agrees to devote such of his
working time and efforts as the Board or Mr. Gray shall determine, to the best
of his ability, experience and talent, to the performance of services, duties
and responsibilities in connection therewith. Executive shall perform such
duties and exercise such powers, commensurate with his position, as the
Chairman and Chief Executive Officer of the Company as Mr. Gray or the Board
shall from time to time delegate to him on such terms and conditions and
subject to such restrictions as Mr. Gray or the Board may reasonably from time
to time impose.
1.3 Nothing in this Agreement shall preclude Executive from engaging
in charitable and community affairs, from managing any passive investment, from
managing businesses not in competition with the Company (as defined in section
11(c) hereof) or as contemplated by Section 11(d) hereof, or from serving,
subject to the prior approval of Mr. Gray or the Board, as a member of boards
of directors or as a trustee of any other corporation, association or entity.
For purposes of the preceding sentence, any approval by Mr. Gray or the Board
required therein shall not be unreasonably withheld, and such approval shall
not be required at any time that Executive is no longer an employee of the
Company.
2. Term of Employment. Executive's term of employment under this
Agreement shall commence on _______ __, 1996 and, subject to the terms hereof,
shall terminate on the earlier of (i) _________ __, 2002 (the "Termination
Date") or (ii) termination of Executive's employment pursuant to this
Agreement; provided, however, that any termination of employment by Executive
other than for Good Reason may only be made upon 90 days prior written notice
<PAGE>
to the Company and any termination of employment by Executive for Good Reason
may only be made upon 30 days prior written notice to the Company.
3. Compensation.
3.1 Salary. During Executive's employment under the terms of this
Agreement, the Company shall pay Executive a base salary ("Base Salary") at the
rate of $1.2 million per annum. Base Salary shall be payable in accordance
with the ordinary payroll practices of the Company.
3.2 Annual Bonus. In addition to his Base Salary, the Board, in it
sole discretion, may award Executive an annual bonus in the event Executive
meets or exceeds any performance objectives established by the Board or Mr.
Gray.
3.3 Exclusive Compensation. In respect of services rendered to the
Company, Executive shall receive only the compensation set forth in this
Section 3 and in the letter from Waterhouse Investor Services, Inc. to
Executive dated as of _________ __, 1996 (the "Retirement Letter").
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices. The Company
shall provide Executive during the term of his employment hereunder with
coverage under all welfare benefit programs, plans and practices (commensurate
with his position in the Company and to the extent permitted under any employee
benefit plan) in accordance with the terms thereof, which the Company makes
available to its senior executives.
4.2 Perquisites. During Executive's employment hereunder, the
Company shall continue to pay the cost of Executive's automobile and life
insurance under the same terms and conditions as in effect on the date hereof.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the Board or Mr. Gray, the Company will
reimburse Executive for all reasonable expenses incurred by Executive in
carrying out his duties.
<PAGE>
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company
or Executive may terminate Executive's employment at any time for any reason.
If Executive's employment is terminated (i) by the Company other than for Cause
(as defined in Section 6.2 hereof), (ii) by Executive for Good Reason (as
defined in Section 6.1(b) hereof) or (iii) as a result of the Executive's
permanent disability (as defined in the Company's long-term disability benefit
plan applicable to senior executive officers as in effect on the date hereof)
prior to the Termination Date, the Company shall continue to pay Executive's
Base Salary through the Termination Date in accordance with the terms of
Section 3.1. In addition, Executive shall receive such payments, if any, under
applicable plans or programs to which Executive is entitled as of Executive's
date of termination pursuant to the terms of such plans or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) Any material breach by the Company of any provision of
this Agreement;
(ii) The occurrence of any circumstance which in Executive's good
faith judgement changes Executive's status or impairs or interferes with
his ability to continue to perform his duties under this Agreement.
(c) In the event that the Company disagrees with or challenges
Executive's determination that his termination was for Good Reason within the
meaning of Section 6.1(b) hereof and discontinues the payments otherwise called
for under Section 6.1(a) hereof, then Executive shall be immediately relieved
of his obligations under Section 11(b) and (c) hereof.
6.2 Voluntary Termination by Executive; Discharge for Cause. (a)
In the event that Executive's employment is terminated by the Company for
Cause, as hereinafter defined, Executive shall only be entitled to receive (i)
any Base Salary accrued but unpaid prior to such termination and (ii) any
benefits provided, as of the date of such termination, under the employee
<PAGE>
benefit programs, plans and practices referred to in Section 4.1 hereof, in
accordance with their terms. After the termination of Executive's employment
under this Section 6.2, the obligations of the Company under this Agreement to
make any further payments, or provide any benefits specified herein, to
Executive shall thereupon cease and terminate.
(b) In the event that Executive terminates his employment with the
Company other than for Good Reason, Executive shall be entitled to receive the
payments and benefits set forth under clauses 6.2(a)(i) and (ii) and the
payments set forth in the Retirement Letter.
(c) As used herein, the term "Cause" shall be limited to (i) any
breach of the provisions of Section 11 of this Agreement by Executive or (ii)
the commission by Executive of (a) any felony or (b) a misdemeanor involving
moral turpitude. Termination of Executive pursuant to Section 6.2(a) shall be
made by delivery to Executive of written notice from Mr. Gray or the Board
specifying the particulars of the conduct by Executive set forth in either of
clauses (i) or (ii) above, after an opportunity to cure such conduct within
thirty days of delivery of such written notice.
6.3 Death. In the event of Executive's death during his employment
hereunder or at any time thereafter while payments are still owing to Executive
under the terms of this Agreement, all obligations of the Company to make any
further payments, other than the obligation to pay any accrued but unpaid Base
Salary, shall terminate upon Executive's death, except as otherwise provided in
the Retirement Letter.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
General Counsel
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
<PAGE>
with a copy to:
Alvin H. Brown
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Lawrence M. Waterhouse, Jr.
c/o Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
with a copy to:
James F. Rittinger
Saterlee Stephens Burke & Burke
230 Park Avenue
New York, New York 10169
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
8. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Except to the extent expressly
provided otherwise in the next sentence, each party shall bear the costs of any
legal fees and other fees and expenses which may be incurred in respect of
enforcing its respective rights under this Agreement.
9. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this
<PAGE>
Agreement to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company, if such
successor expressly agrees to assume the obligations of the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition. (a)
Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed by
the Company, in the business of and for the benefit of the Company, or
(ii) when required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 11(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, The Toronto-
Dominion Bank or their respective affiliates or customers, that, in any case,
is not otherwise available to the public (other than by Executive's breach of
the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement and the purchase of the stock of the Company owned by Executive
pursuant to the Agreement and Plan of Merger (the "Merger") among The Toronto-
Dominion Bank, TD/Oak, Inc. and Waterhouse Investor Services, Inc., dated April
9, 1996 (the "Merger Agreement"), Executive agrees that during the period of
his employment hereunder and thereafter, without the prior written consent of
<PAGE>
the Board or Mr. Gray, (A) he will not, directly or indirectly, either as
principal, manager, agent, consultant, officer, stockholder, partner, investor,
lender or employee or in any other capacity, carry on, be engaged in or have
any financial interest in, any business which is in competition with the
business of the Company and (B) he shall not, on his own behalf or on behalf of
any person, firm or company, directly or indirectly, solicit or offer
employment to any person who has been employed by the Company at any time
during the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 11, a business shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
(including, without limitation, investment advisory services) purchased, sold,
dealt in or rendered by the Company as a part of the business of the Company at
the time of Executive's termination within the same geographic area in which
the Company effects such purchases, sales or dealings or renders such services.
Nothing in this Section 11 shall be construed so as to preclude Executive from
investing in any publicly or privately held company, provided Executive's
beneficial ownership of any class of such company's securities does not exceed
4% of the outstanding securities of such class.
(d) Notwithstanding the provisions of Section 11(b) and 11(c) hereof
to the contrary, Executive may at any time publish a national investment
advisory letter and provide investment advisory services to customers who
reside in the New York metropolitan area and in the immediate geographic area
in which Executive's children may now or in the future reside, but only during
the time they reside in such area; provided, however, that the entity through
which such services are being provided may not be or become affiliated with any
entity which is in engaged in the discount or full service brokerage business;
provided, further, that the foregoing proviso shall not limit Executive's
ability to place customer accounts with any entity of his choosing. The
<PAGE>
foregoing services may be provided through L.M. Waterhouse & Co., Inc.
(currently a wholly-owned subsidiary of the Company which may be sold to
Executive by the Company in accordance with the provisions of a Purchase
Agreement in the form of Exhibit F to the Merger Agreement (the "Purchase
Agreement")) or another entity established by Executive in accordance with the
terms of the Purchase Agreement.
(e) Executive agrees that this covenant not to compete is reasonable
under the circumstances and will not interfere with his ability to earn a
living or to otherwise meet his financial obligations. Executive and the
Company agree that if in the opinion of any court of competent jurisdiction
such restraint is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions of
this covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. Executive agrees that any breach of
the covenants contained in this Section 11 would irreparably injure the
Company. Accordingly, Executive agrees that the Company may, in addition to
pursuing any other remedies it may have in law or in equity, cease making any
payments otherwise required by this Agreement and obtain an injunction against
Executive from any court having jurisdiction over the matter restraining any
further violation of this Agreement by Executive.
12. Beneficiaries; References. Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in either
case by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative. Any reference to the
<PAGE>
masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 13 are in addition to the survivorship provisions of
any other section of this Agreement.
14. Arbitration. Except as otherwise provided in Section 11(e)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in New York, New York
and conducted in accordance with the commercial arbitration rules of the
American Arbitration Association in effect at the time of the arbitration.
Each party shall bear its own expenses in connection with any such arbitration
and joint expenses shall be borne by both parties in equal portions.
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the State of New York, without
reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding between the Company or any affiliate
of the Company and Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is necessary to give effect thereto.
<PAGE>
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
WATERHOUSE INVESTOR SERVICES, INC.
By:
-----------------------
Name:
Title:
--------------------------
Lawrence M. Waterhouse, Jr.
<PAGE>
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Mr. Lawrence M. Waterhouse, Jr.
c/o Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Dear Mr. Waterhouse:
In consideration of your continuing employment with Waterhouse
Investor Services, Inc. (the "Company") following the acquisition of the
Company by TD/Oak, Inc. (the "Merger") pursuant to the Agreement and Plan of
Merger among the Toronto-Dominion Bank, TD/Oak, Inc. and Waterhouse Investor
Services, Inc., dated as of April 9, 1996 and in consideration of your agreeing
to the covenants under Section 11 of Employment Agreement between you and the
Company, dated as of _______ __, 1996 (the "Employment Agreement"), the Company
will provide you with the retirement benefits, consistent with your discussions
with the Compensation Committee of the Board of Directors of the Company prior
to initiation of any discussions regarding the Merger, as set forth below.
Upon the later of your (i) attainment of age 65 or (ii) termination
of your employment with the Company other than a termination by the Company for
Cause (as defined below), the Company shall pay you for a period of ten years
after such date, annual retirement payments in the amount of $600,000 per annum
payable in quarterly installments in arrears. For purposes hereof, "Cause"
shall have the meaning assigned to such term under Section 6.2 of the
Employment Agreement.
In the event of your death prior to the commencement or completion of
payments under the preceding paragraph, your spouse, if then living, shall be
entitled to receive the lesser of (i) five annual payments in the amount of
$600,000 per annum or (ii) the balance of payments remaining at the time of
your death, in each case payable in quarterly installments in arrears. In the
event of your wife's death prior to the completion of the payments set forth in
the preceding sentence, all obligations of the Company to make any further
payments shall immediately cease.
<PAGE>
If you agree with the foregoing, please sign where indicated below.
Sincerely,
WATERHOUSE INVESTOR SERVICES, INC.
By:
-------------------------------
Name:
Title:
Agreed on this __ day of _______, 1996
by
- -----------------------------------------
LAWRENCE M. WATERHOUSE, JR.
<PAGE>
EXHIBIT E-2
Form of Employment Agreement for Certain Senior Executives
<PAGE>
EXHIBIT E-2
EMPLOYMENT AGREEMENT
AGREEMENT, made ______ __, 1996, by and between WATERHOUSE INVESTOR
SERVICES, INC., a Delaware corporation (the "Company") and ___________
("Executive").
RECITALS
In order to induce Executive to continue to serve as ______________
of the Company following the acquisition of the Company by TD/Oak, Inc. (the
"Merger") pursuant to the Agreement and Plan of Merger among The Toronto-
Dominion Bank, TD/Oak, Inc. and Waterhouse Investor Services, Inc., dated
April 9, 1996 (the "Merger Agreement"), the Company desires to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to accept such employment and perform services
for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment
1.1 The Company hereby employs Executive during the term set forth
herein as its ___________, with such powers, responsibilities and authorities
of an Executive nature as the Board of Directors of the Company or its designee
(collectively "Board") shall from time to time assign to Executive.
1.2 Executive hereby accepts employment as the _________ of the
Company commencing as of the effective time of the Merger (the "Commencement
Date") and agrees to devote his full working time and efforts to his duties.
Executive shall perform his duties to the best of his ability, experience and
talent. Executive shall perform such duties and exercise such powers,
<PAGE>
commensurate with his position as the Board shall from time to time assign to
the Executive.
1.3 Term of Employment. Executive's term of employment under this
Agreement shall commence on the Commencement Date and, subject to the terms
hereof, shall terminate on the earlier of (i) the third anniversary of the
Commencement Date (the "Termination Date") or (ii) termination of Executive's
employment pursuant to this Agreement; provided, however, that any termination
of employment by Executive other than for Good Reason (as defined in Section
3.1(b) hereof) may only be made upon 90 days prior written notice to the
Company and any termination of employment by Executive for Good Reason may only
be made upon 30 days prior written notice to the Company.
In the event the Executive's employment continues after the
Termination Date, the Company may terminate Executive's employment for any
reason upon 90 days written notice or payment in lieu of such notice and
Executive shall have no further right to any payments or benefits other than
such payments or benefits if any under applicable plans or programs to which he
is entitled pursuant to such plans or programs.
2. Compensation and Benefits. Executive's base salary, annual
bonus, vacation, welfare benefits and retirement benefits shall be
substantially the same as provided by the Company on the date of the Merger
Agreement, subject to any provision of the Merger Agreement regarding the
treatment of compensation and benefits. In addition, Executive shall be
entitled to participate in the equity compensation plans of The
Toronto-Dominion Bank for U.S. employees of The Toronto-Dominion Bank on the
same basis as similarly situated U.S. employees of The Toronto-Dominion Bank.
3. Termination of Employment.
3.1 Termination Not Cause or for Good Reason. (a) If Executive's
employment is terminated prior to the Termination Date (i) by the Company other
than for Cause (as defined in Section 3.2 hereof), (ii) by Executive for Good
<PAGE>
Reason or (iii) as a result of the Executive's permanent disability (as defined
in the Company's long-term disability benefit plan applicable to senior
executive officers as in effect on the date hereof) prior to the Termination
Date, the Company shall pay Executive's Base Salary through the Termination
Date, provided such amount paid shall not be less than 12 months of Executive's
Base Salary. In addition, Executive shall receive such payments, if any, under
applicable plans or programs to which he is entitled pursuant to the terms of
such plan or programs.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) Any material breach by the Company of any provision of this
Agreement; or
(ii) Any reduction by the Company in Executive's Base Salary or
failure to provide compensation or benefits hereunder, other than a
reduction that arises as a result of a material adverse change in the
business of the Company.
3.2 Voluntary Termination by Executive; Discharge for Cause; and
Death. (a) If Executive's employment is terminated (i) by the Company for
Cause as hereinafter defined, or (ii) by Executive other than for Good Reason,
or (iii) on account of Executive's Death while employed, Executive (or in
connection with his death, Executive's beneficiary), Executive shall be
entitled to receive (x) any Base Salary accrued but unpaid prior to such
termination and (y) any benefits provided under the employee benefit programs,
plans and practices referred to in Section 2. If Executive's employment is
terminated on account of death while employed, Executive's beneficiary shall be
entitled to a pro rata portion of the annual bonus payable in accordance with
Section 2.
(b) As used herein, the term "Cause" shall be limited to (i) willful
malfeasance or willful misconduct by Executive in connection with his
<PAGE>
employment that has a material adverse affect on the Company, (ii) continuing
refusal by Executive to perform his duties hereunder or any lawful direction of
the Chief Executive Officer or other executive senior to the Executive as
required under the terms of this Agreement, after thirty days notice of any
such refusal to perform such duties or direction was given to Executive and an
opportunity to cure same, (iii) any material breach of the provisions of
Section 8 of this Agreement by Executive or (iv) the conviction of Executive of
(x) any felony or (y) a misdemeanor involving moral turpitude. Termination of
Executive pursuant to this Section 3.2 shall be made by delivery to Executive
of written notice from the Board specifying the particulars of the conduct by
Executive set forth in any of clauses (i) through (iv) above.
3.3 Death. In the event of Executive's death following termination
under Section 3.1 while payments are still owing to Executive under such
Section, all obligations of the Company to make any further payments shall
survive Executive's death and be performed in accordance with the terms of
Section 9 hereof.
4. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
with a copy to:
Alvin E. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
<PAGE>
To Executive:
[Name of Executive]
c/o Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
with a copy to:
Richard H. Neiman, Esq.
Executive Vice President and General Counsel
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage paid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described below), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
5. Separability; Legal Fees. If any provision of this Agreement
shall be declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions hereof
which shall remain in full force and effect. Each party shall bear the costs
of any legal fees and other expenses which may be incurred in respect of
enforcing its respective rights under this Agreement.
6. Assignment. This Agreement shall be binding upon and inure to
the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company shall assign this
Agreement to any successor (whether by merger, purchase or otherwise, (a
"Transaction")) to all or substantially all of the stock, assets or businesses
of the Company; provided, however, that in the event Executive's employment
<PAGE>
with the Company is to continue after a Transaction this Agreement need not be
so assigned.
7. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
8. Nondisclosure of Confidential Information; Non-Competition. (a)
Executive shall not, without the prior written consent of the Company, use,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or made accessible such
information. For purposes of this Section 8(a), "Confidential Information"
shall mean any material non-public information concerning the financial data,
strategic business plans, product development (or other proprietary product
data), customer lists, marketing plans and other non-public, proprietary and
confidential information of the Company, The Toronto-Dominion Bank or their
respective affiliates or customers, that, in any case, is not otherwise
available to the public (other than by Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement, Executive agrees that during the period of his employment hereunder,
without the prior written consent of the Board: (A) he will not, directly or
indirectly, either as principal, manager, agent, consultant, officer,
stockholder, partner, investor, lender or employee or in any other capacity,
carry on, be engaged in or have any financial interest in, any business which
is in competition with the business of the Company and (B) he shall not, on his
<PAGE>
own behalf or on behalf of any person, firm or company, directly or indirectly,
solicit or offer employment to any, person who has been employed by the Company
at any time during the 12 months immediately preceding such solicitation. For
purposes hereof, a business shall be deemed to be in competition with the
Company if it is principally involved in the purchase, sale or other dealing in
any property or the rendering of any service purchased, sold, dealt in or
rendered by the Company as a part of the business of the Company within the
same geographic area in which the Company effects such purchases, sales or
dealings or renders such services.
(c) Nothing in this Section 8 shall be construed so as to preclude
Executive from investing in any publicly or privately held company, provided
Executive's beneficial ownership of any class or such company's securities does
not exceed 1% of the outstanding securities of such class.
(d) Executive agrees that this covenant not to compete is reasonable
under the circumstances and will not interfere with his ability to earn a
living or to otherwise meet his financial obligations. Executive and the
Company agree that if in the opinion of any court of competent jurisdiction
such restraint is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions of
this covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. Executive agrees that any breach of
the covenants contained in this Section 8 may irreparably injure the Company.
Accordingly, Executive agrees that the Company may, in addition to pursuing any
other remedies it may have in law or in equity, cease making any payments
otherwise required by this Agreement, seek to obtain an injunction in
accordance with applicable laws against Executive from any court having
jurisdiction over the matter restraining any further violation of this
Agreement by Executive.
<PAGE>
9. Beneficiaries; References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder
following Executive's death, and may change such election, in either case by
giving the Company written notice thereof. In the event of Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative. Any reference to the masculine gender in
this Agreement shall include, where appropriate, the feminine.
10. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 10 are in addition to the survivorship provisions of
any other section of this Agreement.
11. Indemnity. Executive shall be covered by the Directors and
Officers Insurance Policy provided by the Company subject to the terms and
conditions thereof.
12. Arbitration. Except as otherwise provided in Section 8(d)
hereof, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in New York, New York
and conducted in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association in effect at the time of the arbitration.
13. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the State of New York, without
reference to rules relating to conflict of laws.
14. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding between the Company or any affiliate
of the Company and Executive.
<PAGE>
15. Withholding. The Company shall be entitled to withhold from
payments to Executive hereunder any amount of withholding required by law.
16. Survival. Notwithstanding the termination of Executive's
employment by the Company prior to the Termination Date, the provisions of
Sections 3 and 8 hereunder shall remain in effect as long as is necessary to
give effect thereto.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
WATERHOUSE INVESTOR SERVICES, INC.
By:
-------------------------------
Name:
Title:
- -----------------------------
EXECUTIVE
<PAGE>
EXHIBIT F
Form of Purchase Agreement
<PAGE>
EXHIBIT F
PURCHASE AGREEMENT
AGREEMENT, dated ________ __, 1996 (this "Agreement"), by and between
Waterhouse Investor Services, Inc., a Delaware corporation ("Seller") and
Lawrence M. Waterhouse, Jr. ("Buyer").
WHEREAS, Seller is party to an Agreement and Plan of Merger, dated
April 9, 1996, among The Toronto-Dominion Bank, TD/Oak, Inc. and Seller (the
"Merger Agreement"; capitalized terms used herein and defined in the Merger
Agreement shall have the meaning ascribed to them in the Merger Agreement).
WHEREAS, L.M. Waterhouse & Co., Inc., a New York corporation and a
wholly-owned subsidiary of Seller (the "Company"), is registered with the
Securities and Exchange Commission and various state securities commissions to
conduct an investment advisory business.
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer 100% of the outstanding shares of common stock of the Company
upon the terms and subject to the conditions set forth herein (the sale and
purchase of stock of the Company being referred to herein as the "Stock
Purchase").
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
1. Purchase and Sale. On the basis of the covenants and agreements
and subject to the satisfaction or waiver of the conditions set forth herein,
at the Closing, Seller will sell and Buyer will purchase 90 shares of common
stock, no par value, of the Company (the "Shares") owned by Seller, which
constitute and will constitute as of the Closing 100% of the issued and
outstanding shares of capital stock of the Company. In payment for such
Shares, simultaneously with the delivery by Seller to Buyer of certificates
evidencing the Shares (which shall be duly endorsed for transfer, or
accompanied by duly executed stock powers), Buyer will pay to Seller by
certified or personal check an aggregate purchase price for the Shares equal to
the book value of such Shares as of the end of the Company's fiscal quarter
immediately preceding the Closing.
2. No Recourse. The Stock Purchase is being made on an "as is,
where is" basis and neither party makes any representation or warranty, express
or implied, to the other of any nature whatsoever with respect to the Company
or the transactions contemplated by this Agreement (including, without
limitation, title to the Shares; organization, existence and good standing of
the Company and state of its financial condition; possession or validity of
licenses, permits or registrations; and compliance with applicable laws).
3. Closing Conditions. The obligations of the parties hereto to
consummate the Stock Purchase are subject to the satisfaction or waiver of the
following conditions:
<PAGE>
(a) the Closing shall have been completed;
(b) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Stock Purchase shall be in effect, and there
shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Stock
Purchase, which makes the consummation of the Stock Purchase illegal;
and
(c) any necessary regulatory approvals for the Stock Purchase
shall have been obtained and shall be in full force and effect.
4. Consent to Use of Name. In connection with the Stock Purchase,
Seller hereby grants its consent to the Company to conduct under the name "L.M.
Waterhouse & Co., Inc." the investment advisory business (the "Advisory
Business"), and to publish the investment advisory letter (the "Newsletter"),
described in Section 11(d) of the Employment Agreement of even date herewith
between Seller and Buyer, the form of which is set forth in Exhibit E-1 to the
Merger Agreement, subject to the following terms and conditions:
(a) In all written materials, including published advertising,
produced and disseminated by the Company to the public, the most
prominent reference to the Company's name must set forth in full the
name "L.M. Waterhouse" with the initials "L.M." appearing in type
size reasonably proportionate to (but not less than half the size of)
the Waterhouse name. In addition, all such materials must include,
in reasonable proximity to the most prominent use of the name, a
reasonably conspicuous disclaimer as to the absence of affiliation
between the Company and Seller. The Newsletter may, however, omit
use of the initials "L.M." in references to the Company within the
text of the Newsletter.
(b) The consent granted in this Section 4 to the use by the
Company of the name "L.M. Waterhouse" in connection with the Advisory
Business shall terminate at such time as 51% of the total voting
power of all outstanding Voting Stock of the Company is no longer
owned beneficially and of record by Buyer and his descendants
(including for this purpose members of the immediate family of Buyer
and the immediate families of Buyer's descendants) (the "Ownership
Requirement"). In addition, the consent granted in this Section 4 to
the use by the Company of the name "L.M. Waterhouse" in connection
with the publication of the Newsletter shall terminate at such time
as the Ownership Requirement is no longer satisfied, unless (i) prior
to the occurrence of such event Buyer offers Seller an opportunity to
acquire 100% of the outstanding capital stock of the Company at the
Appraised Price, and (ii) Seller shall not have elected to acquire
such stock within 30 days after the determination of the Appraised
Price. For purposes of this Section 4, the term "Voting Stock" shall
mean all outstanding stock and other securities of the Company
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors of the Company; and the term
"Appraised Price" shall be the average of the fair market value of
the outstanding capital stock of the Company as determined by three
nationally recognized independent investment banking firms, one of
which shall be selected by Seller, one of which shall be selected by
<PAGE>
Buyer, and one of which shall be selected by the investment bankers
selected by each of Buyer and Seller (with the fees of such
investment bankers being shared equally by Buyer and Seller). If
Seller elects to so purchase the outstanding capital stock of the
Company, payment of the Appraised Price shall be made by Seller in
immediately available funds as soon as practicable after the receipt
of all necessary regulatory and other consents and approvals for such
transaction. If Seller does not so elect to purchase the outstanding
capital stock of the Company within such 30 day period, the consent
granted in this Section 4 shall remain in full force and effect with
respect to the publication of the Newsletter by the Company
notwithstanding that the Ownership Requirement shall no longer be
satisfied.
(c) Buyer understands, acknowledges and agrees that Seller
retains full right and title in and to the registered mark
"Waterhouse" and all derivatives and variants thereof, and except as
expressly permitted by the consent granted in this Section 4 neither
Company nor Buyer may make any use of such registered marks or any
derivatives or variants thereof that would infringe on Seller's
rights therein nor may Company or Buyer conduct any business under
the name "Waterhouse" or any derivative or variant thereof (including
"L.M. Waterhouse"), to the extent that such conduct would infringe on
Seller's rights therein, except as expressly permitted hereby. Buyer
further agrees not to seek to register the name "L.M. Waterhouse" or
any derivative or variant thereof as a registered mark of Buyer,
Company or any other person, or to license, sublicense, assign or
otherwise authorize any other person to use such name or any
derivative or variant thereof. Any such purported license,
sublicense, assignment or other authorization shall be null and void.
Notwithstanding the foregoing, in the event that Seller shall have
been offered the opportunity to purchase all of the capital stock of
the Company pursuant to paragraph (b) above and Seller shall have
elected not to do so within the 30 day period specified therein (the
"Termination Date"), then Seller shall, upon the request of the
Company, provide its consent to, and use reasonable best efforts to
cooperate with, the Company in seeking to register the full name (but
not less than the full name) under which the Newsletter is published
as a registered mark owned by the Company. Prior to the Termination
Date, Seller shall not register an investment advisory newsletter
under the "Waterhouse" mark unless Seller offers the Company the
opportunity to concurrently seek to register the full name (but not
less than the full name) of the Newsletter as a registered mark owned
by the Company.
(d) Buyer also understands, acknowledges and agrees that Seller
and its affiliates may engage in the investment advisory business and
publish newsletters and similar communications under the mark
"Waterhouse" or any derivative or variant thereof (other than "L.M.
Waterhouse", which Company shall have the exclusive right to use
pursuant to the consent granted under this Section 4), and that such
usage by Seller and its affiliates shall not infringe on or violate
in any way the rights granted to Company under this Section 4.
5. Reversion of Name. Seller agrees with Buyer that if Seller and
its affiliates cease using the mark "Waterhouse" in a reasonably prominent way
in statements mailed to customers of Seller's discount brokerage business, and
<PAGE>
such cessation of usage of the name continues for a period of twelve
consecutive months, then in such event Seller shall cause the registered mark
"Waterhouse" to be assigned and transferred to Buyer.
6. Notices. All notices and other communications hereunder shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, telegram or telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
if to Seller:
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Lee Meyerson, Esq.
if to Buyer:
Saterlee Stephens Burke & Burke
230 Park Avenue
New York, New York 10169
Attention: James Rittinger, Esq.
with a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attention: Roger H. Kimmel, Esq.
7. Entire Agreement; Assignment. This Agreement (i) constitutes
the entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and (ii) shall not be assigned by operation of law or otherwise, without
the prior written consent of the other party and, prior to the Effective Time,
the prior written consent of Parent.
8. Amendment. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto and, prior to the Effective Time, with the prior
written consent of Parent.
9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the internal principles of conflicts of laws thereof.
<PAGE>
10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
11. Headings. The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12. Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
duly executed as of the day and year first above written.
WATERHOUSE INVESTOR SERVICES, INC.
By: ------------------------------------
Name:
Title:
-----------------------------------
Lawrence M. Waterhouse, Jr.
Exhibit 2.2
THE WARRANT GRANTED BY THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON
ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE TRANSFER OF SUCH WARRANT AND THE SECURITIES ISSUABLE UPON ITS
EXERCISE ARE SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND PURSUANT TO THE TERMS OF THIS WARRANT AGREEMENT.
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of April 9, 1996 (the "Agreement"), by and
between WATERHOUSE INVESTOR SERVICES, INC., a Delaware corporation (the
"Company"), and THE TORONTO-DOMINION BANK, a Canadian chartered bank
("Parent").
WHEREAS, the Company, Parent and TD/Oak, Inc., a Delaware corporation and
a direct wholly owned subsidiary of Parent ("Merger Sub"), are concurrently
herewith entering into an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement"; capitalized terms not defined herein shall have
the meanings set forth in the Merger Agreement), providing for, among other
things, the merger of the Company with and into Merger Sub with Merger Sub as
the surviving corporation; and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Merger Agreement, Parent has requested that the Company agree, and the
Company has agreed, to issue to Parent the Warrant (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the Company and Parent agree as follows:
1. Issuance of Warrant. Subject to the terms and conditions set forth
herein, the Company hereby issues to Parent a warrant (the "Warrant")
representing the right to purchase from time to time (subject to the provisions
of Section 2) up to 250,000 shares (the "Shares") of Common Stock, par value
$0.01 per share, of the Company ("Company Common Stock") at a purchase price of
$0.01 per Share (the "Purchase Price").
2. Exercise of Warrant. (a) Parent may exercise the Warrant, in whole
or in part, at any time and from time to time following the termination of the
Merger Agreement at the time specified in clause (A) of the last paragraph of
Section 6.3(a) of the Merger Agreement, subject to and upon the occurrence of
any of the events described in Section 6.3(a) of the Merger Agreement (each, a
"Purchase Event"); provided that, this Agreement and the Warrant shall
terminate and be of no further force and effect upon the earliest to occur of
(i) the Effective Time, (ii) termination of the Merger Agreement prior to the
occurrence of a Purchase Event or (iii) except as provided in the last sentence
of this Section 2(a), the tenth anniversary of the date of this Agreement; and,
provided, further, that any purchase of Shares upon exercise of the Warrant
shall be subject to compliance with applicable law, including the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Notwithstanding the
termination of the Warrant pursuant to clause (iii) above, Parent shall be
<PAGE>
entitled to purchase those Shares with respect to which it has exercised the
Warrant in accordance with the terms hereof prior to the termination of the
Warrant, subject to the Company's right to repurchase such Shares pursuant to
the provisions of Section 7 hereof. The termination of the Warrant shall not
affect any rights hereunder which by their terms extend beyond the date of such
termination.
(b) In the event Parent elects to exercise the Warrant, it shall
send to the Company a written notice (the date on which such notice is given
being herein referred to as the "Notice Date") specifying (i) the total number
of Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than five business days nor later than 20 business days from
the Notice Date for the closing of such purchase (the "Closing Date"); provided
that if the closing of the purchase and sale pursuant to the Warrant (the
"Closing") cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided, further, without
limiting the foregoing, that if prior notification to or approval of the
Federal Reserve or any other regulatory authority is required in connection
with such purchase, Parent shall promptly file the required notice or
application for approval and shall expeditiously process the same (and the
Company shall cooperate with Parent in the filing of any such notice or
application and the obtaining of any such approval), and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained, and in
either event, any requisite waiting period has passed; and provided further,
that the Company shall have the right to repurchase (in accordance with the
provisions of Section 7 hereof) on the Closing Date that portion of the Warrant
which Parent proposes to exercise.
3. Payment and Delivery of Certificates. (a) On each Closing
Date, Parent shall pay to the Company in immediately available funds by wire
transfer to a bank account designated by the Company an amount equal to the
Purchase Price multiplied by the number of Shares to be purchased on such
Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), (i) the Company shall
deliver to Parent (A) a certificate or certificates representing the Shares to
be purchased at such Closing, which Shares shall be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever, and (B) if the
Warrant is being exercised in part only, an executed new Warrant Agreement with
the same terms as this Agreement evidencing the right to purchase the balance
of the shares of Company Common Stock purchasable hereunder, and (ii) Parent
shall deliver to the Company a letter agreeing that Parent shall not offer to
sell or otherwise dispose of such Shares in violation of applicable federal or
state securities laws or the provisions of this Agreement.
(c) Certificates for the Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE TRANSFER OF SUCH
SECURITIES IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A WARRANT AGREEMENT
<PAGE>
DATED AS OF APRIL 9, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Parent shall have delivered
to the Company a copy of a letter from the staff of the SEC, or an opinion of
counsel in form and substance reasonably satisfactory to the Company and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
(d) Upon the giving by Parent to the Company of the written notice of
exercise of the Warrant provided for under Section 2(a), the tender of the
applicable Purchase Price in immediately available funds, the tender of this
Agreement to the Company, and the receipt of all necessary regulatory approvals
(if any), Parent shall be deemed to be the holder of record of the shares of
Company Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Company Common Stock shall not then be actually
delivered to Parent. The Company shall pay all expenses, and any and all
United States federal, state, and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 3(d) in the name of Parent; if such stock
certificates are to be in the name of an assignee, transferee, or designee of
Parent, the Company shall pay all transfer charges (but not United States
federal, state and local taxes) in respect thereof.
(e) The Company agrees (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Company Common Stock so that the Warrant may be exercised without additional
authorization of Company Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Company Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, (iii) promptly to take all reasonable action as may from time to
time be required (including (A) complying with all premerger notification,
reporting and waiting period requirements and (B) in the event prior approval
of or notice to any Governmental Entity is necessary before the Warrant may be
exercised, cooperating fully with Parent in preparing such applications or
notices and providing such information to such Governmental Entity as it may
require) in order to permit Parent to exercise the Warrant and the Company duly
and effectively to issue shares of Company Common Stock pursuant thereto, and
(iv) promptly to take all action provided herein to protect the rights of
Parent against dilution.
(f) Parent agrees that, in the event the stockholders of the Company
are asked to consider and vote on a Transaction Proposal or a Business
Combination within the 13-month period commencing on the date of termination of
the Merger Agreement, Parent shall vote all shares of Company Common Stock
<PAGE>
acquired pursuant to the Warrant with respect to which Parent then has
beneficial ownership proportionately with all other shares of Company Common
Stock other than shares of Company Common Stock held by affiliates of the
Company.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent as follows:
(a) Due Authorization. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject
to any approvals referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms.
(b) Authorized Stock. The Company has taken all necessary
corporate and other action to authorize and reserve and, subject to
obtaining the governmental and other approvals and consents referred to
herein, to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Company Common Stock upon the exercise
of the Warrant terminates, will have reserved for issuance, upon
exercise of the Warrant, shares of Company Common Stock necessary for
Parent to exercise the Warrant, and the Company will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Company Common Stock or other securities which may be issued
pursuant to Section 6 upon exercise of the Warrant. The shares of
Company Common Stock to be issued upon due exercise of the Warrant,
including all additional shares of Company Common Stock or other
securities which may be issuable upon exercise of the Warrant pursuant
to Section 6, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including any preemptive rights of any stockholder
of the Company.
(c) No Conflicts. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of, any provision of the Certificate of Incorporation or By-laws of
the Company or any subsidiary of the Company or, subject to obtaining
any approvals or consents contemplated hereby, result in any violation
of or default under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any
subsidiary of the Company or their respective properties or assets
which conflict, violation or default would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(d) Board Action. The Board of Directors of the Company
having approved this Agreement and the Merger Agreement and the
consummation of the transactions contemplated hereby and thereby, the
<PAGE>
provisions of Article Fifteenth of the Company's Certificate of
Incorporation and Section 203 of the Delaware General Corporation Law
do not and will not apply to this Agreement or the purchase of shares
of Company Common Stock pursuant to this Agreement.
5. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company that:
(a) Due Authorization. Parent has all requisite corporate
power and authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent. This Agreement has been duly executed and delivered by
Parent and constitutes a valid and binding obligation of Parent,
enforceable in accordance with its terms.
(b) No Conflicts. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of, any provision of the Charter or By-laws of Parent or any subsidiary
of Parent or, subject to obtaining any approvals or consents
contemplated hereby, result in any violation of or default under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any subsidiary of Parent or their
respective properties or assets which conflict, violation or default
would, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent.
(c) Purchase Not for Distribution. The Warrant is not, and
any Shares or other securities acquired by Parent upon exercise of the
Warrant will not be, taken with a view to the public distribution
thereof and will not be transferred or otherwise disposed of except in
a transaction registered or exempt from registration under the
Securities Act.
6. Adjustment upon Changes in Capitalization, etc. (a) In the
event of any change in, or distributions in respect of, Company Common Stock by
reason of a stock dividend, split-up, recapitalization, merger, combination,
exchange of shares, distribution to all stockholders of warrants or other
convertible securities or similar transaction, the type and number of shares or
securities subject to the Warrant, and the Purchase Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so as to fully and equitably preserve the economic
benefits intended to be provided to Parent pursuant to this Agreement.
(b) In the event that the Company shall enter into an agreement to
effect a Business Combination, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Warrant
shall, upon the consummation of any such transaction, entitle Parent to receive
upon exercise of the Warrant the number and class of shares or other securities
or property that Parent would have received in respect of Company Common Stock
if the Warrant had been exercised immediately prior to such event or the record
date therefor, as applicable.
<PAGE>
(c) The Company shall not enter into any definitive agreement
relating to a Business Combination unless the other party or parties thereto
agree unconditionally in writing (a copy of which shall be furnished to Parent
as promptly as practicable after the execution and public announcement thereof)
to assume all the obligations of the Company hereunder and take all other
actions that may be necessary so that the provisions of this Section 6 are
given full force and effect.
7. Repurchase of Warrant. (a) At the request of Parent at any time
commencing upon the occurrence of a Payment Event and ending 18 months
immediately thereafter, or at the election of the Company at any time after the
Warrant becomes exercisable, the Company (or any successor entity thereof)
shall repurchase from Parent and Parent shall sell to the Company (or any
successor entity thereof) (I) the Warrant and (II) all shares of Company Common
Stock purchased by Parent pursuant hereto with respect to which Parent then has
beneficial ownership. The date on which Parent gives notice to the Company, or
the Company gives notice to Parent, of its election to exercise its rights
under this Section 7 is referred to as the "Election Date". Such repurchase
shall be at an aggregate price (the "Repurchase Consideration") equal to:
(A) the aggregate Purchase Price paid by Parent for any
shares of Company Common Stock acquired pursuant to the Warrant with
respect to which Parent then has beneficial ownership; plus
(B) the excess, if any, of (x) the Applicable Price (as
defined below) as of the Election Date for a share of Company Common
Stock over (y) the Purchase Price (subject to adjustment pursuant to
Section 6(a)), multiplied by the number of shares of Company Common
Stock with respect to which the Warrant has not been exercised; plus
(C) the excess, if any, of the Applicable Price as of the
Election Date over the Purchase Price paid (or, in the case of Shares
with respect to which the Warrant has been exercised but the Closing
Date has not occurred, payable (subject to adjustment pursuant to
Section 6(a))) by Parent for each share of Company Common Stock with
respect to which the Warrant has been exercised and with respect to
which Parent then has beneficial ownership, multiplied by the number of
such shares.
(b) If either Parent or the Company elect to exercise their
respective rights under this Section 7, the Company shall, within 10 business
days after the Election Date, pay the Repurchase Consideration to Parent in
immediately available funds, and Parent shall surrender to the Company the
Warrant and the certificates evidencing the shares of Company Common Stock
purchased hereunder with respect to which Parent then has beneficial ownership,
and Parent shall warrant that it has sole record and beneficial ownership of
such Shares and that the same are then free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval of the Federal
Reserve or other regulatory authority is required in connection with the
payment of all or any portion of the Repurchase Consideration, the Company
shall deliver from time to time that portion of the Repurchase Consideration
that it is not then so prohibited from paying and shall promptly provide the
required notice or application for approval and shall expeditiously process the
same (and Parent shall cooperate with the Company in the filing of any such
notice or application and the obtaining of any such approval), and the period
of time that otherwise would run pursuant to the preceding sentence for the
<PAGE>
payment of the portion of the Repurchase Consideration requiring such
notification or approval shall run instead from the date on which, as the case
may be, (i) any required notification period has expired or been terminated or
(ii) such approval has been obtained and, in either event, any requisite
waiting period shall have passed. If the Federal Reserve or any other
regulatory authority disapproves of any part of the Company's proposed
repurchase pursuant to this Section 7, the Company shall promptly give notice
of such fact to Parent and redeliver to Parent the Shares it is then prohibited
from repurchasing, and Parent shall have the right to exercise the Warrant as
to the number of Shares for which the Warrant was exercisable at the Election
Date less the number of shares as to which payment has been made pursuant to
Section 7(a)(B); provided that if the Warrant shall have terminated prior to
the date of such notice or shall be scheduled to terminate at any time before
the expiration of a period ending on the thirtieth business day after such
date, Parent shall nonetheless have the right so to exercise the Warrant or
exercise its rights under Section 7 until the expiration of such period of 30
business days.
(c) For purposes of this Agreement, the "Applicable Price," as of
any date, means the average of the closing sales price per share of Company
Common Stock quoted on the NYSE (or if Company Common Stock is not quoted on
the NYSE, the highest bid price per share as quoted on the National Association
of Securities Dealers Automated Quotations System or, if the shares of Company
Common Stock are not quoted thereon, on the principal trading market on which
such shares are traded as reported by a recognized source) for the 15
consecutive trading business days ending on the third business day prior to
such date; provided, however, that in the event that the Warrant is being
repurchased at the election of the Company, the "Applicable Price" shall be no
less than the closing sale price per share of Company Common Stock on the NYSE
on the date of this Agreement. If as a result of the Payment Event the Company
Common Stock has been converted into or exchanged for securities of another
company, cash or other property, the determination of Applicable Price shall be
adjusted accordingly. If the securities being valued are not traded in any
public market, then the Applicable Price of such securities shall be the value
determined by an independent nationally recognized investment banking firm
selected by the Company (or its successor) and reasonably acceptable to Parent.
8. Registration Rights. (a) The Company shall, if requested by
Parent at any time commencing 90 days after the occurrence of a Purchase Event
(but subject to Section 8(b) below), as expeditiously as possible prepare and
file a registration statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all of the
securities that have been acquired by or are issuable to Parent upon exercise
of the Warrant in accordance with the intended method of sale or other
disposition stated by Parent, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and the Company
shall use its best efforts to qualify such shares or other securities under any
applicable state securities laws; provided that the Company shall have no
registration or other obligations under this Section 8 if it has given or gives
notice to Parent of its election to purchase the securities proposed to be
registered pursuant to Section 7 of this Agreement. The Company shall use all
reasonable efforts to cause such registration statement to become effective, to
obtain all consents or waivers of other parties which are required therefor
(provided that the Company shall not be required to make any payments to any
non-governmental parties in order to obtain such consents or waivers) and to
keep such registration statement effective for such period as may be reasonably
necessary to effect such sale or other disposition. The obligations of the
<PAGE>
Company hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding 90
days in the aggregate if the Board of Directors of the Company shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would require disclosure of nonpublic information that would
materially and adversely affect the Company. Any registration statement
prepared and filed under this Section 8, and any sale covered thereby, shall be
at the Company's expense except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Parent's counsel related
thereto. Parent shall provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. If
the Company at any time during the term of the Warrant proposes to register any
shares of Company Common Stock under the Securities Act in connection with an
underwritten public offering of such Company Common Stock, the Company will
promptly give written notice to Parent of its intention to do so and, upon the
written request of Parent given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Company Common Stock
intended to be included in such underwritten public offering by Parent), the
Company will cause all such shares for which Parent requests participation in
such registration to be so registered and included in such underwritten public
offering; provided that, if the managing underwriters of such offering advise
the Company in writing that in their opinion the inclusion of the full number
of shares of Company Common Stock requested to be included in such registration
may materially adversely affect such offering, the Company shall include the
shares requested to be included therein by Parent pro rata with the shares
intended to be included therein by the Company; and provided further, that if
the Company offers to include all of the shares of Company Common Stock then
held by Parent in a registered offering of the Company's securities, then
Parent shall no longer be entitled to request that the Company file a
registration statement as provided above, and the Company shall have no such
obligation. In connection with any registration pursuant to this Section 8,
the Company and Parent shall provide each other and any underwriter of the
offering with customary representations, warranties, covenants, indemnification
and contribution in connection with such registration.
(b) Upon the request of Parent to exercise the registration rights set
forth in Section 8(a) above, the Company may at its option, exercised within
five days after receipt of such request from Parent, elect to either (i) comply
with such registration request, or (ii) repurchase such portion of the Warrant
as is exercisable for shares of Company Common Stock with an aggregate
Applicable Price equal to $3 million, and defer the exercise of Parent's
registration rights with respect to the remaining shares of Company Common
Stock issuable upon exercise of the Warrant until such date, not more than nine
months after the date of the Payment Event as the Company shall determine, at
which time the Company shall perform its obligations under Section 8(a) as set
forth therein.
9. Listing. If Company Common Stock or any other securities to be
acquired upon exercise of the Warrant are then listed on the NYSE, the Company,
upon the request of Parent at the time such securities are registered pursuant
to Section 8, will promptly file an application to list the shares of Company
Common Stock or other securities to be acquired upon exercise of the Warrant on
the NYSE and will use its best efforts to obtain approval of such listing as
soon as practicable.
10. Division of Warrant. This Agreement (and the Warrant granted
hereby) are exchangeable, without expense, at the option of Parent, upon
<PAGE>
presentation and surrender of this Agreement at the principal office of the
Company for other Agreements providing for Warrants of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Company Common Stock purchasable hereunder. The terms "Agreement"
and "Warrant" as used herein include any other Agreements and related Warrants
for which this Agreement (and the Warrant granted hereby) may be exchanged.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, the Company
will execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
11. Miscellaneous. (a) Expenses. Except as otherwise provided in
Section 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
This Agreement (including the Merger Agreement and the other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Warrant
does not permit Parent to acquire, or does not require the Company to
repurchase, the full number of shares of Company Common Stock as provided in
Sections 2 and 7 (as adjusted pursuant to Section 6), it is the express
intention of the Company to allow Parent to acquire or to require the Company
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
<PAGE>
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Parent to:
The Toronto-Dominion Bank
Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Attention: I. Alexander Norton
Telecopier No.: (416) 982-6166
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Lee Meyerson
Telecopier No.: (212) 455-2502
If to the Company to:
Waterhouse Investor Services, Inc.
100 Wall Street
New York, New York 10005
Attention: Lawrence M. Waterhouse, Jr.
Telecopier No.: (212) 509-8099
with a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attention: Roger H. Kimmel
Telecopier No.: (212) 751-4864
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Prior to the occurrence of a Purchase Event,
neither this Agreement nor any of the rights, interests or obligations
hereunder or under the Warrant shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, except that Parent may assign this Agreement to a wholly owned
subsidiary of Parent. From and after the termination of the Merger Agreement
upon the occurrence of a Purchase Event, Parent may assign all or part of its
rights hereunder to any person. It shall be a condition precedent to such
assignment that the assignee shall agree to be bound by all the obligations of
assignor under this Agreement, including, without limitation, the provisions of
Section 7 hereof. Subject to the preceding sentences, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
<PAGE>
(i) Further Assurances. In the event of any exercise of the
Warrant by Parent or repurchase of the Warrant by the Company, the Company and
Parent shall execute and deliver all other documents and instruments and take
all other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise or repurchase.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company and Parent have caused this Warrant
Agreement to be signed by their respective officers thereunto duly authorized
as of the day and year first written above.
WATERHOUSE INVESTOR SERVICES, INC.
By: /s/ Lawrence M. Waterhouse, Jr.
Name: Lawrence M. Waterhouse, Jr.
Title: Chairman and Chief Executive Officer
THE TORONTO-DOMINION BANK
By: /s/ W. Keith Gray
Name: W. Keith Gray
Title: Executive Vice President
Exhibit 2.3
VOTING AGREEMENT
----------------
AGREEMENT dated as of April 9, 1996 by and among The
Toronto-Dominion Bank ("Parent") and each of the other parties signatory
hereto (each a "Stockholder").
RECITALS
--------
Concurrently herewith, Parent, a Canadian chartered bank,
TD/Oak, Inc., a Delaware corporation and a direct wholly-owned subsidiary of
Parent ("Merger Sub"), and Waterhouse Investor Services, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of
Merger of even date herewith (as such agreement may be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement) pursuant to which
the Company will be merged with and into Merger Sub (the "Merger"), and each
share of common stock, par value $.01 per share, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective Time
will, except as otherwise provided in the Merger Agreement, be converted into
the Merger Consideration.
As a condition to Parent and Merger Sub entering into the
Merger Agreement, Parent and Merger Sub require that each Stockholder enter
into, and each such Stockholder has agreed to enter into, this Agreement.
AGREEMENT
---------
To implement the foregoing and in consideration of the
mutual agreements contained herein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder
hereby severally represents and warrants to Parent as follows:
(a) Ownership of Shares. (1) Such Stockholder is the
record holder and beneficial owner of the number of shares of Company Common
Stock as set forth opposite such Stockholder's name on Schedule 1 hereto, and
in addition is the beneficial owner of the number of shares of Company Common
Stock held in the ESOP and allocated to him or her which is set forth
opposite his or her name on Schedule 1 hereto (the "Existing Shares", and
together with any shares of Company Common Stock acquired by such Stockholder
in any such capacities after the date hereof and prior to the termination
hereof, whether upon exercise of options, conversion of convertible
securities, purchase, exchange or otherwise, the "Shares").
(2) On the date hereof, (A) the Existing Shares set forth
opposite such Stockholder's name on Schedule 1 constitute all of the
shares of Company Common Stock owned of record or beneficially by
such Stockholder, and (B) Mr. Lawrence M. Waterhouse, Jr. ("Mr.
Waterhouse") holds a power of attorney, a copy of which is attached
hereto, allowing Mr. Waterhouse to vote the Shares held by the other
<PAGE>
Stockholders to the extent described in such power of attorney (the
"Power of Attorney").
(3) Subject to the Power of Attorney in the case of all
Stockholders other than Mr. Waterhouse, such Stockholder has sole
voting and dispositive power with respect to the Shares beneficially
owned by such Stockholder.
(b) Power; Binding Agreement. Such Stockholder has the
legal capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by such Stockholder and constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms. If such Stockholder is married and
such Stockholder's Shares constitute community property, this Agreement has
been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, such Stockholder's spouse, enforceable against such
person in accordance with its terms.
(c) No Conflicts. Neither the execution and delivery of
this Agreement by such Stockholder nor the consummation by such Stockholder
of the transactions contemplated hereby nor compliance by such Stockholder
with any of the provisions hereof will (x) conflict with or result in any
breach of any agreement to which such Stockholder is a party, or (y) violate
as at the date hereof any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder.
(d) Such Stockholder during the term hereof shall hold
his or her Shares and the certificates representing such Shares free of any
agreements, understandings or arrangements with respect to the voting of such
Shares that would breach the provisions of, or otherwise would be
inconsistent with, this Agreement.
(e) Such Stockholder understands and acknowledges that
Parent and Merger Sub are entering into the Merger Agreement in reliance upon
such Stockholder's execution and delivery of this Agreement.
2. Agreement to Vote. Each Stockholder hereby severally
agrees that, during the time this Agreement is in effect, at any meeting of
the stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, such Stockholder shall
vote (or cause to be voted) the Shares held of record or beneficially by such
Stockholder (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and this
Agreement and any actions required in furtherance hereof and thereof; and
(ii) against (a) any other Business Combination, or (b) any other action
which, as its primary purpose, is intended to impede, delay, postpone, or
prevent the approval and adoption of the Merger Agreement by the stockholders
of the Company or the consummation of the transactions contemplated thereby
or has, as its primary purpose, the consummation of any other Business
Combination. Each Stockholder hereby agrees, upon Parent's request, to
furnish Parent a proxy in form and substance reasonably satisfactory to
Parent to effectuate the foregoing.
<PAGE>
3. Certain Covenants of Stockholders. Except in accordance
with the terms of this Agreement, each Stockholder hereby severally covenants
and agrees as follows:
3.1 No Solicitation. Such Stockholder shall not, solely
in his or her capacity as such, take any action which is prohibited by, or
fail to take any action which is required by, Section 4.8 of the Merger
Agreement (without regard to the proviso thereto) as it applies to
Representatives of the Company (whether or not such Stockholder would be
deemed to be such a Representative for purposes of Section 4.8 of the Merger
Agreement) provided however, it shall be presumed that discussions or
negotiations of Lawrence M. Waterhouse, Jr. in connection with any inquiry or
Transaction Proposal are in his capacity as director, officer or employee of
the Company.
3.2 Restriction on Transfer, Proxies and Non-
Interference. Such Stockholder shall not, directly or indirectly: (i)
except pursuant to the terms of the Merger Agreement and this Agreement,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, any
or all of such Stockholder's Shares or any interest therein, unless the
transferee or pledgee of such Shares agrees in writing (with a copy furnished
to Parent) to be bound by all of the provisions of this Agreement with
respect to such Shares; (ii) except as contemplated hereby, grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares; or (iii) take any action that
would make any representation or warranty of such Stockholder contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement.
3.3 Additional Shares. The Stockholder hereby agrees,
while this Agreement is in effect, to promptly notify the Parent of the
number of any new Shares of Company Common Stock acquired by the Stockholder,
if any, after the date hereof.
4. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by
this Agreement.
5. Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law
or otherwise, including without limitation such Stockholder's heirs,
guardians, administrators or successors.
6. Termination. This Agreement and the covenants and
agreements contained herein with respect to the Company Common Stock shall
terminate on the first to occur of (a) the Effective Time, and (b) the
"Termination Date" which, as used herein, means the date upon which the
Merger Agreement is terminated in accordance with its terms.
7. Stockholder Capacity. No person executing this
Agreement who is or becomes during the term hereof a director, officer or
<PAGE>
employee of the Company makes any agreement or understanding herein in his or
her capacity as such director, officer or employee and nothing contained in
this Agreement shall in any way limit or restrict the ability of any such
person to vote or otherwise act, in his or her capacity as a director,
officer or employee of the Company, as required by his or her fiduciary
duties to the stockholders of the Company or his or her responsibilities in
such capacity as an officer or employee. Each Stockholder signs solely in
his or her capacity as the record and beneficial owner of such Stockholder's
Shares or, in the case of Mr. Waterhouse, as holder of the Power of Attorney
with respect to the Shares held by the other Stockholders.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement
(i) constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) shall not be assigned by operation of law
or otherwise without the prior written consent of the other parties hereto.
8.2 Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such as
Federal Express, providing proof of delivery. All communications hereunder
shall be delivered to the respective parties at the following addresses:
If to Stockholders: At their respective addresses set forth
on Schedule 1 hereto;
copies to: Saterlee Stephens Burke & Burke
230 Park Avenue
New York, New York 10169
Attn: James F. Rittinger, Esq.
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022-4802
Attn: Roger H. Kimmel, Esq.
If to Parent: The Toronto-Dominion Bank
Toronto-Dominion Centre
Toronto, Canada M5K 1A2
Attn: I. Alexander Norton, Esq.
copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attn: Lee Meyerson, Esq.
<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
8.5 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees that in the event of
any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
8.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but both
of which shall constitute one and the same Agreement.
8.7 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
8.8 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
8.9 Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing. Without duplicative counting of the same securities by the
same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person
would constitute a "group" as described in Section 13(d)(3) of the Exchange
Act.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization
or other entity.
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and each Stockholder
have caused this Agreement to be duly executed as of the day and year first
above written.
THE TORONTO-DOMINION BANK
By: /s/ W. Keith Gray
Name: W. Keith Gray
Title: Executive Vice President
/s/ Lawrence M. Waterhouse, Jr.
Name: Lawrence M. Waterhouse, Jr.
/s/ Christine A. Waterhouse
Name: Christine A. Waterhouse
/s/ Jennifer A. Waterhouse
Name: Jennifer A. Waterhouse
/s/ Lawrence M. Waterhouse, III
Name: Lawrence M. Waterhouse, III
/s/ Kevin C. Waterhouse
Name: Kevin C. Waterhouse
/s/ Patrick R. Waterhouse
Name: Patrick R. Waterhouse
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
<S> <C>
Number of Shares of Company
Common Stock Owned by
Name and Address Stockholder (1) or held by ESOP
of Stockholder and allocated to Stockholder (2)
- ---------------- --------------------------------
Lawrence M. Waterhouse, Jr. 1,152,499 (1)
c/o Waterhouse Investor Services, 85,131 (2)
Inc.
100 Wall Street
New York, New York 10005
Lawrence M. Waterhouse, III 220,312 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Patrick R. Waterhouse 219,368 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Kevin C. Waterhouse 220,425 (1)
c/o Waterhouse Investor Services, 4,455 (2)
Inc.
100 Wall Street
New York, New York 10005
Christine A. Waterhouse 221,660 (1)
c/o Waterhouse Investor Services, 16,552 (2)
Inc.
100 Wall Street
New York, New York 10005
Jennifer A. Waterhouse 222,160 (1)
c/o Waterhouse Investor Services, 562 (2)
Inc.
100 Wall Street
New York, New York 10005
</TABLE>
Exhibit 99.1
Public Affairs Affaires publiques Toronto-Dominion Centre
Toronto Dominion Bank Banque Toronto Dominion Toronto, Ontario M5K 1A2
P.O.Box 1 G.P. 1 (416) 982-8578
Release/
Publication: Wednesday, April 10, 1996
N E W S R E L E A S E C O M M U N I Q U E
WATERHOUSE TO JOIN FORCES WITH GREEN LINE, CANADA'S LARGEST DISCOUNT BROKER
TORONTO - The Toronto-Dominion Bank (TD Bank) and Waterhouse Investor
Services Inc. (Waterhouse) announced today that they have signed a merger
agreement following the completion of which Waterhouse and Green Line
Investor Services (Green Line) will join forces to become one of the
largest discount brokers in North America.
TD Bank will pay Waterhouse shareholders approximately CAD$715MM (US$525MM),
35 per cent in cash and 65 per cent in common stock. The agreement provides
for the merger of Waterhouse with a newly-formed subsidiary of TD Bank. In
the merger, Waterhouse shareholders can elect to receive either US$38 in TD
Bank common stock (based on its market price at the time of the merger) or
US$38 in cash, subject to proration so that 65 per cent of the merger
consideration is paid in stock and 35 per cent in cash. The merger will
be tax-free to Waterhouse shareholders to the extent they receive TD Bank
stock. The transaction is subject to approval by Canadian and American
regulatory authorities, as well as Waterhouse shareholders, and is expected
to be completed by August 31, 1996.
Green Line and Waterhouse will continue to operate under their current names.
TORONTO DOMINION BANKBANQUE TORONTO DOMINION<PAGE>
In addition, Waterhouse
founder Lawrence M. Waterhouse Jr., has made a long-term commitment to continue
as Chairman and CEO. Management and employees will remain unchanged and there
is no loss of employment anticipated attributable to this business combination.
Larry Waterhouse said, "the discount brokerage business is specialized and
requires substantial experience in order to succeed. Waterhouse takes pride
in being independently ranked as one of the leading discount brokerage firms
in America. We believe that Green Line's proven leadership as the largest
discount broker in Canada, its commitment to customer service, and its state-
of-the-art technology will make this a winning business combination for our
stockholders, customers and associates."
W. Keith Gray, Executive Vice President of The Toronto-Dominion Bank and
Chairman and CEO of Green Line said, "Waterhouse is a top quality,
exceptionally well-managed discount broker that obviously fits well with
Green Line's business. We share and have demonstrated the same commitment to
customer service, which augurs well for our future in this business.
This merger clearly demonstrates our long-term commitment to growing the
discount brokerage business. With in excess of 70 per cent of Canadian
discount brokerage transactions and years of experience, Green Line
thoroughly understands this business.
By joining with a leading U.S. firm, we believe our Canadian customers will
benefit from a broader range of products and services."
Waterhouse is one of the leading national discount brokers in America with
1,300 associates serving more than 500,000 accounts through 79 branch offices
in 37 States and the District of Columbia.
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Green Line, in addition to being Canada's largest discount broker, leads the
industry in the delivery of personal computer services with its acclaimed
Green Line MicroMax PC-based electronic delivery system. Green Line MicroMax
provides customers with convenient access to accounts and market information,
on-line order entry and real-time trading.
The TD Bank is North America's 14th largest bank with assets of more than
CAD$106 billion (US$78 billion) and equity of CAD$6.2 billion (US$4.6
billion). Rated AA by both Moody's Investors Service and Standard and
Poor's, TD Bank has the highest securities rating of any Canadian bank.
As evidence of its long-term commitment to the U.S. Market, the Bank intends
to seek a listing on the New York Stock Exchange for its common shares. TD
Bank also said that it intends, subject to regulatory approval, to
re-purchase an offsetting amount of common shares in accordance with
applicable securities regulation.
The merger will occur between Waterhouse and a new subsidiary of the Bank.
TD Bank will account for the merger as a purchase transaction with overall
earnings dilution in 1996 and 1997 not expected to be material.
For more information, contact: Andrea Priest
Powell Tate
(212) 521-5211
Heather Conway
Toronto Dominion Bank
Vice President, Public Affairs
(416) 982-8087
W. Keith Gray
Toronto Dominion Bank
Executive Vice President
Investor and Trust Services
(416) 982-2638
